US$2 billion investment to Uber’s largest rival in SEA is the latest move by Softbank in the great war of ride-hailing. How far can Uber go on autopilot?
US$2 billion investment to Uber’s largest rival in SEA is the latest move by Softbank in the great war of ride-hailing. How far can Uber go on autopilot?
US$2 billion investment to Uber’s largest rival in SEA is the latest move by Softbank in the great war of ride-hailing. How far can Uber go on autopilot?
Rumors never come from nowhere. After months of speculation, Didi Chuxing, the company which kicked Uber out of China, finally confirmed the strategic investment into Grab, the largest rival of Uber in Southeast Asia. Together with Softbank, this round of investment will be as high as US$2 billion. Grab also plans to raise another US$500 million from other investors to ensure that it has enough ammunition in Southeast Asia, however, some channels indicated that this round is already over-subscribed.
Rumors never come from nowhere. After months of speculation, Didi Chuxing, the company which kicked Uber out of China, finally confirmed the strategic investment into Grab, the largest rival of Uber in Southeast Asia. Together with Softbank, this round of investment will be as high as US$2 billion. Grab also plans to raise another US$500 million from other investors to ensure that it has enough ammunition in Southeast Asia, however, some channels indicated that this round is already over-subscribed.
Last September, we published a report the intensified competition in Southeast Asia’s ride-hailing market. While Uber and Grab were jostling each other for supremacy in the market, two-wheel-focused Go-jek emerged and rapidly ascended in Indonesia. Many investors had believed that Go-jek were probably looking for a sale after the US$550 million investment from KKR and Warburg Pincus – ultimately, these two investors were not known for taking the VC route.
Last September, we published a report the intensified competition in Southeast Asia’s ride-hailing market. While Uber and Grab were jostling each other for supremacy in the market, two-wheel-focused Go-jek emerged and rapidly ascended in Indonesia. Many investors had believed that Go-jek were probably looking for a sale after the US$550 million investment from KKR and Warburg Pincus – ultimately, these two investors were not known for taking the VC route.
With tens of thousands of motorbike (ojek) drivers acting as tellers everyday, Go-Pay, the payment system of Go-jek is growing quickly in Indonesia. According to one source, ‘Go-Jek already has steady and improving cash flow’. While Uber is in ‘self-driving’ mode, how will this round of investment into Grab change the ride-hailing market of SEA?
With tens of thousands of motorbike (ojek) drivers acting as tellers everyday, Go-Pay, the payment system of Go-jek is growing quickly in Indonesia. According to one source, ‘Go-Jek already has steady and improving cash flow’. While Uber is in ‘self-driving’ mode, how will this round of investment into Grab change the ride-hailing market of SEA?
Southeast Asia has never been a single market; and failing to clearly understand this point is a key reason why multinational companies fail to scale in the region. When the news of Uber’s ‘merger‘ with Didi Chuxing in China come out, Anthony Tan, the cofounder of Grab immediately sent an email to all his employees, saying that the success of Didi in China had proved that Uber was not invincible: if Uber could be defeated in China, then Uber could also be defeated in Southeast Asia, and now Grab seems to make it. Recently, users are receiving more promos and subsidies from Grab than Uber. Early this year, both Uber and Grab entered Myanmar Market, however, Grab are now playing the leading role in both market share or growth rate (interestingly, the person running Myanmar for Grab used to be a regional ops manager of Uber). With US$2 billion soon to be in the war chest, we can’t stop speculating if Grab’s massive and prolonged offensive could be the last straw that leads to Uber’s demise or departure in Southeast Asia.
Southeast Asia has never been a single market; and failing to clearly understand this point is a key reason why multinational companies fail to scale in the region. When the news of Uber’s ‘merger‘ with Didi Chuxing in China come out, Anthony Tan, the cofounder of Grab immediately sent an email to all his employees, saying that the success of Didi in China had proved that Uber was not invincible: if Uber could be defeated in China, then Uber could also be defeated in Southeast Asia, and now Grab seems to make it. Recently, users are receiving more promos and subsidies from Grab than Uber. Early this year, both Uber and Grab entered Myanmar Market, however, Grab are now playing the leading role in both market share or growth rate (interestingly, the person running Myanmar for Grab used to be a regional ops manager of Uber). With US$2 billion soon to be in the war chest, we can’t stop speculating if Grab’s massive and prolonged offensive could be the last straw that leads to Uber’s demise or departure in Southeast Asia.
The story of payment
The story of payment
With the built-in payment system Go-Pay, Go-Jek now moves faster than anyone else to occupy the electronic payment market in Indonesia. Although we believe that Tencent is investing in Go-Jek primarily to take a seat in the wagon, the possibility of Wechat Pay technology appearing in Go-Pay or even replacing Go-pay may still exist. Go-jek has expanded from two-wheeler ride-hailing to various O2O services including massage, courier, meal delivery and shopping. Among all the services, the food delivery are now occupying more than 90% of the market share in Indonesia. Ride-hailing and meal delivery provide a very plausible combination of frequent use cases to foster user adoption of an electronic payment system.
With the built-in payment system Go-Pay, Go-Jek now moves faster than anyone else to occupy the electronic payment market in Indonesia. Although we believe that Tencent is investing in Go-Jek primarily to take a seat in the wagon, the possibility of Wechat Pay technology appearing in Go-Pay or even replacing Go-pay may still exist. Go-jek has expanded from two-wheeler ride-hailing to various O2O services including massage, courier, meal delivery and shopping. Among all the services, the food delivery are now occupying more than 90% of the market share in Indonesia. Ride-hailing and meal delivery provide a very plausible combination of frequent use cases to foster user adoption of an electronic payment system.
At current stage in Southeast Asia, ride-hailing is still the most favoured tech industry by capital: large population, high frequency, enough room for further growth. Considering those 3 factors, the ride-hailing in Southeast Asia is probably the best use case to grow payment adoption. Grab has raised more than US$3.4 billion while Go-Jek raised US$1.8 billion, both on a story that they will be the frontrunner of ride-hailing, and payment.
At current stage in Southeast Asia, ride-hailing is still the most favoured tech industry by capital: large population, high frequency, enough room for further growth. Considering those 3 factors, the ride-hailing in Southeast Asia is probably the best use case to grow payment adoption. Grab has raised more than US$3.4 billion while Go-Jek raised US$1.8 billion, both on a story that they will be the frontrunner of ride-hailing, and payment.
Nadiem Makarim, cofounder of Go-Jek, allegedly rides motorbike to work
Nadiem Makarim, cofounder of Go-Jek, allegedly rides motorbike to work
While Grab is spending a lot of money to incentivise users to top up their GrabPay wallet, its payment portfolio actually falls behind Go-Pay in terms of product readiness and deployment. However, there seems to be nothing for Grab to be worried about, because it counts Softbank as its single largest stakeholder. On other side, with Tencent leading the latest round of investment, Go-Jek finally got a strong ally and a secure position.
While Grab is spending a lot of money to incentivise users to top up their GrabPay wallet, its payment portfolio actually falls behind Go-Pay in terms of product readiness and deployment. However, there seems to be nothing for Grab to be worried about, because it counts Softbank as its single largest stakeholder. On other side, with Tencent leading the latest round of investment, Go-Jek finally got a strong ally and a secure position.
However, this also means both the ride-hailing frontrunners in SEA have lost the opportunity to build their own empire. Didi had this before: by taking Tencent’s investment, they became the leading player in China, beating all their competitors – but they lost the opportunity to take control of its own payment, and become a full fledged internet giant. Maybe Yandex, which just absorbed Uber’s Russian business, still has a chance in its markets.
However, this also means both the ride-hailing frontrunners in SEA have lost the opportunity to build their own empire. Didi had this before: by taking Tencent’s investment, they became the leading player in China, beating all their competitors – but they lost the opportunity to take control of its own payment, and become a full fledged internet giant. Maybe Yandex, which just absorbed Uber’s Russian business, still has a chance in its markets.
The game of Masayoshi Son
The game of Masayoshi Son
A few months ago, Didi raised US$5 billion from Softbank, some of my friends speculated that this money will be used in global ride-hailing marketst. This round of US$2 billion in Grab might have actually come from the same pile that Softbank gave Didi. And with this new investment, I would not be surprised that Softbank already controls more than 50% of Grab’s shares.
A few months ago, Didi raised US$5 billion from Softbank, some of my friends speculated that this money will be used in global ride-hailing marketst. This round of US$2 billion in Grab might have actually come from the same pile that Softbank gave Didi. And with this new investment, I would not be surprised that Softbank already controls more than 50% of Grab’s shares.
Just now, news came out from Wall Street Journal that Softbank is seeking to buy multi-million share from Uber (
https://www.wsj.com/articles/softbank-seeks-multibillion-dollar-stake-in-uber-1500958957
). We speculate that Softbank is having a very very big name in mind: buying out all the early investors of Uber, giving them the much-sought after exit; then seek the negotiation with Uber for a merger, and be strategically patient until a deal is reached.
Uber’s next move
Uber’s next move
Starting with Yandex in Russia, we notice that without Travis Kalanick, Uber is more willing to seek compromise rather than fight until the last breath. It is only a matter of time before the same deal is reached in Southeast Asia between Uber and Grab.
Starting with Yandex in Russia, we notice that without Travis Kalanick, Uber is more willing to seek compromise rather than fight until the last breath. It is only a matter of time before the same deal is reached in Southeast Asia between Uber and Grab.
Stubborn about winning every single war if possible, and burning as much money as possible to achieve this, Travis Kalanick surely had exasperated early investors of Uber. We suspect that all those scandals about Uber were a deliberate attempt by its investors to drive out Kalanick. Otherwise how do you explain that they all disapperared overnight after Kalanish had resigned?
Stubborn about winning every single war if possible, and burning as much money as possible to achieve this, Travis Kalanick surely had exasperated early investors of Uber. We suspect that all those scandals about Uber were a deliberate attempt by its investors to drive out Kalanick. Otherwise how do you explain that they all disapperared overnight after Kalanish had resigned?
This is still fresh in memory…
This is still fresh in memory…
Kiren Tanna, ex-Asia Pacific CEO of Rocket internet, made a few predictions about Uber’s strategy few days ago:
Kiren Tanna, ex-Asia Pacific CEO of Rocket internet, made a few predictions about Uber’s strategy few days ago:
- Enact change in leadership : Get Travis – (opponent of consolidation, proponent of remaining private longer) to leave executive team, bring top team amenable to investors ideas
- Prepare for consolidation : stem the losses from taxing multi-year price wars in various parts of the world, in particular Asia where the opponents are heavily funded. Convince Softbank of the merits of this thought and half the job is done.
- Strike good deals : Use the currently highly valued Uber stock and depressed rival valuation (e.g., Ola) to strike share swap deals with partners. Uber still has upper hand in negotiation in most of the geographies.
- Stop investing in non-transport verticals for now : UberEATS, Uber Rush, Uber etc. Cash is highly valuable.
- Do all this fast : Do not get into a situation where another external funding round is needed as risk of a down round can be big issue
- Establish clear path to profitability : raise prices, gradually reduce driver incentives and increase driver fees, use first degree price discrimination to further improve margins
- IPO by 2019
Enact change in leadership : Get Travis – (opponent of consolidation, proponent of remaining private longer) to leave executive team, bring top team amenable to investors ideas
Prepare for consolidation : stem the losses from taxing multi-year price wars in various parts of the world, in particular Asia where the opponents are heavily funded. Convince Softbank of the merits of this thought and half the job is done.
Strike good deals : Use the currently highly valued Uber stock and depressed rival valuation (e.g., Ola) to strike share swap deals with partners. Uber still has upper hand in negotiation in most of the geographies.
Stop investing in non-transport verticals for now : UberEATS, Uber Rush, Uber etc. Cash is highly valuable.
Do all this fast : Do not get into a situation where another external funding round is needed as risk of a down round can be big issue
Establish clear path to profitability : raise prices, gradually reduce driver incentives and increase driver fees, use first degree price discrimination to further improve margins
IPO by 2019
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We think this is a well thought of scenario – however, we remain sceptical how Uber can IPO at the current valuation.
We think this is a well thought of scenario – however, we remain sceptical how Uber can IPO at the current valuation.
From the gapevine, Uber seems to have cut the International Growth Department (in charge of Latin America, India, Asia Pacific, Mid East, Africa) after Travis’s resignation, while building a new team focused on earnings. Uber needs to speed up the process as other players would not let this golden opportunity to slip away easily.
From the gapevine, Uber seems to have cut the International Growth Department (in charge of Latin America, India, Asia Pacific, Mid East, Africa) after Travis’s resignation, while building a new team focused on earnings. Uber needs to speed up the process as other players would not let this golden opportunity to slip away easily.