Capital is crucial but not the only factor that has brought Go-Jek to where it is today, said Go-Jek’s co-founder Kevin Aluwi.
During a fireside chat at DEALSTREETASIA‘s Indonesia PE-VC Summit 2019 on Thursday in Jakarta, Aluwi said that Go-Jek has been the undercapitalised player for most of its history. This however, did not limit its growth or success in any way.
When Go-Jek raised its first round of venture funding in mid-2014, its competition had raised $250 million. This placed Go-Jek at over 100x less capital compared to its competitor.
“I know it’s a cliche to say that it’s about serving customers better and building a better product, but it absolutely is true. Our journey absolutely validates that. We came in with a unique approach and a unique product and we managed to build a company up to this point when for a huge part of our history, we were always the undercapitalised player,” he said.
Aluwi declined to comment on the size and deadline for Go-Jek’s current fundraising round. The Indonesian unicorn is understood to have secured commitments of nearly $2 billion from investors as part of the round already. Its arch-rival Grab is also currently fundraising and has so far received commitments of over $3 billion of the $5 billion it is seeking to raise.
Aluwi added that 2019 will be a year of building on the progress Go-Jek has made so far. Last year, the company ventured beyond its home market of Indonesia for the first time. It is currently present in Singapore, Thailand and Vietnam.
“2019 is going to be about further deepening the progress we’ve made in 2018,” said Aluwi. “We’ve broadened our stride to focus on the things that are important to us and our team will continue to do this next year.”
According to Go-Jek, the company has over 130 million app downloads across SEA, 2 million driver partners, and over 400,000 partner merchants. It also claims to be SEA’s largest transactional platform with about $12.5 billion in annualised gross transaction value generated across its platform. Go-Jek also added that its food delivery business in Indonesia has over $2 billion in gross transaction value.
Edited excerpts of a fireside chat with Kevin Aluwi:
How was 2018 for Go-Jek? You raised $1.5 billion, you started expanding internationally. What’s 2019 going to look like for you?
2018 was an amazing year for us. Our platform has grown tremendously. We have more than 130 million downloads across SEA, 2 million driver partners and over 400,000 partner merchants. Today, we are also SEA’s largest transactional platform with about $12.5 billion annualised gross transaction value generated across our platform. All this happened in 2018.
Our transportation business, even though it’s the most at scale, actually doubled in 2018. Today, the food delivery business in Indonesia is more than $2 billion in gross transaction value. We’ve launched GoPay as an open platform and we have over 100,000 merchants that have accepted GoPay. So 2018 has been truly tremendous. We also launched internationally in 2018.
2019 is going to be about further deepening the progress we’ve made in 2018. We’ve broadened our stride to focus on the things that are important to us and our team will continue to do this next year.
Let’s talk about international expansion. You recently experienced a roadblock in the Philippines. What are the challenges you’re facing expanding to new markets? Are you happy with your pace of expansion?
International expansion is definitely still new to us. There will inevitably be hiccups in all shapes and forms. The Philippines is a very important market for us and we’re working very closely with government agencies to figure out the right solution, and it’s still an ongoing conversation. It’s very important for us to work closely and comply with local government requirements. But overall, with respect to expansion, the response has been tremendous and has surpassed our internal expectations.
In Vietnam, we launched first with motorcycle taxis. The growth was pretty rapid such that we were confident in launching a food delivery service right after. Our food delivery business is already the second largest in the market after just 1.5 months of the launch.
Thailand is still in its early days, but the response has been strong. The P’win drivers have been very receptive and we’re very excited about what we’re going to do in Thailand. We’ve not gone full steam yet but we are definitely going to aggressively expand across many verticals there.
And then there’s Singapore. Our expansion in Singapore has been one of the more publicised ones. I think out of all the country launches, I think Singapore has been by far the most surprising in terms of reception, both in terms of demand from riders and supply of drivers. The desire to have a more competitive and fair market was overwhelming. We far overshot our targets at this point of the year for Singapore, and we’re re-evaluating about what we want to do because the response has been absolutely staggering. We completed over a million trips within a month of launch there. We definitely see Singapore as a critical and core market for our business today.
Indonesia’s Communication and Information Minister Rudiantara has offered to intervene in your efforts to enter the Philippines. Are you taking up that offer?
We are appreciative of the minister offering help. We’re always working to interact with the right partners internationally and locally to ensure that our launches to be successful. The most important relationship we want to cultivate is with the local parties.
Let’s talk about Go-Jek’s model in Vietnam, Thailand and Singapore. What’s the thinking behind these different models, and what kind of autonomy do these markets enjoy?
As a company that remained in Indonesia for the longest time, I think we have a unique appreciation of what it means to be local and the advantages that it provides. So when we think about our international launches, we always try to think about the most relevant approach or strategy given the dynamics there.
When we looked at Vietnam and Thailand, we thought that having a separate brand working closely with local teams and giving them a lot of autonomy is the right approach whereas in Singapore, a more centralised approach is better. We view every single launch uniquely and we try to make the most sense given the local dynamics and work with it.
Where are you in terms of your progress on your current fundraising round? Do you think you’ll be able to raise more than $2 billion?
I would rather not comment about when that announcement is happening, but I would say, ‘Stay tuned’. In the coming weeks, we hope to share some interesting news.
Grab is raising $5 billion. Do you think capital is the biggest differentiator? Will it come down to who has the most cash to burn?
That question is obviously very relevant but I think for many people in this room who are not aware, we raised our first round of venture funding in mid-2014. At that time, our competition raised $250 million. So we came from a point of literally having over 100x less capital.
Obviously having the right amount of capital is critical to growing your business, but the fact that we came from a position of having 100x less than our competition and still come this far shows that capital is not the only factor. We’re still growing our business, serving our customers and delivering our products. I know it’s a cliche to say that it’s all about serving customers better and building a better product but it absolutely is true.
Our journey absolutely validates that and we came in with a unique approach and a unique product and we managed to build a company up to this point where for a huge point of our history, we were always the undercapitalised player.
How does this affect your path to profitability?
I think because of our history and background, we’ve always had to – relevant to most of our peers – focus a lot more on the sustainability of the business. As such, looking at how our financials are trending over the last two years, even though that growth has been very consistent and explosive, we still always have an eye on a path to profitability and how to create a sustainable business.
Nadiem has said previously that our food business from a profitability standpoint is moving aggressively in that direction. We can say the same for all our businesses. The trend towards sustainability is leaning towards profitability and I think that should still continue to be the case moving forward. Historically we’ve never had the luxury of spending irresponsibly and going forward, that shouldn’t change.
Can you share some revenue projections?
On that point, I would like to reiterate that the focus on sustainability also means growing revenue. I won’t publicly comment on that figure but it is a key focus for us because building a sustainable product for us has always been our focus from day one and it’s definitely trending in the right direction.
The Information recently reported that you’re in talks with your investor JD.com to pick up stakes in its e-commerce and logistics business in Indonesia. Any comments?
Our partnership with JD.com as an investor and from a B2B perspective is one that offers a lot of interesting opportunities. In many ways, our businesses are complementary. The opportunity for e-commerce is large and there are lots of players active here. I’m not going to comment specifically on what those partnerships look like, but we’re still in discussions on many different areas. What I can say is that our support towards e-commerce is one that does make sense. We have logistics, we have payments, so the fact that our businesses are adjacent and supportive is very exciting. JD.com is not the only one we work with regards to payment and logistics. All those partnerships are potentially powerful.
Specifically to us entering e-commerce as a niche, at this stage that probably doesn’t make sense. One can argue that our food business is an e-commerce business but we don’t have any near term plans to enter e-commerce.
Let’s talk about Go-Ventures. What is your company looking to back or acquire through Go-Ventures and are you investing off of your balance sheet?
For Go-Ventures, we have a unique opportunity to offer some of our experience to build companies in Indonesia and beyond. We also have a lot of parts of our platform which can be potentially synergistic with earlier stage companies. Coming from that philosophy is why we decided to launch Go-Ventures. In terms of the structure and relationship between Go-Ventures and Go-Jek, that is one that frankly I’m not too involved in, so I will let you ask the more involved folks about the details of that structure.
When do you plan to IPO? And why IDX?
I think we’ve been very fortunate with the investor base that we have. They see this business on a long-term basis. They’re aligned with what we want and what we think is the vision of this company. The pressure to go public isn’t front and centre. It’s definitely a probable outcome at some point, but it’s definitely still over a longer-term horizon. I don’t think this is something that is top of mind for both investors and ourselves at this point. Whether we do IDX I think is not there yet and at this stage internally, these are still seen as hypotheses rather than having a strong thesis of what we want to do. At the end of the day, we will do what is best for shareholders and our users. I don’t think it goes beyond that.
Super app has been a much-abused term and there are those that want to be the “WeChat of Southeast Asia”. Is that even possible given Southeast Asia’s diverse markets, different user behaviours and varying regulations?
The analogy of being the WeChat of SEA is effective as a narrative building tool but I think it’s a bit of a lazy analogy. There will not be a WeChat of SEA because WeChat is WeChat. WeChat is fundamentally a chat product with 90 odd per cent penetration in a billion-plus population country. Those unique dynamics don’t really exist here. In the same way, people like to say ‘This is the next Silicon Valley’. No, there isn’t going to be a Silicon Valley in this part of the world, because Silicon Valley is Silicon Valley.
With respect to the so-called super app, when we first started this company, we already had three different services. From day one, you could take a ride, send a package, or ask a driver to buy you something. We never set out to build an on-demand platform or be a super app. That was never the intent. We always saw it from a customer’s point of view first. Our customer could be someone who wants to buy food or send a product, a driver or a restaurant or store. So we always build our products by solving those customer problems first. By working towards solving those problems and offering better customer experience and value, we built a lot of those adjacent services. Every single one of these services today was a response to a specific customer need. But we will never say we need to be a super app because starting from a high-level narrative and trying to build products is the wrong way to go.
When it comes to financial services and food delivery, do you see these having the potential of becoming independent businesses? Would you consider spinning these off?
I’m not here to talk about right valuation metrics and how much these are valued, but I think all of the businesses that we have at scale are definitely impressive. Whether or not we spin them off, at this stage probably doesn’t make sense. The fact of us building this platform is not just adjacent services that don’t have synergy to other services. There is a user benefit of having a unified vision across these services. At this stage, we’re focused on how we can double down on the customer experience and value add by having all these services being very aligned.
In the gig economy, there are concerns about worker rights. How do you balance the interest of partners – drivers and merchants – while keeping costs low?
It’s important to note that Go-Jek first started as a social enterprise. We started as a social enterprise trying to figure out how to improve the livelihood of the ojek driver. When you read a lot of these things about gig economy, especially in ride-sharing, there is this dynamic of how can we keep on getting more from the driver as a philosophy because the drivers are the ones empowering the platform. This is not really something we particularly relate to because of our background.
Of course, prices have to be competitive but even internally, we have a product called a driver platform. It is literally on our organisational chart at the same level as food or payments. Because of that, we will always focus on how we continue ensuring our drivers have sustainable income and livelihoods. There are many points to that. Beyond rides, we always allow our drivers to offer multiple services. Food delivery, package delivery and even mobile top-ups. We’re always focused on how do we think about increasing driver income through more productivity rather than incentives.
We also think about the whole driver cycle probably a little bit farther. For example, we have a programme which works with insurance providers and banks to offer things like home loans, medical and accident insurance and even hajj financing, which is a big expense here. So it’s not just about how do we continue growing the top line but also about how do we help our drivers manage their incomes. Those are important to us.
At the end of the day, our platform success is truly dependent on the success of the supply side of the market. That huge transaction value on Go-Jek on food, that’s mostly going to our restaurant partners. So their success is our success. I think having that view is very important to us. It’s not just a social mission.
You say your suppliers are important to Go-Jek. Going forward, do you see yourself building a support system for them to grow?
The growth of our platform is dependent on the growth of our partners. So today, we’ve launched a merchant app internally which is the number one merchant app in the country. Through this, merchants can manage their orders, invoice summaries, get reports and see how well they are doing. We’re also going to allow our merchant partners to start marketing and selling vouchers and coupons to users. So we’re opening up our platform for merchants to expand.
The topic of building and nurturing entrepreneurs is something we’ve spoken about internally. Something like 80 per cent of all restaurants on our platform are actually micro SMEs or single-outlet merchants. By working closely with them, we realised that a lot of things that could use a lot of thought. Like understanding gross margins, or how to implement better cash flow management. A lot of these conversations have come up internally about how we can address this, but we don’t have anything concrete at the moment. This year we should have something around how to run your business better for our customers and partners.