Ula taps founders’ networks to carve growth in Indonesia’s crowded warung space

Left to right: Ula’s founders Riky Tenggara (COO), Derry Sakti (CCO), Nipun Mehra (CEO), Alan Wong (CTO)

Two years ago, Nipun Mehra let himself get lost in busy marketplaces across Indonesia. The ubiquitous small shops selling everything from food to groceries to sundries – warungs – held a key business opportunity.

The small business owners needed a more efficient way to manage their inventory and cash flow, and source goods.

Mehra saw that he could help the warung owners organise their businesses more efficiently, by digitalising inventory and sourcing operations and, importantly, linking them up to financial services.

In January 2020, a few months before the pandemic hit and restrictions took hold, Mehra and a former colleague, Alan Wong, together with two others, Derry Sakti and Riky Tenggara, founded Ula, a business-to-business e-commerce marketplace.

Their startup has attracted more than $100 million in funding in under two years, most recently from a roster of high-profile investors.

Earlier this month, Ula scored $87 million in a Series B round, just nine months after closing its Series A financing. The latest funding – led by Prosus Ventures, Tencent, and B-Capital – also saw the participation of Amazon founder Jeff Bezos, besides leading Southeast Asian funds Northstar Group, AC Ventures and Citius.

Analysts tracking Ula observe that it could be Indonesia’s version of Udaan, the B2B marketplace in India and the fastest startup to achieve unicorn status in the country.

Udaan’s founders—with whom Mehra worked at Flipkart back in the day—are early backers of Ula.

Before becoming an entrepreneur, Mehra worked at e-commerce giants Amazon in Seattle, then Flipkart in Bangalore. In 2014 he joined Sequoia Capital, where he led investments in e-commerce and other internet companies, including Traveloka.

In 2017, Mehra left Sequoia and joined the Indian merchant commerce platform Pine Labs, a Sequoia portfolio company, as chief product and strategy officer. About a year and a half later, he left to become a private investor.

Mehra is clear about the strength of the founders’ previous experience and connections, accumulated from working in the e-commerce and FMCG sector.

“Ula’s really a place where we get to exercise everything we’ve learned,” Wong said.

Mehra and Wong were colleagues at Amazon; Sakti worked at consumer goods giant P&G in Indonesia, while Tenggara served stints at Commerce, Lazada, and Rocket Internet.

“If you think about our seed round that was led by Sequoia and Lightspeed, both of those people knew me,” Mehra told DealStreetAsia in an interview.

He added that there has been keen investor interest in Ula. “The investors who are now on our cap table – they got in touch with us.”

With the latest round, Ula’s total funding has touched $119 million with a valuation of $380.4 million in under two years, according to DealStreetAsia—DATA VANTAGEMehra declined to confirm Ula’s valuation.

Now, Mehra will use that backing to cement Ula’s position in Indonesia, by ramping up headcount and building more services, in what is an increasingly crowded space.

Taking mom-and-pop shops online

The business of digitalising the 63 million mom-and-pop stores across Indonesia promises to be lucrative.

A report by Google, Temasek, and Bain & Company said the total e-commerce gross merchandise value (GMV) in Indonesia had reached $32 billion in 2020. The report also noted that 93% of the new digital consumers will continue to use at least one digital service after the pandemic.

The opportunity has attracted at least a dozen venture-backed startups, with services ranging from bookkeeping, point of sales (POS) system, payment point online bank, to supply chain support.

Overall, the segment has attracted at least $340 million this year, from investors including Softbank Ventures Asia, Asia Partners, and Falcon Edge. Ula and GudangAda each raised more than $100 million this year.

Expand Table

Company nameFounded inLatest funding roundLatest funding timelatest funding sizeLead investorsValuation
Ayoconnect2016pre-Series BSeptember 1, 2021$10 millionMandiri Capital Indonesia, Patamar Capital$34.06 million
Blibli2010---Djarum Group-
Bukalapak2010IPOAugust 6, 2021--$6 billion
BukuKas2019Series BMay 18, 2021$50 million Gokul Rajaram, Taavet Hinrikus$182.06 million
BukuWarung2019Series AJune 10, 2021$60 millionValar Ventures, Goodwater Capital-
GudangAda2018Series BJuly 21, 2021$101 millionAsia Partners, Falcon Edge$519.5 million
Payfazz2016Series BJuly 6, 2020$53 millionB Capital Group, Insignia Ventures Partners-
Ralali2013Series CJuly 26, 2019$13 millionArbor Ventures, TNB Aura, Jo Hirao$98.6 million
Super App2018Series BApril 28, 2021$28 millionSoftBank Ventures Asia-
Ula2020Series BOctober 2, 2021$87 millionProsus Ventures, Tencent, B-Capital$380.4 million
Wahyoo2017Series AAugust 5, 2020$5 millionIntudo Ventures$17.75 million
Warung Pintar2017Series BJuly 7, 2021$6 millionEast Ventures$169.91 million

Some of the companies that Ula considers its competition have been in business for longer. These include B2B marketplace Ralali, which has been operational for seven years now. Others such as Warung Pintar, GudangAda and Super, have been around for three to four years, and have also attracted robust funding.

Warung Pintar, for one, enjoyed significant growth during the pandemic, its CEO Agung Bezharie Hadinegoro, said. He noted that the company now serves 500,000 warungs, from 5,000 at the start of 2020.

“After the B2C e-commerce boom which has given rise to a few unicorns in Indonesia, we think the B2B e-commerce market will be the next industry to watch because of its huge potential,” said Stevensang, CEO and founder at GudangAda, adding that the trend has been supported by the pandemic-induced surge in new digital consumers.

“In view of this, retailers in Indonesia are rethinking their supply chains and looking at B2B e-commerce platforms over traditional distribution models,” Stevensang said.

There is also competition from e-commerce Bukalapak and other more established companies, such as tobacco giant Sampoerna with its Sampoerna Retail Community that started in 2008. Small business owners can join its community and enjoy easy inventory taking from wholesalers in its network.

There are also other players that are not directly competing against Ula in the warung-enabler space, such as accounting startup BukuWarung and BukuKas.

Mehra says Ula’s business model ismore than digitising orders between warungs and their suppliers.

With services that help ensure product availability, timely delivery, efficient inventory, and flexible payment choices, Ula helps the business owners “to capture more demand in the area, help them make more money as a result.. give them the level of predictability and service that you and I are used to as consumers.”

With operations starting out in Surabaya, Ula now claims to have 70,000 registered stores and more than 6,000 SKUs in FMCG, apparel, and fresh products at the moment. In the next one or two years, the startup plans to increase its registered stores to 300,000.

The next phase of growth for Ula, and its merchants, Mehra says, is to offer a pay-later option to its customers. The pay-later option is a new service that bridges the cash flow gap often faced by small retailers who have limited access to traditional banking services. Ula is able to offer payment terms suited to individual businesses.

“Commerce and credit go hand in hand… fintech is actually just an integral part of e-commerce. It’s not a separate thing,” Mehra added.

He observed that lending alternatives are either too costly, or inaccessible to small retailers. This is owing to the lack of trust between the retailer and its supplier, as well as additional onboarding and underwriting process which makes it expensive for lenders to cover small retailers.

Adrian Li, AC Ventures founder and managing partner, noted that the warungs, which account for some two-thirds of Indonesia’s GDP and 90% of the workforce, collectively face a $150-billion credit gap.

“The value is not in being able to charge a subscription to these small retailers; the value lies in getting the volume,” Li said.

Path to monetisation

Mehra is unfazed by the competition. “If the market is very large, which it is in this case, multiple companies will coexist,” he said.

The company’s chief technology officer, Alan Wong believes that the strongest technology does not always mean the most sophisticated.

“One of the things I think we pride ourselves on is, we understand our customers,” Wong said, noting, for instance, that the warung owners typically have older mobile phones with limited storage space.

“As part of the engineering team, we keep a close eye on how efficient we use these bits and bytes… We make sure that the app size is small,” he said.

Ula has allotted part of its latest funding for hiring more engineers in Jakarta and Bangalore as they ramp up new services and products, including its buy-now-pay-later product. The company does not charge a service fee at the moment, claiming that its goal is to help customers manage their business better.

The combination of commerce and financial services is a winning formula, noted Ganesh Rengaswamy, managing partner at Quona Capital, a Ula investor.

“Across the market, we are seeing that the most successful e-commerce players are players who operate across the e-commerce value chain,” he said, noting service could be anything from escrow services to insurance.

“So, there are multiple different financial services, one can overlay on top of commerce,” Rengaswamy said.

Nailul Huda, a researcher at The Institute for Development of Economics and Finance (INDEF), noted that efforts to cut middlemen have been done offline too, and for a digital platform to compete, they need to make sure a competitive margin and more facilities are being offered to retailers.

Still, as startups in the sector are still early-stage, investors are not expecting profitability yet, Usman Akhtar, a partner at Bain & Company, noted.

“What I think all investors typically look for at this stage is they look for signs of positive unit economics as opposed to profitable,” he said.

“Cash burn will undoubtedly still be happening. The question is, are you a positive unit economics business? Is your lifetime value greater than your cost of customer acquisition? Is your contribution margin positive on your B2B e-commerce business? And if it is, then I think we’re going to see more interest,” Akhtar added.

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.