Ridesharing in Indonesia

Why Gojek’s small stake has big implications for Asean’s unicorns

Extending the ‘growth at any cost’ model is over, as backers call for investments that deliver profits faster. Gojek’s reported cash injection into Indonesia’s Blue Bird Taxi has the potential to flip the script on the region’s biggest private companies.

Southeast Asia’s dominant unicorns, notably ride sharing and food delivery companies Grab and Gojek, are vying to become the super-app choice for the Asean region. Following Grab’s acquisition of Uber’s Southeast Asia operations in 2018, at the time it appeared the two were headed towards a ‘winner takes all’ battle that has become synonymous with fast growing tech companies.

Entering 2019, this narrative remained unchanged, as capital  faced minimal resistance flowing into rapidly growing business disruptors amid a low interest rate environment and sluggish global growth backdrop. Tech companies globally were looking to build monopoly-like dominance across a variety of sectors, equating current market share positioning to future income channels.

But twelve months later, it appears that reality disrupted this storyline.

Ride sharing companies Uber and Lyft listed with anemic fanfare, narrowing the valuation gap between private equity expectations and actual public demand. By the fourth quarter, other tech companies also experienced a ‘capital winter’ where stretched valuations were contracting. OneConnect Financial Technology, backed by PingAn and Softbank, came to the market lower than SoftBank’s valuation of $7.5 billion. Bitcoin mining gear maker Canaan witnessed a third of its market cap slip after listing.

With global tech companies witnessing a valuation pullback, industry questioned the outlook for Asean unicorns. Would they follow the script of 2019 or follow a different path?

As it stands, it appears the unicorns have taken a different route, at least for the time being.

“There is no desire to live outside our means,” said Ming Maa, president of the SoftBank backed Grab, which raised over $9 billion in 29 rounds, in an interview with the Financial Times in December. “Our current business plan does not require any additional capital being raised by outside investors.”

Grab’s closet competitor, Indonesia focused Gojek, echoed this sentiment and prides itself on being less capitalised than its rival, having raised $3 billion in 12 rounds.


Their actions appear to match their words. Already profitable in key markets, Grab is confident the entire business will be in the black sometime in 2020, due in part due the rapid growth in the food delivery business, which accounts for 20% of Grab’s total gross merchandise volume (GMV), compared to 5% in 2018.

In December last year, Gojek streamlined their services, discontinuing selected services from its GoLife platform. But around this time Gojek also reportedly paid $30 million for a 5% stake in local taxi operator Blue Bird, valuing the company at $600 million, a 30% premium to the current price, according to Bloomberg.

Though a Gojek spokesperson speaking to FinanceAsia declined to confirm the deal, the two companies have publicly agreed to build on their collaboration since 2017. Currently, taxi bookings can be made through Mybluebird and Gojek apps.

Though small, the moves by Gojek speaks volumes about its future business. Besides streamlining the business, a growing minority interest into a physical taxi company would offers complimentary benefits that play on each other’s strengths and improve operational efficiencies. Gojek, a rideshare app, while Blue Bird, a taxi operator, which, by definition, is a rideshare company.

Particularly when investors are becoming more vocal about capital deployment, the tie-up is scalable and complimentary, especially since Gojek acquired the most coveted prize for tech companies: data.  For $30 million minority stake, Gojek has access to a data pool of 23,000 taxis, approximately $1,300 per taxi, which will monitor everything from the driver, the car, and the passenger. Blue Bird did not respond for comment.

“Data is fuel for tech companies but can only get them so far” says Neil Mascarenhas, a portfolio manager at Hamon Investment Group. “Their ability to control the customer experience as they achieve scale has proven difficult, hence such tie ups are inevitable.”

When Grab and Singapore Telecommunication formed a consortium to apply for a digital full bank licence in Singapore, the partnership was aimed expanding its digital payment platform and develop a credit score for those unbanked in Southeast Asia. Building any future digital business relies on this data pool.


For much of the rivalry, Gojek was cited for falling behind Grab’s more aggressive growth strategy. But with the script flipped, the attention shifts to whether Grab is doing too much.

“GMV become less significant to shareholders” commented a buy-side analyst for a mid-size Asia equities fund not authorized to speak to the press. “If it becomes more expensive (via subsidies and customer acquisitions costs), it becomes less impressive.” 

Grab has raised more money than Gojek, but with SoftBank as a strategic shareholder, could the company modify its approach? Priority of profits appears to be moving to the forefront, as even SoftBank, who is facing pressure to turn around some underperforming investments, has found it challenging to raise significant funds for its second Vision Fund, according to Reuters

In this environment, Asean’s unicorns may prove that less is more. With both Grab and Gojek each offering a payment platform, both are expected to draw more regulatory attention as they add additional traditional banking services such as bank loans and microlending. Typical financial institutional regulations, such as compliance code of conduct or capital reserve requirements, sit in the periphery as future challenges for both companies.

Partnerships over buyouts may become the compromise going forward. With no desire to take on capital requirements faced by traditional banks, a Grab-Singtel partnership allows the incumbents to keep larger clients while unbundling digital services for e-payments, benefiting the consumer. Gojek is also unlikely keen to inherit the costly regulation of a taxi operator but will still be likely be able to cross sell other services.

Both Grab and Gojek appear to recognise that prize for a ‘winner takes all’ super app may soon be their undoing.

¬ Haymarket Media Limited. All rights reserved.
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