Posted on Friday, Sep 9th 2016
It isn’t every day that one comes across a Billion Dollar Unicorn club member out of the South East Asian islands. Recently though, a localized ride-sharing and other sharing services provider Go-Jek has made big news by announcing its entry into the club.
Jakarta, Indonesia-based Go-Jek was founded by Harvard alumnus Nadiem Makarim. Go-Jek’s business model may be similar to Uber’s in that it allows users to book rides from one place to another. However, the similarity stops there. Go-Jek offers motorcycle rides to users instead of the typical car rides that Uber-like services offer. In fact, in Bahasa, Indonesia, ojek refers to two wheeled taxis. Traditionally, the ojek market has been unregulated as it is operated mostly by individuals. Go-Jek is attempting to change the market dynamics.
Nadiem came up with the idea while he was pursuing his MBA from Harvard in 2011. He wanted to do something with the ojek sector as he believed that they were one of the few service providers who had no influence on their ability to get a customer, were highly inefficient, and were a market ready for disruption. But the business took a while to take off. For the first three years, Go-Jek was just a call center that arranged couriers in Jakarta. Its system was manual where employees would call ojek drivers one at a time till someone accepted the order. Meanwhile Nadiem worked other jobs to fund the company. In 2014, Go-Jek introduced a mobile app, and the business finally took off.
Go-Jek’s mobile app allows users to call for a driver after they enter their address points. Prices for the ride are provided before the order is placed. Users receive updates on the driver’s details including contact details and a notification on when the driver is near their pick up point. Go-Jek has also diversified into other services besides offering rides. Users can book a Go-Jek for other services including delivery of food, ordering a beautician or a masseuse, picking up shopping, or even delivering packages through a courier service. It has also expanded into a car sharing app with Go-Car and a mobile payment service Go-Pay.
The app was launched in January of 2015. Since its launch, the app saw registered drivers grow from 1,000 to over 200,000 by the end of December across 10 cities in Indonesia. The app itself has seen more than 9 million downloads within the first year of its launch. As of January this year, Go-Jek was seeing over 340,000 daily bookings. That number grew to 667,000 bookings per day as of June this year.
Go-Jek does not disclose its financials. It earns revenue by charging a commission for fares. To make its service more attractive, it has also been offering drivers cash incentives to maintain low fares and retain them on their platform. But such subsidies are driving customer acquisition costs. Market reports revealed that it spent $73 million between the period October 2015 to March 2016 toward subsidies.
Earlier last month, it raised $550 million in a venture funding round led by KKR & Co. and Warburg Pincus. The funding valued it at $1.2 billion. Prior to the round, Go-Jek was mostly bootstrapped. It had received an initial backing of an undisclosed amount from Northstar Group to launch the mobile app.
Bigger players like Uber are already operating in Indonesia. Uber became a direct competitor for Go-Jek when it launched UberMoto, which is its version of the ojek hailing service in Indonesia. Add to that the mounting pressure from individual taxi players who believe that ride sharing apps are invading into their territories. The new funds will help Go-Jek deal with competition while keeping ojek drivers happy about partnering with them.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
Photo Credit: Dino Adyansyah/Flickr.com
This segment is a part in the series : Billion Dollar Unicorns
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