Uber’s rival in Southeast Asia, Grab, has announced a massive and oversubscribed $750 million Series F investment round led by Japanese powerhouse Softbank. The number isn’t high relative to other players in the global ridesharing market, but following Uber’s surrender to Chinese rideshare giant Didi, it could signal that rivals sense an opportunity to force Uber out of their own markets.
The money is dedicated to a few projects, number one being consolidating and expanding its spot in neighboring Indonesia, where their services already run the gamut with GrabTaxi, GrabBike, GrabCar and GrabFood. That will apparently also include “localized services,” probably similar to how Uber adjusts its own offerings depending on region and city.
“Our vision is to drive Southeast Asia transportation forward and transform the region’s mobile internet ecosystem. This latest funding, the largest in the history of Southeast Asia consumer technology, strengthens our ability to pursue those long-term goals as we continue to build on our market leadership,” said Grab Co-founder and CEO Anthony Tanin a blog post on Grab’s website.
They are already in Indonesian cities like Jakarta, where the company plans to “further expand the diversity, density and efficiency of its services in Jakarta, a congested city with 30 million people,” their press release read. They are also in Padang, Surabaya, Bali and Bandung. One has to assume they are targeting expansion to other major cities in the country like Medan, Bekasi, Semarang, Tangerang and Depok. They are prolific also in Malaysia, Thailand, Vietnam and the Philippines. Through its relationship with Lyft in the US and Ola in India, it has been trying to build a global partnership to compete with Uber.
Its second major endeavor will be to expand its GrabPay service for unbanked customers. According to the World Bank, some 264 million Southeast Asians (half the region) do not have bank accounts and prefer cash payments. They’ve pushed the mobile payment program in conjunction with Indonesian bank Mandiri, which ties Grab payments to customers’ phone bills. They also have partnerships with the Lippo Group of stores to build an e-money payments platform and with Citibank.
“We are committed to supporting local champions like Grab that have a vision for a next-generation internet ecosystem, and look forward to participating in their long-term success,” said SoftBank Group Corp. Chairman and CEO Masayoshi Son.
The money will also be put to incorporating more machine learning and data science capabilities into the company’s business for “predictive demand and driver and user targeting.” They also allude to expanding its R&D teams in Seattle, Beijing and home base Singapore.
Repeating Didi’s strategy to squeeze Uber?
With the announcement of this funding, Grab is broadcasting their ambitions for domination over competitors like Uber loud and clear.
“After more than a year of intense competition, our investor and global partner Didi has effectively won the battle for market share dominance in China,” CEO Tan wrote in a company-wide email that TechCrunch quoted in July. “Localized solutions best solve local problems. Like Didi did in China, we make sure that the unique pain points of users in Singapore or Jakarta or Manila will get addressed because they are prioritised over the competing needs of users in New York or London or Istanbul.”
While this $750 million round is definitely huge, it only (“only” being a relative term here) brings their cash on hand to $1 billion and change. That is dwarfed by US rival Uber’s $11 billion on hand change pouch following a colossal $3.5 billion investment by Saudi Arabia’a Public Investment Fund. Lyft also has a fatter wallet than its little Singaporean brother. A lot of that Saudi money was apparently designated for India, but without China to worry about, Grab’s territory should still be considered as prime real estate for expansion.
The round also values the company at $2.3 billion, a far safer number than the $62.5 billion colossus that is Uber. It also makes the company the second largest tech startup in Southeast Asia by valuation, just behind $3.75 billion titan Garena, according to Tech in Asia.
Grab is no smarter at reaching profitability than Uber is though. TechCrunch says they brought in $31 million in revenue last year while spending $111 million. Normally, $80 million in losses would be considered disastrous, but such losses have been deemed tolerable in rideshare considering what Uber has burned.
Didi had reached 400 cities by the time it bought out Uber’s China business. Ola is already approaching 200 if it hasn’t crossed that line already. Ola is also far more familiar with local culture, trends and spending habits. Grab has that advantage as well, being fully aware of the unbanked problem and developing solutions around it, a popular trend among Southeast Asian and Indian fintech startups these days.
Market penetration is starting to become a no-contest. Compared to Grab’s current 31 cities in Southeast Asia, Uber is present in only 15. The company claims they’ve quadrupled its number of drivers to over 400,000 since raising a $350 million Series E funding round in August 2015, as well as quadrupled its active users. Grab also boasts over 21 million downloads.
But driver numbers might be a mute point in the coming years as Grab has followed Uber into the autonomous car game. Grab is now partnered with MIT spinout nuTonomy, the company which announced at the end of August it had launched its own trials in Singapore.
There’s no reason just yet to assume the partnership would grow into a full-fledged merger, but such a move would certainly have global repercussions as rideshare companies undoubtedly expand their services or pivot from their main business in order to become sustained, profitable enterprises. Car manufacturing might be one way to do that. If a buyout is on Grab’s mind, they might need some more cash to make what would likely be a $200 million+ deal (nuTonomy has already raised $19.6 million according to Crunchbase), which could slow down an aggressive expansion plan.
Grab is certainly in a position to hold Singapore and Indonesia, but the question is breaking profitability. Uber is reportedly profitable in Singapore while Grab lost $30 million there in 2014-2015 according to Tech in Asia. The same report notes its bookings did jump 5.3 times YoY heading into 2016, and that Grab had yet to spend its Series E, so the company appears ready to hold its ground. There is also the possibility it will not expand the number of cities where it operates, instead focusing on making local markets profitable and maybe goading Uber into a costly and pointless expansion campaign to burn capital.
Whatever the scenario that will play out, it appears to be an exciting time to watch the world’s largest startup face determined competition, doubling down on both its core business and new technologies like self-driving services.