Indonesian unicorn Go-Jek is learnt to have picked up a minority stake in Bangladesh-based two-wheeler ride-hailing app startup Pathao, according to two people familiar with the development.
The companies are understood to have closed this deal few weeks back. Go-Jek is learnt to have invested around $2 million in Pathao’s Series A round, these executives, who are industry sources added.
When contacted by DEALSTREETASIA, both Pathao and Go-Jek have declined to comment.
This portal had earlier reported that Go-Jek was actively looking at investing in the Bangladeshi startup. When contacted by DEALSTREETASIA, both Pathao and Go-Jek have declined to comment.
Go-Jek is learnt to have opted for a relatively small stake as Pathao was not keen on selling majority holding in the company.
Through this deal, industry observers say, Go-Jek will get an exposure into one of the most populated and untapped frontier markets, where traffic, like Indonesia, is a big concern.
It is also believed to be part of Go-Jek’s strategy to diversify horizontally across different markets while making it one of its first investments in a new region in a company which has similar operations as its core business. The industry sources added that Tencent, that is among the investors in Go-Jek, was keen that the Indonesia player invest in Pathao.
Further, these executives added that hedge funds, believed to be early investors in Pathao, also favoured the Go-Jek partnership. The two investors, whose names could not be ascertained, also played a big role in enabling Pathao founders to replicate Go-Jek’s business model in Bangladesh.
Founded by Hussain Elius in 2015, Pathao started out as a delivery partner to e-commerce merchants and now claims to be the biggest such company in Bangladesh. In 2016, it expanded into the ride-hailing transportation space with a fleet of motorbikes. It is also looking at expanding to different verticals such as food delivery. Elius has been quoted in several media reports as claiming that Pathao does ‘thousands of rides’ daily. According to Crunchbase, Pathao had raised an undisclosed amount in its seed round from Battery Road Digital Holdings in October 2015.
Dhaka, the capital of Bangladesh, is among the world’s most congested cities. In a recent report, the World Bank noted that average traffic speed in the city has dropped from 21 km/hour to 7 km/hour, only slightly above the average walking speed, in the last 10 years. Congestion in Dhaka is estimated to eat up 3.2 million working hours per day.
Other ride-hailing companies in Bangladesh include BDCABS, Chalo, Garivara, Taxiwala, and bike-hailing startup Amarbike. BDCABS, which allows users to hail an auto-rickshaws as well as cars, had last year raised seed funding from Turkish startup accelerator Etohum. While the amount of the investment was not disclosed, the round valued the company (BDCabs) at $6.5 million.
US ride-hailing giant Uber too launched its operations in Bangladesh in November last year. However, just three days after the roll-out, its services were declared illegal by the country’s transport regulator, Bangladesh Road Transport Authority (BRTA), which ruled that Uber had launched its service in Dhaka without permission from the authorities.
The company has since resumed its operations in the country. BRTA recently came up with draft guidelines for ride-sharing firms in a bid to ensure service quality and passenger security.
India’s ride hailing startup Ola is also planning to launch operations in Dhaka, its first market outside of India, by the fourth quarter of this year, according to a report by The Ken. The firm also plans to expand services to Chittagong later.
Ride hailing firms have emerged as an investor favourite around the world. Some of the largest deals this year include Chinese ride-hailing major Didi Chuxing‘s $5.5 billion fundraise in May and Indonesia’s Go-Jek raising a $1.2 billion Series C round.
Go-Jek has been on an acquisition spree with five startup deals in the last one year. Earlier this month, this portal had reported that Go-Jek is learnt to have acquired a majority stake in local payment service provider Kartuku.
This portal had also recently reported that Go-Jek, which competes with Grab and Uber Technologies Inc, plans to expand its offering to more markets in Southeast Asia, targeting countries with large populations using cash for transactions. The Indonesian unicorn will be targeting both the payments space as well as the ride-sharing segment as it looks to expand in the region.