For Indonesia’s startups catering to Indonesia’s micro, small and medium enterprises (MSMEs), their focus on the underserved segment, especially the country’s millions of mom-and-pop stores (warungs), continues to bear fruit.
After a strong fundraising performance last year, companies seeking to digitalise MSME operations in the archipelago are now set to raise at least another $200 million in the coming months.
MSME bookkeeping apps BukuKas and BukuWarung are set to raise around $60 million in new funding each, while FMCG supply chain platforms GudangAda and Super are in talks to secure fresh capital of $75 million and $30 million, respectively, DealStreetAsia has learnt.
These fundraising negotiations are set to continue the momentum seen in the first quarter of this year.
Bookkeeping app BukuKas started the ball rolling in early January when it announced a $10 million Series A round led by Sequoia Capital India. It was followed by B2B commerce company Ula, which closed a $20 million Series A round in the same month. The month of February saw accounting startup BukuWarung secure an undisclosed amount of capital from Silicon Valley-based investor Rocketship.vc.
The additional capital expected to flow in is set to accelerate digital transformation in the MSME market while also pitting these cash-loaded startups against each other.
In the supply chain space, B2B FMCG marketplace GudangAda told DealStreetAsia it is looking to wrap up a $75 million funding round. Super, a social commerce startup that helps supply FMCG products to warungs and agents in rural Indonesia, is understood to be raising a new round of $30 million. Super, however, claimed the information was incorrect.
We had also reported earlier this month that B2B commerce platform Sinbad was in advanced talks to raise a new round of about $15-20 million.
These three companies operate in a space occupied by a host of venture-backed tech companies, including specialised players such as Ula and Warung Pintar. At the same time, fintech platform AwanTunai has also expanded into the supply chain game.
While these players may differ in the business models they adopt, they are all ultimately vying for a slice of the same demand pie: the warungs and micro-businesses.
To add to the crowd, a number of tech giants have also rolled out services that help warung owners replenish their stocks, such as Bukalapak (Mitra Bukalapak), Tokopedia (Mitra Tokopedia), Blibli (Blibli Mart), Gojek (GoToko) and Grab (GrabKios).
In February, the market witnessed the first consolidation in the B2B commerce space when Warung Pintar acquired Bizzy, which focuses on the FMCG supply chain, for $45 million.
|BukuWarung||Bookkeeping||Quona Capital, East Ventures, AC Ventures, Golden Gate Ventures, Tanglin Venture Partners, Michael Sampoerna, Snapdeal founders||Series A|
|BukuKas||Bookkeeping||Sequoia Capital India, Speedinvest, S7V, January Capital, Cambium Grove Capital, Credit Saison, Hustle Fund, Whiteboard Capital, 500 Startups||Series A|
|Ula||Supply Chain||Sequoia Capital India, Lightspeed India, SMDV, Quona Capital, Alter Global, Patrick Walujo, WillyArifin, Sujeet Kumar, Vaibhav Gupta, Amod Malviya, Rohan Monga, Rahul Mehta||Series A|
|GudangAda||Supply Chain||Sequoia Capital India, Alpha JWC, Wavemaker Partners||Series A|
|Warung Pintar||Supply Chain||SMDV, Vertex, Pavilion Capital, Line Ventures, Digital Garage, Agaeti, Triputra, Jerry Ng, EV Growth, OVO||Series B|
|Super App||Supply Chain||Undisclosed||Series A|
|Ralali||Supply Chain||Arbor Ventures, TnB Aura, AddVentures, Qualgro, Jo Hirao, SBI Group, Digital Garage||Series C|
|GrabKios||Bill Payment, Supply Chain||Grab||Acquired by Grab|
|Tokopedia||PPOB, Supply Chain, Bookkeping||Softbank, Alibaba, Sequoia Capital India, East Ventures, CyberAgent Capital, Indonusa Dwitama||Series G|
|Bukalapak||PPOB, Supply Chain, Bookkeeping||Emtek, Mirae Asset-Naver Asia Growth Fund, Ant Financial, 500 Startups, Shinhan Financial Group, GIC, aucfan Co||Series G|
|Wahyoo||Supply Chain, Operations Management||Agaeti Ventures, Kinesys Group, Chapter1 Ventures, SMDV, East Ventures, Rentracks||Series A|
|Blibli||PPOB, Supply Chain||Djarum Group||-|
|Ayoconnect||PPOB||Finch Capital, STRIVE, Convergence, Miten Sampat, Aakrit Vaish||Series B|
|Payfazz||PPOB||Y Combinator, Insignia Ventures Partners, ACE & Company, Quiet Capital, BRI Ventures, B Capital Group, Tiger Global Management, Vertex Ventures||Series B|
|GoToko||Supply Chain||Gojek||Series F|
The interest in the warung segment has become increasingly apparent. According to a 2019 CLSA report, Indonesia’s 6 million warungs accounted for 65-70% of the country’s retail sales.
The COVID-19 pandemic has emphasised the importance of digital B2B solutions for both warungs and brands. A 2020 report by consulting firm Redseer showed that B2B e-commerce FMCG startups reported a moderate growth of 10% in order volumes and a 4-5% rise in average order value due to COVID-19. It notes that the rise in the frequency of orders was due to lockdown measures as warungs could not visit their offline wholesalers to procure products.
With the opportunity so big, and competition increasingly fierce, the need for larger pools of capital may be justifiable.
GudangAda, for example, said that its upcoming $75 million capital infusion would be used not only to boost the company’s operations but also to build out additional services such as logistics and financial services for its users. “Strategic investors can help GudangAda complete the B2B infrastructure it plans to build,” said founder and CEO Stevensang, whose company also targets medium-sized retailers.
The Alpha JWC-backed company, which connects wholesalers and retailers through its B2B marketplace platform, claims to have started the year with over 300,000 users and targets to onboard 750,000 to one million users by the end of the year.
Another vertical in the MSME segment that has started to see an enthralling competition unfolding is accounting solutions.
Going head to head in the space are BukuKas and BukuWarung that were launched around the same time in late 2019 and have since amassed a similar quantum of funding of around $20 million, according to Crunchbase. Both companies are currently raising a new round of about $60 million, DealStreetAsia has learnt. The companies declined to comment when contacted.
Interestingly, their numbers are also comparable. BukuWarung claims to have over 5 million registered merchants on its platform. Meanwhile, BukuKas, which earlier this year launched a social commerce app called Tokko, says it has over 6 million merchants registered across its two apps.
With substantial financial backing set to be closed soon, the two are poised for continued rapid growth in the market.
“We believe there will be several unicorns coming out of this space in the future due to the large market size,” said BukuWarung co-founder and president Chinmay Chauhan. “Solid execution on product and backed by a solid investor base is key.”
BukuWarung is backed by AC Ventures, East Ventures and Quona Capital, while BukuKas’s investor base includes Sequoia Capital, Saison Capital and January Capital.
While the two appear to be running a two-horse race, e-commerce unicorns Bukalapak and Tokopedia are quietly foraying into their territory as an extension of their MSME/warung supply chain business. These bigger companies could emerge as forces to be reckoned with.
Bukalapak, which has made O2O a priority and has onboarded more than 6 million offline MSME partners, earlier this year rolled out a bookkeeping feature on its Mitra Bukalapak app for its partners, most of whom are warung owners. Tokopedia has also launched new features on its Mitra Tokopedia platform resembling bookkeeping services.
While the adoption of these platforms among warung owners is growing rapidly, monetisation may prove to be a challenge. The bookkeeping platforms are free of charge, and companies look to make money through additional offerings such as financial services.
In the FMCG supply chain space, players either offer a marketplace connecting wholesalers and warungs and charge a small commission for each transaction, or play the role of distributors which also involve small margins, unless they are able to source their supplies directly from manufacturers, who already have well-established distribution channel and mechanism.
According to Sequoia Capital, the proliferation of tech startups around MSMEs is not exclusive to Indonesia. Tech startups across Asia, the firm said, are identifying opportunities in fragmented offline markets where small businesses with the added layer of technology can better optimise resources and capital so that they can focus on long-term growth.
The VC firm is one of the 43 investors that made bold bets in newly-established warung enabler startups in Indonesia last year, having backed Bukukas, Gudangada and Ula.
Sequoia India managing director Abheek Anand admitted that the MSME-SaaS thesis has some risks attached to it. However, he believes that some players can be successful due to the depth of the market and the quality of their teams.
In terms of competition, Anand believes the winners in the market will possess a combination of high-quality product and a strong consumer-centric product design and distribution strategy. Additionally, the ability to leverage unique ways to monetise will also prove to be key.
“A lot of this will play out in the next few quarters, and the winners in this space are the ones that are going to be able to scale most capital-efficiently as well as effectively monetise at scale,” he said.