Rising Unicorn

4 years ago . 12 min read
MP
Marella Putri
Writer at Forbes Indonesia
Rising Unicorn
Nadiem Makarim with Gojek drivers. Photograph by Ahmad Zamroni for Forbes Indonesia.

by Aastha Saboo

It’s 11 o’ clock in mid-December outside the Pasaraya Grande building in Blok M in Jakarta, and a group of about 14 motorcycle taxi drivers dressed in bright green uniforms are buzzing with excitement. They are getting their photo taken with Nadiem Makarim, the 32-year-old founder of PT Gojek Indonesia, who is standing among them dressed in a black T-shirt with “Go-Jek” printed on the front. In unison they pump their fists in the air and shout “Gojek, Gojek, Gojek,” then click selfies with Nadiem.

The drivers’ energy is just one indication of the remarkable Gojek phenomenon. From a small startup in 2011, Gojek is now arguably Indonesia’s most successful tech firm—responsible for several major transformations. For one, it has transformed the way thousands of Indonesians earn a living, and also get their goods and services, beyond just the original motorcycle taxis. Second, it has emerged as Indonesia’s first unicorn, with an implied valuation over $1 billion. Finally, it has propelled Nadiem from an obscure entrepreneur into the country’s most visible poster boy for Indonesia’s booming tech sector.

In a rare interview, in Gojek’s new headquarters on the top floor of Pasaraya Grande, Nadiem explains Gojek success by paraphrasing the Lord of the Rings. “One app to rule them all,” he says. By this he means Gojek has evolved far beyond being a simple ride-sharing app into an entire ecosystem. “It’s your portal to connect to the real world,” he says. Today Gojek provides 15 different types of services, from massages to package delivery. Its payment system GoPay connects all of them. A new service, GoPoints, allows loyal users to collect and win extra points if they use GoPay.

Thus a user can spend much of his day within the GoJek system. “You’re there in a world of services, that the user can then live in,” says Nadiem. One can use GoBike or GoCar to go to work, order lunch from GoFood, and after work, get tickets to a movie from GoTix or a massage with GoMassage. If your smartphone’s credit is running low, there’s GoPulsa to top it up. All of them can be purchased with GoPay. In fact, the firm has put several of its services under the aptly named app GoLife. “Gojek is a unique combination of different verticals, which is constantly changing,” says Nadiem. “The company’s key emphasis is on solving problems rather than product offerings, making it different from other startups.” He adds: “The beautiful part is how these all services synergize together, and basically empower each other.” GoJek’s path is similar to that of the original ride-sharing firm Uber, out of San Francisco, which has also been adding services such as Eats, for food delivery, and Freight, for package delivery, and even Moto, a motorcycle service similar to GoJek’s original service.

Born into a well-to-do family—his lawyer father Nono Anwar Makarim co-founded the prominent law firm Makarim & Tiara S., while his mother was a social activist, and his grandfather was part of the delegation that won independence for Indonesia from the Netherlands in the historic 1949 conference at the Hague. Nadiem had an international childhood. He was born in Singapore, but lived in Australia, Singapore, the U.S. and the U.K. “I was a bit of global trekker,” he says. He started his professional career at McKinsey in Jakarta, after graduating from Brown University in the U.S. He worked there for three years, but itched to be his own boss. “In McKinsey, I realized that I wasn’t a great subordinate. I enjoyed building things,” he says.

He then got an MBA from Harvard University before returning to Jakarta to start Gojek in early 2011 with Michaelangelo “Mikey” Moran. While at McKinsey, he met one of the founders of Rocket Internet, German Oliver Samwer, who asked Nadiem to develop Rocket’s business in Indonesia and in late 2011, he became managing director of Zalora Indonesia, Rocket’s fashion site. In 2013, he left Zalora and worked at payments site Kartuku.

All the while, he was building Gojek as a personal passion, using his paid jobs to support himself. Much like Uber was founded in 2009 by Travis Kalanick as a way to help him get around San Francisco while he was focused on other projects, Gojek was started by Nadiem as a way to improve the ojek service he was already using. At the time, Nadiem was taking ojeks several times a day—he preferred them over taxis or private car. One day, he had a flash of inspiration to set up a call center where passengers could call in to request an ojek. “I soon realized ojeks have got the highest value and fastest logistics, and also the lowest cost,” he says. While many ridiculed ojeks as a low-class service, Nadiem felt differently: “I saw these uneducated men as precious gems.” The first Gojek service was as envisioned, a call center with 20 drivers.

Early on, Nadiem focused on branding. Cofounder Mikey had the idea to give the drivers bright green jackets and helmets with the Gojek logo, so when driving around town, Gojek drivers were also advertising the service. Also, in the early days, Nadiem saw that users were using ojeks for other services, such as delivery of cell phones left at home to offices, or picking up takeaway meals. In 2012, Gojek even had contracts with companies to deliver their products, including multinationals. That same year Gojek started building a buzz when it won first place in the non-tech category at the U.S. State Department-affiliated Global Entrepreneur Program Indonesia (GEPI) 2012 event held in Bali, an event that drew 500 applicants for the awards, and which was attended by Hillary Clinton and Google Chairman Eric Schmidt. At the time, Gojek had about 350 drivers and 4,000 users, including 25 corporate clients.

Nadiem got a big boost when Eric Schmidt compared Gojek to Amazon during his address at the GEPI event. “It [Gojek] is a classic example of an infrastructure play, an important human need and a service. It’s no different in that sense from the Amazon idea of 15 years ago,” said Eric. (Hillary Clinton also mentioned Gojek by name as well.) In 2014, the global ride-sharing craze was in hypergrowth, and Nadiem became more serious about Gojek. Uber and regional ride-sharing firm Grab, from Malaysia, both entered the Indonesia market in 2014. After raising some funds, Nadiem was able to launch Gojek’s first app in January 2015 for iOS and Android devices. Before that, the firm had operated as a website and call center, and many operations were still manual and had 500 drivers in its network. The company after that exploded with growth: within six months the app had four million downloads, then nine million by year’s end.

Traditional ojek drivers began to protest Gojek in early 2015, a controversy that eventually led to a 12-hour ban on Gojek in December 2015 by the then-trade minister, which was personally reversed by President Joko “Jokowi” Widodo. “They revoked the ban almost immediately,” notes Nadiem. The other ride-sharing apps faced similar challenges. In early 2016, there were street protests, with taxi drivers marching along one of Jakarta’s main roads, setting fires and blocking traffic. “It is a unique company born out of disasters,” Nadiem says. “All these events taught us how to control our fears and anxiety.”

Yet even with these challenges, Gojek was undergoing hockey-stick growth. In December 2016, Gojek and GoPay combined completed close to 35 million transactions, which represents around $1 billion (annualized run-rate) worth of transactions through its platform, with an average of more than eight bookings per second being processed. The Gojek app has now been downloaded more than 30 million times, and reaches more than 70% of iOS users and more than 30% of Android users in Indonesia, according to researcher App Annie (the original ride-sharing service is now renamed GoRide). “We are probably the largest transactional app by penetration in the country,” says Nadiem. The network of drivers grew to 200,000 and its GoPay service, launched in April 2016, now may create its own sub-services. “Some of our products will have children,” says Nadiem.

The biggest validation came in August 2016 when the company received $550 million funding from a group of international investors, including KKR & Co, Warburg Pincus, Farallon Capital and the Capital Group. The investment was a watershed in two ways: the amount and the investors behind it. The $550 million was the largest ever single-amount of funds raised by a Southeast Asian tech firm in history. “We are extremely humbled and excited to be work with such world-class partners,” said Nadiem in a release at the time. The second achievement was the A-list of investors, such as KKR. To be sure, Nadiem had already raised funds earlier, also from some notable names, such as Sequoia, Northstar and Japan’s Rakuten.

Most significantly, the deal valued Gojek at somewhere in the neighborhood of $1.2 billion. While other Indonesia tech firms are approaching unicorn status—such as Traveloka and Tokopedia—Gojek was the first to reach and break that barrier, and set a milestone for Indonesia. The investment had a significant impact for Nadiem. “Not many things scare us anymore,” he says. “Gojek can now follow its own path instead of reacting to competitors.”

In the last six months, Gojek has seen more growth. The company now claims that GoRides and GoCars have a 60% share of the Indonesia’s ride-sharing market. Its food service, GoFood, is the second largest online food delivery service in the world outside China with over 15 million meals delivered since inception, and has 35,000 food merchant partners. The company claims it has a 95% market share of all online food deliveries, far above rivals such as Rocket’s Foodpanda. Its logistics service GoSend is said to have a 75% market share of same-day logistics and delivery. The company has gone from its original service only in Jakarta to 16 cities across the country, including Bandung, Medan and Surabaya.

Moreover, one rival, the country’s largest traditional taxi company Blue Bird, became Gojek’s partner in May 2016. Blue Bird said in a filing at the time that: “The partnership of the company and Gojek will stretch across technology, payments, and promotions.” Nadiem sees further validation in the tie-up. “We are excited about our partnership with Blue Bird, together we can have a huge impact with our technology and their drivers,” says Nadiem. Ironically, just before announcing the tie-up with Blue Bird, Nadiem launched GoCar, its first car-sharing service akin to Uber or Grab.

The Blue Bird deal contrasts with Nadiem’s troubled history with his former friend from Harvard Business School, Malaysian Anthony Tan, the founder of Grab (also a unicorn in valuation). The two had been friends, even as they both grew similar firms, until Grab announced the launch of a motorcycle taxi service, Grab Bike, in 2014. After that, the two stopped talking. In May 2015, Anthony launched Grab Bike in Indonesia (Uber launched its Uber-Moto in Indonesia in June 2016). “We were friends who turned enemies and, who knows, maybe we will become friends again,” says Nadiem.

Yet all these firms share one big concern: enormous burn rates in subsidizing their services. The process of gaining market share, keeping fees affordable, signing up drivers, and attracting new customers is a costly affair. Some venture capitalists question how firms such as Gojek can ever make money (at least at present prices). “Nobody wants to do a subsidy, but it’s not really a choice,” says Nadiem. “Subsidies are a competitive necessity, but it’s a not a strategy.” Nadiem is confident of Gojek’s success despite the subsidies, noting that its rising number of verticals are an advantage. “You can fight us in one vertical to the death but not in the others,” says Nadiem. “So the strategy is that I can play subsidy wars but, in the meantime, I’m getting people into my ecosystem, and they like being in there. Gojek has now become home base for them.”

Another interesting aspect of Gojek is Nadiem’s sharing of the wealth. “We are disproportionately generous in giving out options and equity to our management,” he says. “The management owns way more [of the company] than I do.” He notes that some of his investors have urged him to curtail the practice, but Nadiem sees it as a competitive advantage. “We are a company of owners,” says Nadiem. While he won’t disclose his actual ownership, Nadiem’s personal stake has been diluted from fund-raising and sharing equity—the historic $550 million raised was, for example, a D round. Even in the U.S., studies have found that founders will own, on average, only 11% of the firm when it goes public.

One clear focus of Gojek is Indonesia. Nadiem states unequivocally that Gojek will not go regional or global, unlike Grab and Uber. Rather than spread geographically, Nadiem wants to cement Gojek’s already formidable presence in Southeast Asia’s largest economy. “Gojek is focused on Indonesia, we are deeply nationalistic,” says Nadiem. However, Nadiem has needed to beef up Gojek’s programming and technology backend, especially after the firm’s user base exploded with the introduction of the app in 2015. To that end, Nadiem acquired Indian tech firms C25, CodeIgnition, Leftshift Technologies and Pianta in 2015 and 2016 to help enhance Gojek’s IT structure.

Nadiem is also preparing for major growth as evidenced by its new headquarters. The firm has taken up the entire top floor of Pasaraya Grande, most of it filled with empty chairs and desks, with plans to build a cafe and outdoor terrace for its current 1,800 staff. Boxes filled with containers of mineral water lie open for refreshment, and printouts taped above desks indicate the location of various departments, including one hung over the area where Nadiem sits—an open office the same as all the others—reading simply BOD. “We’re going to be around in Indonesia for a long time,” says Nadiem.

MP
Written By
Marella Putri
Writer at Forbes Indonesia
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Companies