GRABBING THE MARKET
Malaysian ride-share app tightens regional grip
Grab’s unprecedented fundraising shows how Southeast Asia is fast becoming a central arena in the global campaign to keep the US-based ride-hailing service Uber at bay.
Malaysia-based Grab last month raised US$750 million from investors led by SoftBank Group Corp, the largest-ever for a Southeast Asian consumer technology company. That mega-round underscores how Asian ride-hailing services from India to Indonesia are arming themselves to fend off Uber now that the aggressive industry goliath has ceded China to Didi Chuxing.
The most recent fundraising also bumped up Grab’s valuation to more than $3 billion, according to a person familiar with the matter.
The funding turns up the heat on Uber, which agreed to sell its Chinese operations to Didi and end a battle that had cost it billions. Grab chief executive officer Anthony Tan said at the time that he expected the US company to pour more resources into relatively untapped Southeast Asia, a prophecy that has come true as Uber introduced new services and features, from upfront pricing to food delivery in Singapore.
At stake is a region on the cusp of an internet commerce boom with twice as many people as the United States. While a far smaller market than China, it remains a wide-open field that could prove pivotal if Uber is to sustain growth beyond the US and Europe.
It’s also where the US company is again encountering stiff resistance from wellfunded, scrappy Asian operators. Go-Jek, an Indonesian rival to Grab better known for its motorcycle taxis, just raised $550 million in a round led by KKR and Warburg Pincus.
“The battle has shifted to Southeast Asia,” said Song Seng Wun, a regional economist with CIMB Private Banking in Singapore. “We have seen this in China, where you’re just trying to outspend your competitor. Similarly this is what we are going to see in Southeast Asia.”
Didi, Grab and India’s Ola form the vanguard of Asia’s burgeoning on-demand economy. Car-hailing has taken off as smartphone use expands and riders seek simpler or quicker alternatives to taxis and public transport.
But the process of signing up drivers and attracting customers remains a costly one, requiring big subsidies and constant marketing. Uber is arguably best-capitalised as the world’s largest technology startup, earning a $68-billion valuation.
Uber’s experience in China may offer lessons on the battle ahead. It threw in the towel only after more than a year of a take-no-prisoners war with Didi that played out in the media and on the streets of hundreds of cities. That battle, waged through massive subsidies on rides, was said to have cost Uber $2 billion. Alarmed, its investors clamoured for a ceasefire.
Like Didi, Uber’s Asian rivals show no sign of pulling their punches. Tan, whose grandfather drove a taxi, has said his company will keep exploring new areas, such as payments. Go-Jek CEO Nadiem Makarim told Bloomberg after the company’s fundraising announcement in August that he intended to use the money to become a market leader in all segments, not just motorbikes.
Yet they’re no Didis. Grab’s total capital now amounts to $1 billion — a fraction of what its Chinese ally managed and what Uber has access to. Didi enjoys government support as a champion of the domestic internet industry, whereas Uber has gone to great lengths to court Southeast Asian governments with promises to curtail pollution and traffic congestion.
While Uber is making inroads from Malaysia to Vietnam, its focus is on Grab’s stronghold of Indonesia, a ride-hailing market Tan estimates is worth $15 billion. India is also shaping up as a major battleground, as the local operator Ola and Uber slug it out not just on the streets but also in courts.
“While the Uber-Didi truce stopped the bleeding, the uncertainty now is the rest of Asia,” said Finian Tan, chairman of Vickers Venture Partners in Singapore. “Uber may double down in Southeast Asia and India, so competition is going to get tougher for Grab and Ola until another consolidation occurs.”
The escalating battle will put their fundraising abilities to the test. Grab turned to new as well as existing investors for its latest effort. Didi was said to be joining that round but Grab only mentioned SoftBank in its statement. It won’t be disclosing any other participants, the company said. The Asian startup, whose previous backers included Vertex Ventures and GGV Capital, was said to have initially targeted as much as $1 billion.
“For Grab and Uber, the way of doing business is staying within the eyesight of their consumers. The only way to do that is to remind them you are there. And that’s really about throwing money in whatever shape and form, be it advertising or subsidies,” Song said.
Beyond money, Grab can call on several notable allies in its campaign. Grab, Didi, Ola and Lyft Inc formed a strategic alliance last year to fend off Uber. They’ve begun by hooking up their services, allowing users from their respective home countries to switch to a partner’s network while travelling.
Grab, which said it operates as many as 1.5 million daily bookings across six countries, now plans to invest in mobile payments and sustain its pace of geographical and service expansion.
“Our vision is to drive Southeast Asia transport forward and transform the region’s mobile internet ecosystem,” Tan said in a statement. “This latest funding strengthens our ability to pursue those long-term goals as we continue to build on our market leadership.”
“Uber may double down in Southeast Asia and India, so competition is going to get tougher for Grab and Ola until another consolidation occurs” FINIAN TAN Vickers Venture Partners