Time for Indonesian logistics startups & investors to look beyond delivery

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In the past few years, technological innovation in Indonesia’s problem-ridden logistics sector has largely come from players in the express delivery and trucking space. However, the coming years could see the rise of other logistics verticals, as investors continue to look for game-changers and potential winners in the industry.

“The field is still wide open for logistics tech startups as no single player currently dominates this sector,” says Gitta Amelia, CEO of local VC firm Everhaus. “Investors can take a geographic-focused thesis, given Indonesia’s archipelagic landscape or take a vertical approach, such as logistics to serve specific supply chains as the needs vary across different verticals”.

A country with 17,000 islands marred by connectivity problems, Indonesia’s logistics cost is as high as 24 per cent of the country’s GDP, making its logistics performance among the worst in Southeast Asia. In neighbouring countries Thailand and Malaysia, the logistics cost-to-GDP ratio is 15 per cent and 13 per cent, respectively.

This presents an enormous opportunity for tech players to tackle various problems and inefficiencies in the country through innovations commonly referred to as smart logistics.

Some of the quickest to tap into this opportunity have been players in the last mile delivery game. Spurred by the early boom of the e-commerce market worth around $12.2 billion in 2018 and projected to grow to $53 billion in 2025, Indonesia has seen a spike in the number of tech-driven express delivery players in the last five years, though the industry did not immediately attract venture capital backing.

Among the earliest players are JNE, J&T Express, and SiCepat, who to this day are still arguably the dominant forces in the market due to their early mover advantage, and also considerable financial backing. While JNE’s financial details are not publicly known, its peers have boasted a large number of investments. J&T Express claims to have raised over $100 million from undisclosed investors in 2017, while SiCepat has received total funding of $53.5 million from Kejora Ventures and other backers.

Among the few existing international players fighting for a share of the delivery business pie is Thailand’s Deliveree, which last raised a $14.5 million funding in 2017 and Singapore’s NinjaVan, fuelled by its latest investment of $85 million.

To spice up competition, heavily-funded unicorns in the country have also launched their own delivery arms including Gojek with GoSend, Grab with GrabExpress, as well as e-commerce giants including Lazada with LEX (Lazada Express) and JD.id with J-Express (JX).

Action in the trucking segment

Accompanying the rise of last-mile delivery is the emergence of VC-backed players in the trucking industry in the past year, seemingly out of the blue.

Last year, 18 VC firms announced investments in five early-stage B2B startups in Indonesia’s burgeoning trucking space. These include prominent local firms such as Convergence Ventures and Skystar Capital as well as a handful of foreign investors such as Japan’s Genesia Ventures, China’s ZWC Ventures, and Sequoia Capital India.

The companies that have secured the largest funding are trucking platform Ritase, which last raised an $8.5 million Series A led by Golden Gate Ventures, and freight marketplace Kargo Tech, which last year raised $7.5 million seed funding round from a host of investors including Sequoia Capital and Uber co-founder and former CEO Travis Kalanick’s 10100 Fund.

Other new players in the game are Genesia Ventures-backed Logisly and Trukita, which is understood to have secured funding from conglomerate Astra and Amelia’s Everhaus. Neither has confirmed the investment.

“Logistics is a chain. Trucking is one of the most fragmented markets while the last mile (previously) had few players. That’s why there are a lot of investors betting on those two,” said Amelia.

Opportunities in new verticals

Outside of pure express delivery and trucking play, not many logistics companies have managed to scale significantly so far, largely due to capital constraints.

One logistics company that has bagged multiple investments to grow its business is East Ventures-backed Waresix, which initially focused on warehousing, but has expanded into other verticals, including trucking services. The company raised a $14.5 million last year led by EV Growth and joined by SMDV and Singapore’s Jungle Ventures.

Others that have managed to attract VC interests are Shipper, a logistics aggregator platform, and Triplogic, an on-demand logistics service that makes use of latent commercial spaces.

However, observers believe that there are plentiful of opportunities in the logistics sector that is still untapped by tech startups and investors.

According to a report by RedSeer, one of the major obstacles in Indonesia’s logistics chain, for example, is its ports largely due to limited infrastructure, regulation constraints, and low productivity. The logistics market is also suffering from a lack of a significant correlation between price and quality of service offered, with OTC negotiations still very rampant. Meanwhile, an obvious problem still waiting to be resolved is road congestion and lack of comprehensive connectivity, which cause delays and lead to inefficient utilization of resources for the Logistics players.

According to Ritase CEO Iman Kusnadi, the different stages in logistics processes or chain have their own unique challenges and opportunities that can give birth to new logistics startups.

“With relevance to Indonesia, each section is still big enough as a market for a logistics player.  For example, export/import handling requires specific documentation treatments, telecommunication industries needs shipment delivery to remote areas with multi-modal transport, cold-chain delivery still requires much better visibility and speed with affordable solutions, shipment to remote areas still requires better coverage potentially through a hub and spoke model, and the list goes on,” he said.

With the last mile delivery and trucking space now becoming increasingly crowded, it may be time for budding founders and entrepreneurs, as well as investors, to seize the opportunities in the blue ocean of other logistics sub-sectors.

“I think the key idea here is to focus on different areas, instead of replicating what’s already available in the market. They need to see the logistics problems in a holistic manner, tackling problems in the different areas of the supply chain, rather than competing in an uber-model for trucking and inevitably driving down prices through a price-war to obtain market share,” Kusnadi added.

[DealStreetAsia has put together a dedicated panel in our upcoming Indonesia PE-VC Summit 2020 on January 15 to unravel this topic. Speakers in the panel will include Kargo Technologies co-founder and CEO Tiger Fang, Reefknot Investments managing director Marc Dragon, Kejora Ventures founding partner Sebastian Togelang and Ninja Xpress country head Eric Saputra].

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.