Meet David Gowdey, who runs international corporate development and M&A for Yahoo — which basically means all markets outside the US. His office is at Yahoo’s Singapore headquarters on Anson Road, a stone’s throw from the bustling container port.
Most readers will remember that Yahoo bought Indonesia’s Koprol earlier this year. The deal had to pass through Gowdey’s desk to get done. In the first part of our interview we talk to him about Yahoo’s plans for Koprol, what countries and spaces he’s looking at, and the problem with Southeast Asia’s startup ecosystem.
Look out for our second part, which will have even more interesting details if you’re a startup looking to get bought out — or just noticed — by Yahoo.
You’re responsible for M&A and corporate development for the rest of the world outside the US. How do you make sense of such a broad portfolio?
I think the first thing you have to be, is just be very focused on what it is you’re trying to achieve and be in sync with the strategies in California and kind of execute that. So largely it breaks up in terms of developing existing businesses or products that we have, moving into new spaces, or moving into new geographies. So I think those are the three things we look at.
Can you elaborate on those three things?
From a product standpoint, we recently hired Blake Irving who is our new head of products. So I think we have a very good strategy in terms of the products we bring to market, where we’re focusing — we’ve trimmed down the number of products over the years, and that leads to moving into some new and exciting spaces — Koprol is a great example of that. I think we’re very interested in both mobile and social and, in addition, Indonesia being a top investment market for us — it was kind of opportunistic that Koprol is based in Jakarta and doing something in the social and the mobile space.
So social and mobile are the main trends you’re watching?
I think the four (trends) that would probably be top of mind would be mobile, social, maybe games and e-payments.
Are there more specific subsets you can talk about?
No, I think those are the kind of broad themes, so…
Yahoo invested in an Indian matchmaking site, Bharat Matrimony. Would that fall under social?
So we made that investment … a few years ago. And there were vertical categories where we didn’t necessarily want to be a principal player in but we were excited about the space and wanted to plug some channel partners into the site, and matrimonial services was one. In Australia, same theme, we had an investment in Seek.com.au and also in Carsales.com.au as well as, you know, some investments in India. So Seek is now public, Carsales is now public in Australia. So it’s a strategic kind of partnership where we made a minority investment but also had a commercial deal.
When do you make a minority investment and when do you acquire a company?
I think a lot of it comes down to, one, whether or not you want to own the business, whether you want to be the principal player in the space that they’re operating in, and two is around integration. So when you own a business you can integrate it and you can do a lot more with it than if you’re just a minority investor.
So for matrimonial services, for example, in India, it wasn’t necessarily a business that we wanted to run, but we were excited in the space and wanted to be a player in it, but also wanted to have a commercial relationship, so it’s an arms-length commercial deal with them as a channel partner.
How does Yahoo organize its international offices and coverage?
My coverage area used to be what we called South Asia, which was Korea, India, Southeast Asia, Australia, New Zealand and it was run with the headquarters out of Sydney. And then we formed something called the Emerging Markets Group, which kind of broke off all the emerging countries: Latin America, Middle East, Africa, Russia, Eastern Europe, India, Southeast Asia and we ran Emerging Markets out of Singapore.
So today we have three operating structures. We have Americas, which is North and South America, EMEA, which is everything from Russia to South Africa, and then APAC. Within APAC, APAC has all four joint ventures (including Yahoo-Alibaba), so APAC is Japan, China, Australia, New Zealand, but then all of our own businesses, so Taiwan, Korea, Hong Kong, Southeast Asia, India.
Can you tell us more about Yahoo’s plans for Koprol?
I think the first thing is, Koprol was a pre-revenue business. So it was something that wasn’t fully developed, so the first thing we’re doing – and you have to remember it just closed in May or whatever it was – the first thing we’re doing, is we’ve significantly ramped up the size of the team and really just accelerating the product roadmaps that they had. So building a lot more features and functionality into the product, getting it on more devices and expanding its footprint and its addressable market size and then I think we’ll look to expand it.
Does Yahoo have milestones for Koprol?
In Indonesia, we definitely do. I actually don’t know what those are. We also have a really big ‘new to net’ campaign in Indonesia and I think Koprol fits really good into that kind of ‘new to net’ strategy, because it’s the combination of mobile and social. So it can actually start to reach out to people that may not have a PC connection but who have a mobile connection and, you know, want to connect with friends.
Is Koprol exportable to markets like Latin America, which similar dynamics?
I think so, to a certain extent. If you think about most of the emerging markets like India and certain parts of Southeast Asia, having a product that is accessible to mobile web browsers rather than having to require an iPhone or a smartphone, I think that has a lot of potential. And I think that was one of the things that attracted us to Koprol, when we sat down with them, they said we’re really going after the feature phones, we’re going after mobile web browsing because that gives us the broadest penetration, so I think that’s an exciting place.
What other trends do you see across Southeast Asia for startups?
One is, if I think back to a few years ago, a lot of the startups in Southeast Asia were very much focused on going to the US market. And I think the primary reason for that was that the online digital markets in Southeast weren’t as developed. And I think they saw a lot of opportunity in the US because the online ad market was sizable, the penetration rate was high, lots of consumers, English language.
Now, I think, if you sit down and talk to startups, a lot of them are focused on how do I build something for Singapore, how do I reach as many people as I can, how do I expand to Indonesia, or Vietnam or the Philippines. And I think that’s been a shift over the last few years. And I think part of that is the increase of awareness for internet, digital, in Southeast Asia, increasing numbers of users coming online, huge mobile populations, and an ad market that’s now starting to get big enough around the region that it can support ad-supported businesses.
The second thing I’ve noticed, is that the ecosystem doesn’t seem to be as developed. So I think — and Garag3 is probably a good example of this — if you’re an entrepreneur and you’re at NUS, and you’re looking for 20 grand, 50 grand, 200 grand, whatever it is, in angel, seed money, I think that’s accessible to you today. I think if you can develop a business and generate, you know, $2 million in revenue, and be profitable, and you’re looking to bring on that series A, series B kind of money, I think that’s very scarce, it’s hard to find in Southeast Asia.
But is it because there aren’t enough companies like that in Southeast Asia?
I don’t know. Maybe. Maybe it’s a chicken and egg kind of scenario. I think about Vietnam as an example, IDG Vietnam Ventures, they’ve done a fantastic job, they’re now out raising another fund to try to be that follow-on fund, which I think is great. But they’re very Vietnam focused. So if you’re in Indonesia, or you’re in Singapore, I think there needs to be a more developed ecosystem for investing in startup companies.
One of the exciting things about Koprol, was that it was the first time a Western company had come and acquired an Indonesian digital business, right? And I was hoping that it would be a kind of catalyst, some sort of inflexion point, where all of a sudden entrepreneurs and investors say hey there are exits in Indonesia. If 11 guys sitting in Jakarta building a social mobile app can be acquired by Yahoo then there’s no reason why our business can’t be acquired by Yahoo, or no reason why we can’t get funding, or do something.
So I’m hoping that there’s a certain amount of groundswell that comes along with that. If I think back to last year we bought Maktoob, Maktoob is the number one portal in the Middle East, and it was the first time Yahoo had ever done M&A for market entry, so in the Middle East, Maktoob became that. The two founders of Maktoob were heralded as cases in point to say here’s the reason why you should go and create a startup, here’s a point to say there’s an exit that happened and here’s a justification for investment in that space.