For many startups, achieving that $1-billion valuation or unicorn status is a dream. But for Lalamove, a Hong Kong-based on-demand logistics startup, entering the unicorn club is a nice milestone to achieve but, at the same time, it is very arbitrary, said its head of international Blake Larson.
“…we actually became a unicorn long before that. But anyway, it’s not important to us. Our customers and drivers don’t care, right? …that’s more of like, a milestone that’s nice to write about,” he told DEALSTREETASIA on the sidelines of HKVCA China Private Equity Summit 2019.
The startup had raised $300 million in a Series D round led by Hillhouse Capital and Sequoia China this February. It also expanded into India in January. Its rival GoGoVan raised $250 million last July from Alibaba-backed Cainiao and others.
Founded in 2013, Lalamove matches drivers with customers via its website and mobile app to fulfill same-day deliveries. The company currently operates in 11 cities in Asia outside China, matching around 15 million registered customers with a pool of 2.5 million drivers of vans, trucks and motorcycles.
It is not surprising for unicorn startups to start thinking about going public. A TechCrunch report had said Lalamove intends to go public in Hong Kong. But Larson said the company so far has no particular plans for doing so.
“We always say as long as you build a good company, you have options. We have no plans for IPO. We don’t need an IPO because we don’t need the money. And our investors are not asking for liquidity. So then the reasons to IPO become less. As long as we keep growing, I think we’ll have options,” he said.
On fundraising, Larson said, it has never been easy but the startup had turned away a lot more capital than it took.
“When you need money, there’s no one. When you don’t need money, there’s as much as you want. So fundraising has been a very interesting learning curve for me. Most of our money came from mainland China and most of our revenues are still from there,” said the former Rocket Internet executive.
Prior to joining Lalamove in 2014, Larson was the co-founder of Rocket Internet’s e-hailing startup Easy Taxi, spearheading its Asia operations in Hong Kong. Reminiscing on his previous role, he said he has learnt a lot from the internet giant.
“So Rocket was amazing for me in a lot of ways, because of the lack of structure. I showed up in Hong Kong, my then CEO gives me a piece of paper with 10 things and he flies off to our HQ in Brazil. I spent my first two months at the petrol stations handing flyers to drivers. So it teaches you that at the beginning, there’s no one but you and there’s no backup. You can’t be afraid there’s no structure – you just have to make it happen. Whatever that means,” he said.
With Rocket Internet, Larson learnt about execution and let the market to tell him what it wants.
“Don’t overthink, just go do something. Doing something and getting feedback is more valuable. So I really learnt that. That has really helped me now as we (Lalamove) have many countries, I can empathise with the local challenges that each market has,” he added.
So how was the fundraising journey for your recently announced $300 million Series D round?
I never did any fundraising before I came to the company. And then I helped with our Series A the first time round.
I learnt a couple of things about fundraising. One, I always said I would never be in sales. And then I had to fundraise, which changed everything. I had never been said no to so many times in my life.
Two, fundraising is when you need money, there’s none. And when you don’t need money, there’s as much money as you want.
So, I don’t want to ever say it’s easy but we turn a lot more away than we take it because we don’t need it. Hence, we’re like a better bet for the investor.
When you need the money, it’s probably because you’re desperate and you’re running out of money. So fundraising has been a very interesting learning curve for me. Most of our money came from mainland China and most of our revenues are still from there. We’re in about 140-150 cities there, so it’s quite a big presence. But the investor appetite across the markets [from Singapore or Hong Kong or other markets] follow very, very different approaches, I found.
The round was led by Hillhouse Capital and Sequoia – so how do these investors add value to the company?
The value is more about validation sometimes because these are investors with track record. So it gives you the confidence that you’re on the right path. They can give you some guidance on missteps and what to look out for while getting to the next phase. Being financial investors, as opposed to strategic ones, they are extremely supportive in that they don’t try to get too involved. They invested in us because they believe that we know how to operate the company. So, some of the value is actually just having the space to make the strategic decisions and not being overly influenced on strategic decisions by your investors. So there’s like a maturity from an investor standpoint that I really appreciate in ours.
So is an IPO on the table?
I would say anything’s on the table. We always say as long as you build a good company, you have options. We have no plans for IPO. We don’t need an IPO because we don’t need the money. And our investors are not asking for liquidity. So then the reasons to IPO become less. As long as we keep growing, I think we’ll have options.
What’s next for Lalamove then?
I think for us, it’s more about penetration in our existing markets and offering different types of services. We started selling vehicles to our drivers as a revenue centre and we are seeing some strong early signs there. We have over 2.5 million drivers. Naturally, some of them need a new vehicle. We’re a very efficient sales channel to do this. So, we’re trying to do some adjacent businesses, and then also like having a more complete portfolio of delivery services.
Will you venture beyond Asia?
I think we’ll see how India does. And then and we’ll make a call on this. Because if you can’t build a great company, across 3.5 billion people which is mainland China, Southeast Asia and India, what business do you have going outside? So we still feel like there’s a lot of opportunity. So I think we’re pretty pragmatic about that. We want to be successful doing what we’re doing, prior to overextending ourselves.
Was being a unicorn startup an important ambition?
I don’t think so. Because we actually became a unicorn long before that. But anyway, it’s not important to us. It’s actually very arbitrary. Because our customers don’t care. Right? Our drivers don’t care, right? Even for employees, like it feels good. But if they only need shares, or options, it’s still on paper. So it’s not real yet. So I think that’s more of like, a milestone that’s nice to write about. But it’s not a milestone that we ever said like: We must be a unicorn. We only talk about what our customers care about.
Are you already profitable in all markets?
Not all markets, but as a company, we’re right around breakeven. We have lots and lots of cities that are profitable. We’re not hoping the model is profitable, we’ve proven that it is profitable. So the only reason we wouldn’t be profitable is if you try to expand quickly. But we’re not trying to test the theory that this model is sustainable, because we’ve proven it in several cities in several different markets in several different countries.
And we have a very different strategy than a consumer-facing [business] because we’re mostly focused on SMEs, and enterprises. That’s more B2B – it doesn’t mean consumers don’t use us, for say, flat moving but that’s not our core market. And, as a consequence, our subsidy or incentives are less than 1 per cent of our revenue.
For consumer-facing businesses, there are no switching costs for consumers so consumer-facing brands will have to [provide incentives] to build share. So we’ve tried the mass incentive [model]. I’m sure you’ll get volume, but it goes away if your service isn’t good, and that’s the difference.
While the consumers are much more tolerable to average service for cheap prices, for businesses, if you’re a core part of their value proposition to their customer, they can’t afford a poor service. I think, consequently, our sustainability and our approach to growing market share is probably a bit different than consumer-facing companies.
You entered India this year – how has the market there performed?
We launched in India in late January. So it’s not just New Delhi. We started in Mumbai, New Delhi and now Bangalore and we’re going to go beyond these three cities. So far, the reception has been quite good from a market development standpoint. It’s quite far behind Southeast Asia even, maybe five years or maybe more. There are parts of India, I was walking around the streets, and it felt like it could have been 1960, but it was 2019.
So smartphone penetration is not a problem. I would say the challenge lies in technical literacy. So I think there’s a shift in behaviour that markets go through from like, using the smartphone as a social or a means of communication, right? So instead of talking on chatting, or Facebook, or whatever, to actually looking at your phone is like a a tool. So it actually is like a service provider to you. In India, it is still in its infancy when it comes to this.
So does your experience in Southeast Asia give you leverage when entering India?
I don’t think so, I think the Indian market operates more like the mainland [China], at least for our business.
So how has Southeast Asia performed for your business?
It’s been alright but it’s so fragmented. Everybody talks about the Southeast Asia opportunity. 630 million people in the region and Indonesia alone has 300 million people – they get so excited. But when your company has a high-level of offline presence like us, it’s not just like a game.
The complexity of being scalable but local, is why there are very few good tech startups that come out of Southeast Asia. Have any of those who have IPO-ed have an offline presence? The biggest startups are Grab and GOJEK, which people are excited about and they’re not bad companies – they’ve actually done a pretty good job to navigate Southeast Asia. So while the region has a big opportunity, it’s very hard to really grow and sustain the business because of the local nature of each culture.
And how do you tackle each market in the region?
We hire local people to run the business. We also don’t try to grow just to grow. We try to spend enough time to figure out the local market before we invest heavily in it. At the beginning, the growth in cities might be a bit slow, until we figure out where we can create value, and then we start to invest more money. So this is how we’ve approached it.
For example, in Taipei, it’s not Southeast Asia, but it’s one of the markets that runs on the same product and tech. In Taipei, they need a fa piao (发票) – it is like a government receipt. No other market in Southeast Asia needs anything like this. But you can’t operate in Taipei without it – legally. So do you go build that, and then customise your product for just that? That’s time and resources that you are spending on a small market.
And so you come across these choices all the time, vehicle restrictions in different cities, for example, the ERP (electronic road pricing) in Singapore – do you let that happen offline – which is still happening, or do you go build the technology to support it? So you do these – and then you multiply the number of countries in Southeast Asia and then the number of languages and then building – so it’s more about building a good product for Southeast Asia is very, very hard.