If you thought the battle between Southeast Asia’s ride-hailing leader Grab and its Indonesia-headquartered foe Gojek couldn’t get any more intense, it has.
Gojek pushed its business across Southeast Asia last year, and Singapore-based Grab has spent the last two years trying to unseat its rival in its native Indonesia. The fundraising battle has gone stratospheric with both sides raising billions; Grab’s last round was $6.5 billion and its investors span SoftBank, Toyota and Microsoft, while Gojek is in the process of completing a round of at least $2 billion from a cast of backers that include Google, Tencent and Mitsubishi.
Then, in an unexpected curveball, Gojek’s founder and CEO Nadiem Makarim announced his departure from the company. His exit is a win for Indonesia, since Makarim quit the job to become minister of education and culture in President Joko “Jokowi” Widodo’s cabinet.
The unusual move makes Makarim, only 35 years old, the youngest minister Indonesia has ever seen. A more classic exit for contemporary startup founders would have come after a milestone such as an acquisition or IPO. Or involuntarily after a major misstep. Neither scenario is true in Gojek’s case.
Makarim’s sudden departure had some at Gojek’s arch nemesis, Grab, assess their own leader’s potential to follow a higher calling.
“Our biggest risk is Anthony starting a church somewhere,” an executive at Grab told The Ken under the condition of anonymity to avoid upsetting CEO Anthony Tan, who is known for his devout following of Christianity.
Tan may well become a pastor in the future, but for now his faith and efforts are entirely focused on ride-hailing and the myriad of other “super app” services that Grab invests in. Especially as it rivals Gojek in the bid to become the daily app for Southeast Asia’s 600 million-plus population.
The biggest challenge Gojek will face without Makarim at the helm is maintaining continuity and alignment inside of what has become a gargantuan structure.
All the while both companies are facing increasing pressure to improve their financials. Some observers have suggested Makarim’s exit may lead Grab and Gojek towards an inevitable deal. That would put an end to their costly rivalry.
The new era for Gojek
Grab has a more traditional corporate look to its structure, but Gojek is a company made out of companies. Its top management includes entrepreneurs whose startups were strategically acquired, often with their entire teams in tow.
That might work in the firm’s favour, because the units act independently, but it’s also a recipe for friction.
“Gojek has a very unique structure that can allow it to survive major leadership change,” Willson Cuaca, co-founder and managing partner of VC firm East Ventures, told The Ken in an interview. “As long as they still align their vision.” East Ventures is a rare example of an investor that has portfolio exits to Grab and Gojek, having sold payment company Kudo and ticketing startup Loket, respectively.
The other unknown is what influence, if any, Makarim continues to wield on Gojek, and how he will fare in the political arena. He now sits at Jokowi’s table but was allowed to keep his stake in the company, with Gojek calling him a “passive shareholder”.
“[Makarim] has managed many people and built a big company in very quick time; the only thing he hasn’t experienced is bureaucracy,” said Cuaca. Other observers from the tech industry have pointed out that Makarim is not aligned with any political party at the moment, but that he may consider doing so in the future in order to advance his agenda.
Driven by “fear of missing out”
“I’d be surprised if [Makarim] isn’t still calling the shots,” one tech executive who worked closely with Makarim before he started Gojek told The Ken. “Kevin [Aluwi, the co-founder, now co-CEO], for one, still looks up to him.”
Makarim has been synonymous with the company’s name. He often speaks about the origin of Gojek in interviews or events, but the story comes alive most vividly when retold on Gojek’s in-house podcast Go Figure, hosted by Makarim with one or two Gojek leaders as guests.
There have been no new Go Figure episodes since July. It’s around then that rumours of Makarim’s venture into politics became more concrete. Regardless, in the most recent episode, Makarim spoke with Aldi Haryopratomo, the CEO of Gojek’s payments spinoff Gopay, and Ryu Suliawan, the head of merchant services. In doing so, he revealed a fascinating snapshot of the bond that they carried from university into Gojek.
The three met at Harvard Business School (HBS) and were the only Indonesian nationals in their cohort, which immediately made them gravitate towards one another.
Haryopratomo had already started his own company, Ruma, after gathering experience as an early employee of US microfinance startup Kiva. Suliawan came from a Japanese-Indonesian business family and while at HBS had started working on the payment processing startup Midtrans.
Haryopratomo and Suliawan, already further along on their entrepreneurial paths, were going around pitching and fundraising for their ideas. “Seeing you guys in action at HBS, I had this inherent ‘fear of missing out’ building in me,” said Makarim in the podcast. “Yo, if they can do it, so can I, right?!”
It must have been particularly satisfying for the unabashedly competitive Makarim that, years later, at the end of 2017, his startup Gojek ended up acquiring both of the companies his friends had started.
In 2011, when Makarim returned to Indonesia with an MBA, Gojek was little more than a call centre. If a customer dialled the number on its website, it would dispatch a motorcycle driver to them; either to run an errand such as delivering a parcel, or to take a passenger on the back seat. Gojek didn’t even have an app.
It wasn’t until around 2014 that Haryopratomo and Suliawan urged Makarim to go full time with Gojek.
It was a good year. Cab company Uber picked up speed; started its Southeast Asian expansion. It launched in Jakarta in August that year. Elsewhere, the Malaysian taxi aggregator app GrabTaxi—now known simply as Grab—had already launched in several countries in the region, including Indonesia.
VC funding was reaching new heights, too. In October 2014, e-commerce marketplace Tokopedia raised a $100 million round. This was then unheard of.
Growth was inevitable for Gojek.
Both in terms of the number of drivers or merchant partners and employees.
The company has gone from 40-50 employees in 2015 to over 3,000 today—across Indonesia, India, and Singapore. Its geographical expansion to Vietnam, Thailand and Singapore—not to mention more than 20 different services—has seen it ramp up to 2 million driver partners. It also claims to service some 155 million users.
Gojek developed a distinctive pattern in the way it grew its leadership team. It offered leadership roles to people at companies working with Gojek or it acquired their companies outright. One of the early hires to come in this way, Gojek’s co-CEO Andre Soelistyo, was a former director at Indonesian private equity firm Northstar, one of Gojek’s earliest investors. Soelistyo had been spending so much time with his portfolio company that it made sense for him to join the team.
With plenty of cash to go around, Makarim went shopping for companies with specific expertise complementary to what his company needed. He appointed their CEOs as leadership, often taking their entire teams with them.
That is how Gojek chanced up its Group CTO Ajey Gore, and his deputy Niranjan Paranjape, who handles tech specific to the ride-hailing service. Both came from India-based development shop CodeIgnition and formed the backbone of Gojek’s India-based tech team.
One year later, Gojek extended acquisition offers to Haryopratomo and Suliawan’s companies, as well as his former employer Kartuku. Thomas Husted, Kartuku’s former CFO, is now Gojek’s CFO, and Antoine de Carbonnel, another former Kartuku exec, serves as chief commercial officer.
Gojek’s growth was messy at times. In its bid to become a “super app”, or one single app that can solve almost every problem, it launched some new products with great enthusiasm, only to shut them down or spin them out into separate entities.
Grocery delivery service Go-Mart for example was completely scrubbed in 2018 after two years of operations. It has since relaunched but in a much reduced version, with a smaller product offering and no fresh produce. Gojek’s lifestyle services, such as the often-referenced on-demand masseuses, were externalised into a separate app called Go-Life.
Perhaps learning from the need to remove some services from its core app, Go-Play—Gojek’s ambitious plan to enter into the digital content and entertainment space—never launched within Gojek’s main offering. It instead began its life as a standalone app when it launched in September.
Winter winds blow
On the podcast, Makarim slips into soccer parlance, describing some key individuals at the firm, such as himself, as strikers—the players who score the goals and take risks—while there are others, including merchant head Suliawan, who he sees as defenders.
With Makarim moving into politics, Gojek loses one of its most prominent strikers, and an obvious effect that could have on Gojek is that it becomes more defensive, less risk-taking. That transition is inevitable to an extent, given the current climate in which free-spending, mission-driven startups like coworking giant WeWork have come into question, and the general mood is swinging towards better unit economics and focus on core services.
This could spell trouble for Gojek divisions that are loss-making and particularly unproven, because a risk-averse leadership may prefer channeling funds towards things that already work, such as transportation and food delivery.
A shift could diminish the value of one of Gojek’s important assets in the battle with Grab in Indonesia: the value of its brand. That continues to hold a high emotional appeal among Indonesians and that is at least partly linked with Makarim’s charismatic personality and Gojek’s unusual corporate culture.
Makarim’s exit could make way for discussions that would have seemed out of the question before: a possible deal with arch-rival Grab with the potential to put an end to the competition that is costing both companies fortunes.
“Gojek Indonesia will really miss [Makarim]’s presence,” a former Uber Southeast Asia executive told The Ken. “I always thought there was no merger due to the relationship between the two founders. A merger now is inevitable.”
Makarim and Tan were known to think of their companies’ rivalry as a personal feud.
But assuming that only one of the two can survive in Indonesia may be somewhat presumptuous. After all, any such deal would need a green light from anti-competition authorities. It is something to watch, though.
SoftBank, Grab’s largest investor, is revamping its dealmaking after a tough run with investments like WeWork—which cut its valuation from a reported $47 billion to as low as $10 billion after canceling its IPO—not to mention the sluggish performance of Uber and Lyft, whose share prices are down 25% and 45%, respectively, following IPOs earlier this year.
That’s a dawning reality on tech startups and the VCs who fund them. For some, the party has come to an end, at least as they know it, in terms of spending. Gojek’s fellow Indonesian unicorns are already in rainy day territory: Tokopedia is reportedly in talks to raise what will be its last investment as a private company, while Bukalapak recently made layoffs as it bids to become more sustainable.
Sustainability is the buzzword for unicorns in Southeast Asia at this moment, but Grab and Gojek seem far removed. Both have “no idea” of how to be profitable, one well-connected VC said. Yet, the two ride-hailing companies continue to burn capital like kerosene, lighting up new subsidy-based battles in Indonesia and other Southeast Asian markets.
Added to that, the investment sentiment has been better. One prominent VC in Southeast Asia told The Ken that Grab stock is currently being offered at a discount of up to 35% through secondary sales—a steep discount on the typical 5% discount for such trades—which stokes a feeling that Grab (at $14 billion) and Gojek (approaching $10 billion) may be overvalued in today’s post-WeWork climate.
A Grab-Gojek merger may well not come to fruition, but Gojek’s new management structure will need to weather a winter that looks like it is only just beginning.
Headline image via Justin Luebke/Unsplash