Go-Jek in talks to raise $400m from KKR, Warburg? Deal values co at over $1 billion

Visual from the company website

Indonesia’s most popular ride-hailing app Go-Jek is in negotiations with two of the world’s largest investment firms, KKR and Warburg Pincus, to raise funds totaling $400 million, according to several market sources, tracking the development.

In a development first reported in the in Wall Street Journal, Private equity (PE) major Kohlberg Kravis Roberts (KKR) is set to be part of this round, and may invest in the region of $100 million for a minority stake in the Indonesian startup. Bulk of the remaining amount for this financing round is slated to come from Warburg Pincus, industry executives said.

For the last two weeks, the market buzz in Jakarta on Go-Jek’s latest funding round has only intensified, evan as the company, named after the motorcycle taxis, or ojeks, has remained silent on the issue.

Market sources said this financing round will see Go-Jek’s valuation increase to an estimated $1.2 billion, making it the biggest startup to date in Indonesia, as well as the largest fund raising round in Southeast Asia. KKR’s investment in Go-Jek is like to come from its $6 billion pan-Asian fund, which it closed in 2013.

It would also be the first time for both KKR and Warburg to invest in the ridesharing market, which until now are dominated by venture capital firms. Go-Jek, KKR and Warburg Pincus could not be reached for comment.

KKR has been investing in and also providing financial solutions to companies in Indonesia since 2013. In recent years its appetite for the country appears to be increasing. Just last month, the private equity major had announced that it would invest Rp 1 trillion ($81 million) into PT Japfa Comfeed Indonesia Tbk (JPFA), a local subsidiary of Singapore’s agri-food producer Japfa Ltd. The transaction will see KKR purchasing 10.44 per cent stake in Japfa Indonesia through private placement.

Other activities for the PE firm in Indonesia include investments from KKR-backed Mandala Energy – a Southeast Asia-focused oil and gas exploration and production company – and an investment in Tiga Pilar Sejahtera Food, one of Indonesia’s leading food businesses.

Also Read: China Resources, Macquarie to buy control of Australia healthcare firm GenesisCare, KKR exits

Much needed service

Ride-hailing services have been particularly attractive in Indonesia, especially in Jakarta where traffic jams are notorious. Home to 10 million people, the city is in desperate need for alternative solutions as the current public transportation is limited, crumbling and is of poor condition.

The Go-Jek app was officially launched in 2015 and is now estimated to have more than 200,000 drivers operating in 10 cities. It offers more than just motorcycle taxis, and has been expanding services to on-demand groceries, cleaning, door-to-door masseuses, and courier among others.

The Northstar-backed startup was founded by 32-year Nadiem Makarim, a Harvard graduate who prefers to call Go-Jek a technology company rather than a service provider.

Makarim has been tight-lipped in regards to revealing numbers financials and other performance data about the firm, leaving analysts  and other market watchers speculating about Go-Jeks’ real value.

A leaked presentation obtained by media platform Tech in Asia, however, revealed that the company was growing 12 per cent from October 2015 to March 2016. It means that the growth had been slowed dramatically compared to the period of March – October 2015, which saw an increase of 98 times.

Also Read: Indonesia: Go-Jek, Djarum, Mensa invest undisclosed amount in HaloDoc

Competition

Go-Jek has been facing stiffer competition from Singapore-based transportation service app Grab, a regional transport service major which is targeting to grow its market share to 50 per cent this year. Its the major competitor is US-based Uber Technologies Inc., with a market capitalisation of nearly $68 billion rendering it the worlds most valuable startup venture.

Grab has been intensively expanding its services and network, via partnerships with local companies in order to formulate and develop products and services that to outcompete rival firm Go-Jek.

This week, Grab signed an agreement with Indonesia’s Lippo Group to develop an e-money payments platform. The partnership is an extension of a strategic deal signed between the two companies in March this year. Grab is determined to expand new services specifically for Indonesian preferences, as the country is Grab’s largest market.

Grab claims that Indonesia has become its largest market by completed rides across all of its platforms, withits GrabBike offering having quadrupled in Indonesia so far this year, despite a reduction of subsidies by 50 per cent.

Go-Jek generates revenue from a commission charged for fares; a common model across most ride-hailing service providers. In addition, they often offer drivers cash incentives to maintain low fares and retain them on their platform.

However, such subsidies have also driven up customer acquisition costs and expenditures, with many transport services seeking to reduce the subsidies paid out. Grab’s CEO, Anthony Tan, has already reported that its services in some cities are seeing profitability.

Also Read:

Indonesia taxi operator Blue Bird, GO-JEK joins hands to grab higher marketshare

Grab Indonesia launches food delivery service to take on rival Go-Jek

Indonesia’s Go-Jek in talks to raise fresh funds to grow business, says CEO

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.