Carousell shies away from unicorn chatter

Carousell shies away from unicorn chatter

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Merger with 701Search values combined entity at over US$850m, but homegrown startup wants eyes to be on US$40m annualised revenue it has
4 -min read
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CAROUSELL'S merger with rival 701Search may have brought it tantalisingly close to a US$1 billion valuation - or unicorn status - but the startup is more focused on how the deal will grow its topline and unlock two new markets, its chief financial officer Rakesh Malani told The Business Times.

On Thursday, Carousell announced that it has agreed to merge with 701Search, a unit of Norwegian telco Telenor, in a deal that values the combined entity at over US$850 million. Telenor received Carousell shares in exchange for the 701Search assets, and further bought Carousell shares for US$20 million in cash, Mr Malani revealed to BT.

These transactions have handed Telenor a 32 per cent stake in Carousell, replacing backer Rakuten Ventures as the startup's single-largest minority shareholder.

But rather than focusing on Carousell's shiny valuation, Mr Malani points out that the deal boosts Carousell's annualised revenue for 2019 to about US$40 million, over five times its US$7 million topline in 2018.

"Internally, there's zero time that we've spent on thinking about how to become a billion dollar valuation (company)... When we do M&A (mergers and acquisitions) for the company, when we do that part well, valuation is just a by-product for the company. As long as we are doing great work for our users, we will get to that status," he said.

The merger will also add Vietnam and Myanmar to Carousell's existing slate of markets - Singapore, Malaysia, Indonesia, the Philippines, Hong Kong and Taiwan. Carousell is also available in Australia, although it is not currently a market of focus.

Post-merger, Carousell will still be unprofitable, Mr Malani said, albeit declining to reveal any bottomline figures. He also declined to comment on whether 701Search was profitable on its own. Carousell made a net loss of US$25 million last year, according to regulatory filings. When asked how the deal with 701Search came about, Mr Malani said: "We've operated in the same markets, competed with each other and known each other super well. It was very organic."

701Search's three online marketplaces - Mudah in Malaysia, Cho Tot in Vietnam, and OneKyat in Myanmar - will retain their individual names and operations, but now report to Carousell chief executive Quek Siu Rui. Meanwhile, 701Search's regional hub team, which operates in Singapore, will be fully integrated into Carousell. In total, Carousell will add about 300 staff from 701Search, bringing its overall headcount to over 700.

In a press release on Thursday, head honcho Mr Quek said: "Merging with 701Search will allow us to... fortify our leadership in South-east Asia as Mudah, Cho Tot and OneKyat are already leaders in their markets."

Carousell's latest deal comes about seven months after classifieds giant OLX took a 10 per cent stake in the startup, valuing it at over US$550 million. OLX also injected its Philippines unit into the startup, together with about 100 staff in that market.

The startup's first backer, Quest Ventures, told BT in a statement: "We congratulate Carousell on reaching unicorn status in Singapore dollar terms. Quest remains invested in Carousell and its mission, which the founders believe is less than one per cent done. We are very proud to have provided the angel capital when Siu Rui, Marcus Tan and Lucas Ngoo started Carousell eight years ago."

Johan Rostoft, head of online classifieds at Telenor, said: "This transaction presents an attractive opportunity for us to take the next step in our marketplace journey. We believe that Carousell is the best partner to continue growing the online classifieds business further in South-east Asia."