After five years leading Uber’s operations in Western China and later, Indonesia, Tiger Fang officially stepped away from the ride-hailing game when he co-founded Kargo Tech late last year to tackle inefficiencies in the trucking space in Indonesia.
While the B2B logistics space is a new sector for him and the handful of ex-Uber colleagues he has roped in, Fang said he has found on-demand trucking space to have notable similarities with ride-hailing, allowing him and his team to leverage past know-how to accelerate the company’s growth in its early months of establishment.
“Most of the conversations we are having with truckers are almost the exact same conversation we had with rental car companies when we first started Uber. Again, Uber was in the logistics of moving people – smart cargo. Kargo is in the logistics of moving freight. The biggest difference is being able to match the right truck with the right cargo at the right time at the right price,” he said in an exclusive interaction with DealStreetAsia.
Kargo Tech can be said to be a revamp of an older web-based e-trucking company called Kargo.id, which Fang acquired last year. Following the buyout, Fang and former Kargo.id founder Yodi Aditya teamed up to build the new venture but decided to keep the name to retain the older startup’s quarter of a million monthly website visitors.
Combining the co-founders’ distinct network and expertise, and backed with a seed funding of $7.5 million from a host of investors including Uber co-founder and former CEO Travis Kalanick’s 10100 Fund, Kargo claims to have become the largest trucking network in Indonesia in just six months of operation.
This is despite increasingly stiff competition from a number of other VC-backed local peers such as Golden Gate-backed Ritase, Genesia Ventures-backed Logisly and EV Growth-backed Waresix, which are all looking to tap the opportunity in Indonesia where logistics costs are as high as 24 per cent of the country’s GDP.
Interestingly, while it is currently focused on serving the Indonesian market, Kargo sees the country as a launchpad for it to eventually become Southeast Asia’s biggest trucking platform. The company says it is currently already in talks with a few of its clients to potentially serve them in other geographies.
“Our clients are global companies with presence and logistics needs in every market they are in. Our main focus is on serving them well in Indonesia. If we can do this well, I believe our customers will help us expand,” Fang said.
Edited excerpts of an interview with Kargo co-founders Tiger Fang and Yodi Aditya:
Of all the sectors and industry you could have jumped into after Uber, why did you choose trucking? What opportunity did you see in the sector?
Fang: Before Kargo, I was the country launcher and GM of Uber Indonesia. Uber had a big role in shaping the ride-hailing industry in Indonesia. We helped to launch the digital revolution in bringing motorbikes and private cars online. I think digitalization of trucking and logistics is not a question of if, but of when. At the time of the Uber-Grab merger, we were operating at a pretty significant scale, doing millions of trips every week across 40 cities in Indonesia. Uber was in the logistics of moving people, Kargo is in the logistics of moving freight. We hope Kargo can bring the technology, in conjunction with the operational excellence & execution speed of the team from Uber and various other top tech companies into the trucking space.
Aditya: Our president [Jokowi] will invest billions of dollars into infrastructure, building new highways and ports connecting all of the islands in Indonesia. I think this is truly great. However, building physical infrastructure is just the first step in improving logistics efficiency. Kargo is building the digital infrastructure that will make all of the underlying assets more utilized, starting with trucking, which is 80 per cent of the logistics spend. This is will be a key lever and is in line with our government’s vision to move Indonesia forward.
Can you explain/clarify Kargo Tech’s position in relation to Kargo.co.id? Is it the same company or a totally different entity?
Aditya: Kargo Technologies is a completely different company, vision, strategy, team & tech. Similar name. Kargo.co.id gets a quarter million visitors a month, so we kept that. Tiger and I founded this company to be able to create a truly global platform for trucking, starting in Indonesia.
Kargo launched to serve as a platform for truck owners and not drivers. Is this correct? What is your strategy for inducting these owners onto the platform? Will we see Kargo move towards adding independent drivers too?
Aditya: In our industry, most drivers are not truck owners. Our first product is focused on trucking companies. We have since developed a driver app and enterprise dashboard that will have real-time location tracking, job assignments, invoicing, digital proof of delivery & payment to make sure it’s integrated seamlessly with all systems.
Tell us more about the general trucking landscape in Indonesia. Is it dominated by independent driver/owners or players with a sizable fleet? What are the big pain points?
Aditya: About 75 per cent of trucking companies in Indonesia have less than 20 trucks. We are providing a digital gateway for these trucking companies to be able to find jobs faster, get paid faster, and be able to expand their business. On the shipper side, they are able to track their assets in real-time, have access to the biggest trucking network so they can focus on their core business instead of worrying about moving their freight.
The trucking space is becoming increasingly crowded. How does Kargo differ from the other players?
Fang: It comes down to the speed of execution, the quality of the product and ultimately, whether you can provide value to your customers. Everything else is noise. Yodi has created TMS/ enterprise software for various logistics companies over the last few years, our tech, people & culture will be our secret sauce.
Aditya: I love using technology to solve truckers’ problems. I’ve been in the trenches, spent time with drivers on the road, visited the pools under the highways, the truckstops, I speak their language. No one can get more local than me.
How tight will the competition be in this space? Do you believe this space is big enough for multiple players to scale? Or is consolidation inevitable?
Fang: The market is huge, but I don’t think there’s really anyone else out there with our tech stack, our hustle to win business and the analytical rigour it takes to build an optimized marketplace network at scale. In just six months of operations, we already have won marquee clients and contracts and become the largest trucking network in Indonesia.
At the moment, who do you consider as Kargo’s biggest competition? Could ride-hailing companies, which are expanding into adjacent areas to their core areas, be a potential competitor in the near to medium term?
Aditya: Our competition has always been a massively inefficient offline network. I’ve worked in this industry for over five years, and we are not even close to a 0.1 per cent penetration.
Fang: Kargo is in the B2B space, completely different customers on both sides of the marketplace.
While there are obvious differences between on-demand trucking and ride-hailing, do you see notable similarities between the two that you and peers could learn from?
Fang: It’s going to be a massive offline to-online endeavour. It helps that we have had experience building Uber from scratch. Most of the conversations we are having with truckers are almost the exact same conversation we had with rental car companies when we first started Uber. Again, Uber was in the logistics of moving people – smart cargo. Kargo is in the logistics of moving freight. The biggest difference is being able to match the right truck with the right cargo at the right time at the right price. This is a much more complicated problem than just matching people with the closest available car/motorbike, which is precisely what makes us so much more excited about the opportunity.
Unlike a B2C model like ride-hailing or food delivery, trucking is largely B2B and may not require the cash burn strategy that B2C often needs to acquire customers. Can you take us through the economics of the model?
Fang: There are many ways to monetize. We’ve successfully piloted a subscription model with hundreds of paying customers. When we match shippers with transporters, we are able to take an industry-leading take rate, validating the business model and the unit economics. Today, we are focused on building liquidy and the network, so we invest in our expansion to new enterprise customers and geographies. Traditional brokers in the business charge up to 20 per cent commission for each shipment.
China’s Full Truck Alliance has claimed to have hit cash flow breakeven as it moves towards an IPO. Do you think the path to profitability in a business like this is way shorter?
Fang: We are the only true pure-play trucking platform in Indonesia, we have the first-mover advantage in this category. Our technology and operational execution is our moat. We have had positive unit economics from the start, so I think the pathway to profitability for Kargo will be much shorter.
Would Kargo focus only on Indonesia or do you plan to expand overseas in the short term?
Aditya: We are building Southeast Asia’s biggest trucking platform, starting in Indonesia.
When do you see yourself starting to expand beyond Indonesia? And which countries are likely to the first destination for Kargo?
Fang: Our clients are global companies with presence and logistics needs in every market they are in. Our main focus is on serving them well in Indonesia. If we can do this well, I believe our customers will help us expand. In fact, we are already having conversations with a few of our clients on how to help them with managing trucking companies in other geographies.
Do you think your model can be easily duplicated in different SEA markets? From your observation, do you think the countries share similar problems? Or does each market have marked differences in terms of challenges in the trucking industry?
Fang: Southeast Asia has some of the highest logistics costs in the world. Many countries have a fragmented supply base like Indonesia. Our model is made for the global market.
Could you talk us through how the investment from Kalanick’s 10100 fund came about? Was he looking for ex-Uber founders or did you approach him for funding? Has he been involved in helping the company beyond providing capital backing?
Fang: I worked with Travis in my Uber China days when I used to be the GM of Western China. During that time, we ran one of Uber’s biggest operational P&L in the world. Travis, along with a few super angels invested in Kargo, including Patrick Walujo & Pandu Sjahrir because they believe in Kargo’s mission of digitalizing this industry and this business model, whose time has come. Everyone has been very helpful and supportive with helping Kargo grow.