[Updated] Eyes on earnings as Bukalapak gets finance veteran as CEO

Achmad Zaky with Bukalapak CEO Rachmat Kaimuddin

Bukalapak’s announcement this week that its co-founder and CEO Achmad Zaky will be stepping down from the role, and replaced by someone from outside the company, ex-banker Muhammad Rachmat Kaimuddin, came as a complete surprise even to people within the company.

“We really don’t know what’s going on with the company anymore,” one Bukalapak employee told DealStreetAsia when asked about the announcement.

In his letter to employees, however, Zaky assured that his departure and the appointment of his successor had been well thought out.

“Since the beginning of this year, we founders have sought and screened a large number of candidates, and we finally found the choice that we think is right and can carry Bukalapak’s mission to the next level,” he said.

Even so, for Bukalapak employees and outsiders looking in, Zaky’s departure is yet another bold move by the company that has raised eyebrows.

Zaky’s seemingly sudden departure follows efforts to cut costs in the name of driving higher efficiency towards business sustainability. In September, the company abandoned a number of functions, including smart retail and some marketing roles, and laid off about 10% of its workforce, or around 250 workers.

The company had earlier appointed a handful of new senior executives, ostensibly to steady the ship in the wake of the resignations of a few of the company’s first employees. Those who left included the vice president of marketing Bayu Sherli Rachmat, who is now a co-founder at proptech startup Mamikos, and vice president of Talent Gema Buana, who now assumes a similar position at travel startup Tiket.

Since the start of this year, the company has roped in former BBM CTO Mohan Krishnan to come in as Bukalapak’s new SVP of Technology; former Amazon senior software development manager Mohammad Alabsi as VP of Engineering; former Commonwealth Bank Indonesia Chief of HR Bagus Harimawan is the chief of talent, and former Adidas global brand communications lead Erick Wicaksono now leads Bukalapak’s marketing team.

Observers say the turnover of top executives could signal a new, earnings-driven direction for Bukalapak. “It marks a new era for Bukalapak as they push for profitability much faster given the pressures from market with WeWork debacle while maintaining growth to meet investors expectation in highly competitive market,” said Aldi Adrian Hartanto, GM of Investments at MDI Ventures.

Indeed, amid increasing pressure in the heated e-commerce space, with competition from heavily-funded unicorns such as Tokopedia, Lazada and Shopee, Bukalapak is still seen as an underdog. According to iPrice, the company trails behind Tokopedia and Shopee in terms of total web visits as of the third quarter of this year.  However, the company claims that its gross profit in the first half of this year was three times higher than that of the same period last year, with profitability exceeding expectations.

Alibaba-backed Tokopedia has raised a total of more than $2 billion over nine rounds, while Lazada, also backed by Alibaba, has raised over $4 billion. Meanwhile, Shopee is owned and funded by New York-listed SEA, which last year raised $575 million in convertible notes for its e-commerce arm. It had $2 billion in cash and cash equivalents at the end of Q3 this year and raised another $1bn in convertible notes in mid-November.

Though it is not known whether the drive towards efficiency and profitability was as a result of pressure from Bukalapak’s shareholders, which includes local conglomerate EMTEK, China’s Ant Financial, Singapore sovereign wealth fund GIC and Sequoia Capital India, Hartanto has said that generally, investors tend to become more involved in the operation of a heavily-invested company that is struggling to keep up with competition.

“Usually investors will be more passive if a company is still in early-stage with limited funds being raised. However, if a company is richly funded and cannot meet investors’ expectations on the performance and returns, they will become more active and involved to drive the change to secure their money, especially the later one who put the biggest money,” he said.

Company outsider

Still, one of the main challenges for Bukalapak after Zaky leaves is to maintain team morale, “as he had already become the icon and face of the company,” added Hartanto. Zaky was popular among employees, and the company’s culture revolved around him.

“You often see companies hire more experienced COOs at this stage, [and as in the case of Bukalapak] replacing the CEO is rare,” said Jianggan Li, founder and CEO of venture builder and investment consultant Momentum Works. “A founding CEO leaving the company would surely have an impact on the culture – for the better or for the worse. You can’t deny Nadiem [Makarim’s] departure has a material impact on Gojek – even though he might not have been at Gojek day-to-day before his ascension to the cabinet.”

When Nadiem left the company to join the Indonesian cabinet as minister for education and culture, Gojek promoted its existing executives, Andre Soelistyo and Kevin Aluwi, to co-CEOs. This could be seen as a move to minimise disruption to the company’s culture and maintain growth momentum.

Bukalapak could have done the same. For one, the company’s co-founder and president Muhammad Fajrin Rasyid has already assumed parts of the CEO role following his promotion from the CFO position in 2018. However, the company picked an external candidate, which has been a surprise to industry observers.

Zaky’s replacement, Kaimuddin, was a director of finance and planning at local lender Bank Bukopin. His CV describes him as a financial expert, having previously served stints at Quvat Management, Baring Private Equity, Bosowa Corporindo, and Semen Bosowa. But there was no visible track record in e-commerce or technology.

Nevertheless, Kaimuddin could be what Bukalapak needs to move to what it has itself described as “the next level”, which is business sustainability, as it aims to turn a profit in the near future.

“Having a CEO with a financial background is a strong plus to the company where he can further review strategically and deep dive to pivot or review its business model to profitability,” said Farid MN, a venture founder at Singapore-based VC and venture builder FutureLabs Ventures.

“The only issue is if the new CEO has deep management experience and competencies to manage and turn around the company given that he has never been a CEO managing such a size of a company previously,” he added. “I would rather he be the COO for at least next 9-12 months as part of transition before taking over the new post”.

Profitability pressure

Bukalapak was one of Indonesia’s earliest e-commerce plays. It became the country’s fourth unicorn in January last year, according to an announcement Zaky made at the time saying the company’s valuation had surpassed US$1 billion, even as he refused to disclose funding details.

However, there is now increasing pressure on founders, following the reality check that was SoftBank portfolio company WeWork’s failed IPO, and drastic correction in its valuation from an estimated $47 billion to $8 billion. Investors are scrutinising business models, and the focus has shifted from growth and valuations to profitability.

Farid, who was previously a co-founder and CEO of Indonesian fintech startup Walletku [acquired by Hong Kong-based TNG FinTech Group in 2018] believes the developments at Bukalapak reflect the increasing demand by investors for venture capital-funded businesses to turn a profit.

“Don’t get too excited when founders close series of funds from investors and go around being speakers as start-up founders. You should remain focused on the business and turn it around profitably, or else your impatient investors will step in to change the scenario,” Farid said.

“FY2020 will be a very difficult year for most startups and many will close shop if they do not work towards the sustainability of the business – in this case, cash flow positive and profitability.”

Here’s what Zaky wrote to his staff 


My Letter to All Bukalapak Squads

Dear Bukalapak friends,

Exactly 10 years ago this company where you are working was just an idea, we never imagined we could get this big now. We were just young people at that time, like most other young people, who did not have anything, neither experience nor capital. We started all this with the capital of dreams, hopes, and noble intentions. The noble dream and intention of not just living for ourselves, but also supporting others.

Today, I am proud and very happy that Bukalapak has benefited millions of people, especially small businesses throughout Indonesia. From a financial standpoint, growth is still above 100% with continued improvement in EBITDA. I pray that we’ll always have the strength and unity to keep this trust and mandate from the Almighty, forever and ever. Amen.

Surely all the achievements we have achieved so far would not have been possible had it not been for the hard work and mutual cooperation of all of you. As the founder and employee with the longest working period at this company, I really feel your spirit of persistence, cohesiveness, and enthusiasm of to create change for many people. You guys have been my passion for leaving for work in the morning and returning late at night. Every time I interact with you, I become more excited because I always learn new things and get new ideas/input. It is thanks to this interaction that the company has become better and better over time.

I remember our early years when our management style was still “dormitory” style. One time for example, our website was down for three days, but we were still relaxed. Then, we improved it to “shophouse” style. Over time, our management has become more modern, and I can say that this company has adopted the best practices of world-class technology companies. On behalf of all co-founders and top management of this company, I want to express my deepest appreciation and gratitude for your infinite contributions.

As the company matured, I and the other co-founders Fajrin [Rasjid, president] and Xinuc [Nugroho Herucahyono, chief technology officer] – felt that we needed to make some changes to grow this company so its benefits could be even greater. One of the changes is the regeneration of leadership. Maybe you have felt these changes for the past few years, starting from 2016 (when we grew 5 to 7x a year) with the presence of Willix [Halim] as COO (chief operating officer), then the following years when Natalia [Firmansyah] came in as CFO (chief financial officer), then Teddy [Oetomo] as chief strategy officer, and finally Bagus [Harimawan] as chief talent officer. They are the best executives in their respective fields. We will also continue to accelerate the regeneration of senior and middle management. All of them come from the best companies, and they bring in the best experiences that we can all learn from. Praise be to God, all these transitions went smoothly without any hindrance.

With the same goal, it’s time for myself to regenerate myself. I want to inform you that on January 6, 2020, I will hand over the reins of leadership to a new CEO who is more experienced and can bring Bukalapak to the next milestone. Since the beginning of this year, we, the founders, have sought and screened a large number of candidates, and finally pursed to the choice that we think is right and can carry the Bukalapak mission to the next level, he is Muhammad Rachmat Kaimuddin.

Rachmat is not new to us, he is an old friend. He has a wealth of experience in many large companies, from traditional companies to private equity, which indeed observes many companies in various industries. He is also a graduate of world-class educational institutions, MIT and Stanford. Not only that, but he is also active in several social initiatives, making Rachmat “really Bukalapak.”

We believe that under the leadership of Rachmat, Bukalapak will further develop and continue the mission of goodness to further spread benefits to many people. In the next few weeks, I will introduce Rachmat to each Tribe and Function to get to know him better, while Rachmat can get to know the Tribe or Function in Bukalapak. I hope you will support Rachmat and work well with him

Going forward, I will act as Bukalapak co-founder and advisor. Although not active day today, I will continue to assist Rachmat with Fajrin and Xinuc. However, Bukalapak is like my own child. So, for sure I will still visit our cool new office. After going through a long decade, it’s also time for me to think about other things more broadly. I will spend a lot of time being a mentor for the startup ecosystem/entrepreneurship out there, so our industry will get bigger, and more jobs can be created. There are also problems in other fields that need to be solved by the next generations.

I will also spend my time on nonprofit activities through the foundation that I will establish later. My late father always told me, “Urip iku mung mampir ngombe,” which means “life is just like stopping by to drink.” I will make the most of the remaining time of my short life to give the maximum benefit for many people.

Finally, from the bottom of my heart, I apologize for all the mistakes in my actions and words to you. I personally want to express my gratitude to all of you. You’re all amazing. See you later in a different role. We are still one family.

Warm regards,

Achmad Zaky

[Editor’s Note: Bukalapak CEO’s letter to employees was originally written in Bahasa. We have now translated the letter and updated this story. We had earlier used the translated version of the letter from Tech In Asia.]

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.