Indonesian SME-focused SaaS startup Mekari, which counts the region’s biggest startups Gojek and Ninja Van among its clients, snagged a Series B and C funding last year, in the latest major milestone for company’s CEO Suwandi Soh.
Soh has spearheaded the company’s growth through the inorganic route by sealing three M&A deals and consolidating them into one market-leading entity.
It all started in 2014 when Soh, who had been advising corporate managers for almost a decade, felt the calling to jump into the deep end.
Disappointed at the growing inefficiencies in human resource administration, Soh was drawn to set up his own venture Sleekr that sought to provide cloud technology services for HR and administration professionals in Indonesia.
The decision to deep-dive into cloud service for SMEs in 2014 was, in hindsight, an inspired move as it gave the company an early-mover advantage. For Soh, at that time, however, it was just a matter of empowering SMEs with cloud technology, which he believed was “most-suited for the Indonesian market” due to its efficiency and practicality.
“The cost of workers is ever-increasing, office rental is more expensive. In Jakarta adding one employee costs around Rp 8-10 million a month for wages, allowance, office space and so on. That kind of money is driving businesses to think about technology to make them more efficient and productive,” he said.
King of consolidation
Sleekr quickly branched out into accounting when it sealed a deal to acquire accounting platform Kiper in 2016.
The deal, Soh recalls, was a necessity, as “accounting was another basic function that Sleekr needed to have” as part of its vision to become an operating system for SMEs.
Subsequently, in 2018, Sleekr sought to reach M&A agreements with two of its strongest competitors. It acquired East Ventures-backed HR solutions platform Talenta in May 2018 and merged with accounting platform Jurnal a few months later.
The following year, Mekari, the new consolidated company was launched. Led by Soh as CEO alongside all but one of the founders of the consolidated companies, Mekari claims to have grown 3x since its merger, serving thousands of SMEs in eight cities.
When asked for the ingredients of successful mergers, Soh points at two factors: synergy and people.
“The strategic rationale needs to be clear and of course, you need to be able to see the potential synergy, whether in terms of product, operation or market power,” said Soh, whose exploits make him the most prolific founder outside of those in the unicorn club, when it comes to M&A deals.
“Secondly, in any M&A the people within those companies are important. It is important for the teams to understand how the M&A can bring improvements, whether it’s to the company or to the customers. The key is to communicate and make people see that, and for the company to walk the talk,” he added.
More competition anticipated
With little meaningful competition to begin with, the consolidation naturally made Mekari the dominant player in its space. Its HR cloud solution, which goes by the brand of Talenta, helps SMEs manage employee information, provide employee self-service (reimbursements, time off, etc.), calculate payroll, and set up policies. Its accounting product, Jurnal, allows SMEs to send invoices, receive payment, pay their vendors, generate financial reports, and collaborate with their accountants.
To add to these two core products, Mekari launched KlikPajak, a tax management service that integrates tax API with SMEs ERP, and enables them to file and pay taxes online.
With those three core products, Mekari does not face any direct competitors as a company. However, it does compete with different players in each of the verticals it operates in. In the HR cloud solutions space, for example, Mekari’s Talenta competes with GreatDay HR, Golden Gate-backed Gadjian, and Finch Capital-backed Jojonomic. In accounting, Jurnal is pitted against Paper.id and new startup BukuWarung, while its new tax product competes in a market that had been occupied by existing players such as OnlinePajak.
According to Eddi Danusaputro, CEO of Mandiri Capital Indonesia, Mekari is in a position to fend off competition, despite the emergence of companies in the same field, given the company’s multiple offerings.
“Their competitive edge is their product lineup, so when they go to an SME/potential subscriber they can offer a comprehensive solution,” Danusaputro said. One thing the company needs to focus more on in order to become a true market leader, he added, is customer retention.
To improve and expand its services for potential and existing clients, Mekari has been aggressive in its fundraising exploits, albeit largely under the radar.
The company, which has never announced any of its funding rounds, has raised three funding rounds in just over a year. In December 2018, it raised an undisclosed amount of Series A funding from a host of backers including Midplaza, MoneyForward Japan, East Ventures, Mandiri Capital, and Beenext. Though he did not divulge details, Soh said the company closed its Series C funding round at the tail-end of last year. The round was joined by existing investors but led by a new backer.
The fresh capital, he said, is being used to enhance Mekari’s engineering capabilities and product development, as well as to grow the market through education initiatives.
Despite all its efforts to be the leader in the Indonesian market, Soh said he sees room for multiple cloud services players to seize the opportunity in the SME market. He expects more founders to try their luck in the HR, accounting and tax space, but also sees some untapped opportunities that new players may choose to focus on.
“At the moment the cloud model that is most visible is models like ours, which I call horizontal SaaS or products that can be used across industries. Going forward, for more innovative entrepreneurs, they will look at vertical niches, for example, SaaS for hospitals, schools and construction. It is in those verticals that we think there will be a lot of opportunities in the future,” he said.
Keeping up with “agile” clients
At the moment, Mekari claims to have over 200,000 individual Talenta users, over 150,000 KlikPajak users, and more than 15,000 SMEs using its Jurnal software, in a market of more than 600,000 small and medium-sized companies, each with dozens to hundreds of employees.
Very much included in the SME category are companies in Indonesia’s tech sector – a segment Mekari seems to have a considerable grip on. Its clients include some of the country’s biggest tech companies such as Gojek, Ninja Van and Fore Coffee, as well as a large number of smaller startups.
Imam Ibrahim Amir, an HR observer and former chief of staff at fintech startup Halofina, believes it is important for a company like Mekari to stay on its toes and ready to adapt to changing needs of clients.
“Mekari will need to grow in line with the needs of many companies because a lot of companies nowadays are quite agile in its growth and organization design, which inevitably has implications to the needs of a company’s people and culture,” he said.
This is something Mekari will invest more energy and resources on going forward, Soh says. One example of how the startup says it quickly adapted to the sudden needs of clients is the launch of a health-related questionnaire function in its Talenta product amid the COVID-19 scare. The feature allows HR admins to comprehensively monitor the wellness of all of its employees in real-time.
“There will be lots of efforts from the engineering and products team to release features that will help HR. For example, we recently released a feature connected to COVID. There will be more of these innovations to make our products more helpful to HR admins and accountants,” he said.
Counting on “attractive” margins
Like all companies, Soh said Mekari is currently suffering from the effects brought about by the COVID-19 pandemic, although the impact for the company, so far, has not been significant. Sales cycles are getting longer due to meeting constraints, which could ultimately result in a dip in the company’s overall performance.
“We will try to evaluate it. It’s only been less than a month, but what we are seeing is that there has been a change in sales approach… It’s still too early to derive a conclusion,” he said.
The virus serves as a setback for Mekari at a time when it has started to explore other revenue streams beyond its main revenue source of product subscription. Soh explained that the company has been making additional money from hosting third-party products and services on its platform such as payment services that have been made available for Talenta and Jurnal users, while also generating revenue from educational activities it organizes for entrepreneurs and professionals.
Mekari was originally targeting to turn profitable next year. However, with the COVID-19 crisis looming large on the industry, the target is likely to be re-evaluated, Soh said.