Indonesian unicorn Bukalapak weighs next fundraising strategies

Fajrin Rasyid, Bukalapak Co-Founder and CFO

Amid repeated calls by the government and the IDX urging Indonesia’s unicorns to go the IPO route, marketplace platform Bukalapak, the country’s newest unicorn, says it is in two minds about becoming a publicly listed company.

Over the years, the e-commerce firm has received funding from a host of regional and local investors including Batavia Incubator, 500 Startups, Aucfan, IREP and Emtek. The company may still stick with private financing.

“Regarding which path to take, whether it’s IPO or fundraising – that we haven’t finalized. We are still open to both. Because frankly speaking, we see there is a trade-off with the two,” Co-founder and CFO Fajrin Rasyid told DEALSTREETASIA.

According to Fajrin, while being listed would allow more parties to invest in the Bukalapak, it will also mean greater responsibility and less flexibility for the company. Likewise, remaining private also comes with its own sets of pros and cons.

“If we stay as a private firm, we have to look at who are the potential investors and so on. However, the operation is more flexible because as a private company we don’t have the responsibility of disclosing data in detail. So we’re still weighing it,” he said.

In an exclusive interview with this portal, Fajrin elaborates on Bukalapak’s take on investors, IPO and Indonesia’s e-commerce industry, as well as the company’s expansion and recruitment strategies.

Edited excerpts:

You are reportedly Indonesia’s newest unicorn. What does it mean to you?

It’s just a means to an end. Of course, we are grateful because this shows that we are given trust by the users and investors of Bukalapak to grow even bigger. What is important is the business itself. With or without the unicorn status, we continue to develop our service.

Now that you’ve got a unicorn status, will the next step be IPO or another fundraising round?

What’s next for us? Honestly, we are still setting up our strategy. Like I said, between IPO and fundraise is something, not the final goal. The goal is building a profitable and sustainable business. A business that is profitable that brings benefits, instead of only burning money. That’s not a good thing. The eventual goal is a business that is sustainable.

Regarding which path to take, whether it’s IPO or fundraising, that we haven’t finalized. We are still open to both. Because frankly speaking, we see there is a trade-off with the two. For IPO, for example, we know the process is long – although I hear that the IDX is making it easier for startups. But of course, by being a public company, we will have greater responsibility and less flexibility compared to a private company.

A major plus point is that more parties can participate, it is more open and so on. If we stay as a private firm, we have to look at who are the potential investors and so on. However, the operation is more flexible because as a private company we don’t have the responsibility of disclosing data in detail. So we’re still weighing it up.

Talking about investors, you are known to be selective when it comes to accepting investment. What do you look for in an investor?

Apart from valuation and funding, we have a number of criteria for investors. Basically, we want those that can help take Bukalapak to a higher level. There is dumb money where investors just give money and meddle with the business or don’t have much knowledge. That’s what we don’t want.

So what we’re looking for are investors that either have experience or skill or network that can help us going forward. An example is one of our investors who used to be an entrepreneur and established an e-commerce business in Japan. He has gone through the experience of building an e-commerce firm.

Bukalapak CEO Ahmad Zaky has been quoted in the media as saying he doesn’t want Bukalapak to ‘fall into foreign hands’. Can you explain what he meant by that?

Maybe you will have to clarify that with him, but what I can say is that we at Bukalapak do consider whether or not an investor is foreign or local. Of course, if there are local investors, we think it would be better, because in the future when Bukalapak grows bigger, it will be the local people that will reap the benefit.

But we can’t deny the fact that there are more foreign investors at the moment. Maybe he was trying to stimulate local investors, urging them to invest, saying “This is an opportunity for you. If this gets bigger the ones that will reap the rewards are foreign ones.”

We see lately that local investors have started to come in like in the case of Go-Jek. Bukalapak also has a local investor in Emtek. That increasingly shows that local investors are showing more interest in these businesses.

How is the competition in Indonesia now with the flow of foreign money and e-commerce firms?

Competition is a good thing. It pushes people to compete in giving the best to customers. That is a positive thing. Secondly, I can understand why there are a lot of people investing in Indonesia – because of its incredible potential.

In Southeast Asia, Indonesia is the biggest with the fastest growth. And so it is normal that investors are coming to the country. That’s why, going back to Zaky’s comments, he is urging local investors not to miss out on this opportunity and have it seized by foreign investors. So in looking for investors, we try to reach out to both potential local and foreign investors.

With the money pouring in comes huge price subsidy by many e-commerce firms. How do you compete and survive without also giving subsidies?

A subsidy is something that will take a long time to discuss. We feel that this is something that the government needs to at least look at. Because, if it is left too open, there is a tendency of it ending up being a battle of capital.

So the best will not be the one with the best service, but with the biggest capital, which could be a good and a bad thing but at least the government should look at it. I’m not saying they have to regulate it, but at least look at it and know that it exists.

In the field of online transportation, this has been regulated in the form of price ceiling and price floor. So that is one of the forms of regulation. For e-commerce, how should it be? I myself am still unable to answer that. If I was the government, I wouldn’t know how best to deal with it. But at least the government must look at this.

You have moved into providing mutual fund and gold investments through BukaReksa and BukaEmas. What was the thinking behind this?

As a marketplace, we manage the method of payment. We provide the payment system, so all the transactions go through the Bukalapak payment system. So, there is a lot of money flowing in here. And we see that there’s a lot of cases in which people would withdraw their money after a transaction and just spend it. It’s not a problem if it is used for their operational needs.

But we don’t know – it would be a shame if the profit from their sales is wasted away on consumption. So our initial thinking was: what if we try to implement a concept of investment for them. So instead of spending their money on consumption, why not just invest it or save it in the form of mutual funds or gold. Then we thought this mutual fund feature should not only be for sellers but can also be used by buyers. So we just opened it for everyone.

Will Bukalapak continue to focus on e-commerce or expand to other verticals?

Maybe. But our core business will always be marketplace or e-commerce. So even if we do expand to another business, it most likely would be a business that is connected to e-commerce. For example, if we look at e-commerce in Amazon and Alibaba, there are loans. We also now have BukaModal, so from the transaction in Bukalapak, it will be the basis for risk assessment for credits.

How has hiring been? What kind of talent do you look for and is it hard to find it in Indonesia?

One of the biggest allocation from the money we raise is for investment in talent, particularly in the field of technology. We have a plan to build a research centre in Bandung. So this is one example. One of the things we’re looking for is people skilled in the field of technology, IT programming, data, artificial intelligence, machine learning and so on. That’s an example. But we also recruit for talent in other fields.

For artificial intelligence, yes, it is really scarce in Indonesia. That’s why we open opportunities for people from abroad. But it’s the same as it is with investors if there is someone from Indonesia that can do it, why should we hire from abroad? But, if there is none from here, of course, we’re not going to reject ones from abroad. We now have three or four foreign people at Bukalapak.

Are there any exit timelines from investors?

The investors have not told us of any exit timelines. Maybe they do have targets but haven’t told us about it. Or maybe there are some that are like me, just want to focus on growing the business.

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