Month: May 2019

The rise of ride-hailing applications has transformed the commuting habits of millions of citizens around the world. But its effects have been greater felt in developing countries where the amount of traffic has been increasing at an alarming rate; public transportation has become inefficient, inadequate, or too expensive; and populations continue to grow but public infrastructures remain lacking.

In Indonesia, ride-hailing company Go-Jek has partnered up with over a million of drivers. To compare, Astra International, the biggest Indonesian conglomerate, only has 226 thousand people working full time across its 226 subsidiaries. Within just a few years, the Go-Jek has created a super app with enormous economies of scope, offering numerous services such as food and parcel delivery, cleaning services, repair & maintenance services, etc.

The company’s digital wallet, Go-Pay is widely considered to be the biggest e-wallet in the country and is expected to play an important role in providing credit to Indonesia’s unbanked population.  The economic and social impact that Go-Jek is having in Indonesia is immense.

Looking at the success story of Go-Jek in Indonesia, we saw opportunities in ride-hailing apps in African countries and Bangladesh. These countries have similarities to Indonesia: such as cogested traffic, high population density, and an attractive economic backdrop.

Being Safe(boda) in Uganda

Safeboda started out in Kampala, the capital of Uganda, which has 1.4 million people and is plagued by heavy traffic. The city has 10 fatalities per day due to road traffic accidents – the highest level in East Africa. The solution for its heavy traffic, like Jakarta, exists in conventional motorcycle taxis called Boda-boda. According to Uber Africa’s General Manager Alon Lits, there are nearly 2 million weekly motorcycle taxi trips happening in Kampala per week.

Ricky Rapa Thomson, one of the co-founder of Safeboda who used to make a living as a motorcycle taxi driver.
Source: PC Tech Magazine

However, conventional motorcycle taxis are often unsafe, require the client to negotiate prices and drivers often (claim to) have no change. The emergence of digital ride-hailing services has created a massive opportunity in the city.

Safeboda started in 2018 with only 1,000 drivers. By end of the year, they had more than 8,000 drivers registering over 1 million rides a month. They’ve also expanded to neighbouring country Kenya, with plans to expand to East Africa.

Carving a Path(ao) in Bangladesh

Meanwhile, Bangladesh, home to 165 million people and the fifth largest mobile market globally, is another attractive market for a ride-hailing platform. In the past decade, the Bangladesh economy has consistently grown and beat most regional peers; their GDP growth averaged at 6.6% and is expected to record an impressive 7.8% growth in 2018.

Ride-hailing Pathao has had the first mover advantage in this area and has financial backing from a strong strategic partner.

Started by three graduates from a local university in 2015, Pathao’s journey wasn’t easy considering that before the company began, Bangladesh had no culture of motorcycle taxis. They went on the ground and pushed this concept to the market. Eventually, they found success.

Hussain M Elius, co-founder of Pathao spoke at TED. Click here to watch (left), Pathao’s drivers (right)
Source: tedxdhaka.com.bd, Thedailystar.net

In November 2017, Go-jek participated in their series A round which helped them expand to multiple services such as Pathao Food and Pathao Cars. According to Techcrunch, Pathao is valued at over US$ 100 million based on their pre-series B US$10 million round led by Go-Jek.

Aside from being in a good position to become the leading ride-hailing platform in the country, the company, has provided opportunities for millions of Bangladeshis. According to its founder and CEO, drivers on its platform are able to make more than twice the average salary in Bangladesh.

Jumping on the ride-hailing wagon

We wonder whether Pathao and Safeboda can change South Asia and Africa the way Go-Jek and Grab have changed Southeast Asia. So far things seems to be on the right track.

 

 

 

 

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There must be something in the water in Indonesia. Because in the span of just three years, the country managed to produce four unicorns – startups the have reached at least US $1 billion in valuation.

Young people creating new businesses at scale is relatively new in Indonesia, as for decades, Indonesia’s formal economy was dominated by few incumbents. After the country’s independence in 1945, cronyism ruled as the prosperity of individuals remained highly dependent on personal relations with leading members of the government.

The shift from oligarchy to unicorn maker is remarkable, driven by the unique combination of a supportive government, the public’s increased access to technology, and the youth’s growing desire to launch their own business ventures.

Power in the Hands of Few
During the era of President Soeharto, the South East Asian nation saw the rise of politically connected companies who, together, came to control most of the formal economy.

Despite deregulations that had monopolies and privileges revoked in the late nineties, the political and economic systems of Indonesia still have features of an oligarchy today.

In 2014, for example, the four largest privately-held Indonesian conglomerates that have assets listed on the Indonesia Stock Exchange (IDX) are the Astra Group, Salim Group, Lippo Group, and Sinar Mas Group. Combined, all listed companies controlled by these four groups accounted for 17.50% of total market capitalisation on the IDX.

In addition, with 25.84% of total market cap, state-controlled listed companies (SOEs) also remained dominant players in the country’s economy.

Because of all these factors, middle-class hopes for a stable income and secure future have typically rested on a job as civil servant, which guarantees life-long employment and an early pension – not exactly an environment that cultivates innovation. However, things are now changing in Indonesia.

Tech Offering Opportunities to Many
Not only is the country’s current president, Jokowi, the first president who doesn’t belong to the traditional political, religious, or military elite; Indonesia’s tech scene is also rapidly transforming the playing field for aspiring entrepreneurs.

Young entrepreneurs are breaking through barriers on the back of tech, connectivity, and a supportive government. The proliferation of smartphones and the creation of digital applications has enabled young entrepreneurs to by-pass the existing SOE- and conglomerate-dominated market structures and spawned four unicorns in just three years’ time.

We’re talking about ride-hailing company Go-jek, travel site Traveloka, and market places Bukalapak and Tokopedia. New unicorns are expected to rise in the underdeveloped education and healthcare sectors, with the potential to leapfrog Indonesia’s development.

With Help from The Government
This, of course, could not have happened without a supportive government. While governments in other countries like Hong Kong prohibited ride-hailing companies under the pressure of incumbents, the Indonesian government resisted such pressures and tried to balance the needs of both the public and the drivers.

To further support Indonesia’s digital ecosystem, the government also developed several programmes. These include SMEs Go Online; Farmers and Fisherman Go Online; and Nexticorn, which aims to provide start-up founders with access to suitable investors. The government also pledged to strengthen its e-commerce roadmap and digital certification this year.

76 year old muslim scholar, Jokowi’s Vice President-elect, Maruf Amin mentioned that Indonesia soon will have a decacorn (a start-up valuation with over US$ 10bn).
Source: Tribunnews

The role of Indonesia’s government has shifted from being just a regulator, to now more of a facilitator.

Looking to the Future
The success of tech in the country has inspired many, initiating a positive feedback loop. In economic literature, entrepreneurs not only bring new goods to the market, but also generate information about the profitability of new activities. And in Indonesia, the four mentioned unicorns have fueled optimism over the digital economy, inspiring the Indonesian youth and attracting investors in the process.

Mobile commerce start-ups now rank as the best companies to work for among millennials. In addition, according to a 2018 survey by IDN Research Institute, a staggering 69.1% of millennials want to be entrepreneurs. And according to the Ministry of Cooperatives and SMEs, Indonesia’s entrepreneurship ratio doubled from 1.55% in 2014 to 3.1% in 2017.

All of this means good news for aspiring entrepreneurs with innovative ideas looking to launch, as well as existing business owners hoping to expand. For us as investors this implies that we need to carefully consider the vulnerability of indonesia’s incumbent conglomerates and SOE’s, as well as the opportunities that Indonesia’s youth are bringing to the table.

Indonesian Millennial Superheroes: William Tanuwijaya (Tokopedia), Diajeng Lestari (HijUp), Jonathan Sudharta (Halodoc), and Nadiem Makarim (Go-jek)
Source: Kalimat.id, Moneysmart.id, Otcdigest.id, vbprofiles.com

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