There is no recipe that fits all. What works well for some companies might be disruptive for others. This statement is rather accurate when it comes to startups attempting to diversify into other businesses. Some industry experts suggest that diversification during the start-up phase is dangerous as it draws the focus away from the core business. This being said, diversification turns out to work very well for Singaporean Unicorn company Garena. The company launched its activities in 2009 and currently employs around 4500 employees across Southeast Asia.  Its current valuation stands at around 3.75 billion USD (source: TechCrunch, July 2016).

Fireside Chat with Nick Nash (Garena) and Jon Russell (Techcrunch) as moderator

The secret to diversifying successfully

According to Nick Nash, Garena’s Group President, one of the driving factors for the company’s success is building on existing expertise and diversifying – however, diversifying exclusively into complimentary businesses. Initially Garena started up as a games and social platform.  About 2 years ago it ventured into the payments business by launching the AirPay platform. Recently the company added an e-commerce marketplace platform for mobile phones called Shopee. Undeniably, the launch of AirPay was to some degree determined by the necessity to reduce Garena’s payments to third parties. As a result, approximately 20-25% of the payment business volume comes from Garena itself. Likewise, Garena’s marketplace platform Shopee can also draw upon the existing payments engine.

Now with this triad of games-and-social-platform, e-payments platform and shopping platform as a foundation, Garena’s e-commerce business is growing really fast. Proof of that is the record amount of 1 million shoppers on the platform. Interestingly enough, Nash also mentioned that the cost of customer acquisition for Shopee is around only a third to a quarter compared to what other e-commerce players spend.

In addition, Garena is a good example of successful geographical diversification: scaling, which is a big challenge for majority of start-ups. The company’s businesses are present in all major Southeast Asian countries and Taiwan. Being a regional player and being eager to maintain the culture of a start-up company, Garena looks for the right balance between centralization and decentralization. To this end, Nash emphasized that Garena’s headquarters also encourage autonomy of the local leadership teams.

“Garena’s three core businesses fit together really nicely,” emphasized Nash – nevertheless, the company is already looking into future and reflecting on how they can strengthen their businesses and make each of them more unique. To conclude, Garena’s group president shared reflections regarding possibility of Garena’s payment business to provide other financial services such as loans and the like. This thinking reflects what other speakers at Techsauce Summit 2016 shared with all of us, that we are reaching a phase when the one-product/one-service oriented fintech companies are starting to add multiple financial solutions to their portfolio to better meet their clients’ financial needs.