The connections, cash, and mindset behind Grab’s plans to become the first multi-billion tech company in South East Asia
Up until last week, most of the business press was missing-- or only watching one half-- of one of the most intense rivalries I’ve seen in the startup world in nearly twenty years covering the industry: The battle between Uber and Didi Chuxing.
I’d call it an epic David and Goliath battle, except which one is which? Uber has raised a few billion more, and has a bigger valuation, but Didi’s closest backers have even deeper pockets and control most of the ways people hail and pay for cars in China and-- thanks to that $1 billion Apple deal-- around the world. Uber has more revenues, but Didi completed 40% more rides in one year than Uber has in its entire life.
It seems Didi has the more calculating long term international strategy too: Focus all its efforts on winning China right now, while it tacitly supports potential Uber killers in all the other major markets too. The first one it allied with was South East Asia’s Grab. If Didi has been lightly covered by the US business press, Grab has been all but ignored.
Still, to see this merely as a game of either Didi or Grab trying to build “an Uber” in the East misses why ridesharing is such a huge opportunity in emerging markets. It isn’t merely about being a “baller” with a car service. It’s about solving major problems we can hardly imagine in the West.
There’s been a crush of urbanization in emerging markets, leading to sprawling little-planned mega-cities the world has never seen before. And with them, slums filled with millions of people picking up work on the side out of the formal economy. In China alone, the move from rural areas to cities has been the largest migration in human history. And China has controlled the flow of people to cities far more than India or other emerging markets have.
The biggest place where the realities of these dual economies overlap several times a day is in getting people from one place to another. The more well off rarely drive themselves in countries like India and in regions like South East Asia. And even in China, car ownership is incredibly low. The less well off rely on jobs like those to feed their families. And all of these countries have massive traffic and congestion problems. It once took me eight hours to get between meetings in Mumbai. Jakarta-- Grab’s fastest growing and potentially most important market-- may be even worse.
The scale of the problem, the lack of credit card ownership, the disparity between those providing the service and consuming it, and the huge differences in language, income and culture from country to country hardly make this the same problem even within Asia, much less the same problem Uber and Lyft have solved in the US.
For one thing, Uber and Lyft, haven’t really solved a core problem here. They’ve just made life easier for people. In emerging markets, transportation simply doesn’t work right now.
In an earlier era, Uber probably could have waited to come up with more tailored solutions for other countries. But global entrepreneurs no longer wait on the US, and sophisticated capital doesn’t wait to bet on the US interloper either.
While the rapid ascendency of the four-year-old Didi tells us everything we need to know about how formidable Chinese tech has become, the fate of Grab may be even more important for its region where there hasn’t yet been a huge tech hit.
In many ways, Grab is trying to do something even harder: Build a service that works in places as different as Singapore-- where transportation systems can seem futuristic in some ways and taxis can charge a premium-- and chaotic megacities like Jakarta where the needs are great, local agendas conflict, and tempers can flare.
And the stakes for Grab are bigger: If it succeeds it will be the first tech giant to come out of South East Asia. The Tencent. The Alibaba.
Grab was the first ridesharing company Didi backed directly, and it’s also backed by Softbank’s Masayoshi Son who has a long term focus, deep pockets, and is said to believe Grab could be South East Asia’s Alibaba.
I caught up with Grab’s co-founder and CEO Anthony Tan last week for our first on the record interview to learn more about Didi’s younger Asian brother.
To help us understand how this “never Uber” coalition works, I started by asking Tan how -- specifically-- Didi had helped Grab.
Anthony Tan: The first is that business is about relationships and relationships are usually founded on values. We just share so many similar values. When we first came together even before [Didi president Jean Liu] was there, four years ago [Didi founder] Cheng Wei and I were talking about creating great companies from our regions.
The one thing that China has that South East Asia doesn’t is local giants and local partners. In life we need role models. Some people think of religious leaders like Jesus as role models. Some look up to business leaders. We both share this value of how do we build a great company that we are proud of, that we believe that startups can really help a country grow, and help everyone.
In South East Asia, we’ve never had a Tencent-sized company. When we spoke, I think he saw that in my eyes. For the first time, we have a company with $700 million in capital, growing with all of this talent and solving a huge problem. A massive problem. It’s not just the congestion; there’s the lack of rail. Bangkok has the most, but it has one-eighth the rail of Shanghai. When you think about it, that’s a pretty massive opportunity.
The second thing is the amazing talent we’ve been able to amalgamate, focused on solving South East Asian problems, run by South East Asian group of people who want to see South East Asia rise. It’s a massive enough local problem, that we are all positioned to solve.
We believe we are the next Tencent of South East Asia.
So the number one is the shared values we have. The second is how strategically and tactically we can help each other. [One thing they helped with was] investor expertise. If not for them, frankly, we may not have even pitched our investors. But we saw the success in China. Beyond just capital, there is the knowledge capital and the human capital of how to solve a problem and create value and at the same time. Then there’s the technology.
We have agreed to co-locate our engineering center up there. Cheng Wei and I have agreed to share an office. I thought if we are going to put our engineering in China, even ten minutes is too far. I suggested we share an office and he said, “Yeah great idea, why don’t we do that?”
Just that openness. Always. They don’t own the majority of [Grab]. They don’t even own close. They are just one of our shareholders. Such openness and trust and collaborative attitude.
For once we believe a company can come out of this region and emerge as a champion.
SL: For all China or India’s challenges, building a company to serve all of South East Asia seems even harder. The countries are so different and there can be rivalries. For instance, people in Indonesia sometimes feel like they are the dominant market demographically, but all the money and best jobs are in Singapore. How do you deal with those country by country rivalries?
AT: First of all, how I think about it is you always go where the best talent is. Why is our engineering not in our largest and fastest growing market of Indonesia? Because engineering needs to go where there is the most talent. And engineering-wise, it’s better in Singapore relative to other countries in South East Asia.
For us, how we think about Indonesia is we never see [it] as a single country. It’s individual countries within a country. You go from the Javanese cities to Bali and you don’t even have the same religion, the dialects. All of this is fundamental to Grab.
We can’t impose our religious values or culture or language. We have our local teams running the show in Jakarta. Having local people speaking different dialects...it’s just crucial.
SL: That makes sense as an approach, but that sounds like it just creates a huge management challenge. How do you deal with that?
AT: I couldn’t if I wasn’t from this region. I went to Harvard Business School for my MBA. In the classroom there were up to 90 different nationalities. For many people that’s normal. For me it was such an eye-opener of seeing the power of diversity. People didn’t care what the gender, skin color, or anything was, the best ideas win.
I took that same concept to South East Asia. The best ideas will win. This is very non-South East Asia.
It’s a complete mash of nationalities. There are different drivers of people across countries. It’s not one race, one religion, or one spirit in Grab. Once you send that message very strongly across the management team, and they see that it’s not just talking, that everyone is practicing it.
The culture Grab has is that high performance will be rewarded and promoted.
SL: Let’s talk more about Jakarta because that seems to be the city where Uber is intensifying its competition against you guys. How is that market evolving?
AT: I would say it’s no coincidence we are no. 1 in South East Asia. I’d break it down into three things that people wanted in the market. One thing we learned is that people didn’t want taxi only. They wanted taxi in peak hours, then on weekends Indonesian families are five, six people, and they need a bus. And other times they want to get on a motorbike.
When we understood that dynamic, we could localize our product and serve that need quickly.
SL: How do you find drivers?
AT: We have a very big offline team. A lot of the more developed countries can sign up completely online and take a photo. How we’ve done it in Indonesia is there is an online component, but we want them to come in to make sure we match the license with the face. We want to make sure who they are is who they say they are.
So for example, we created this thing called Grabbike Kingdom. We rent a big football stadium, and five to six thousand drivers come in all in one day. We sign up drivers and there’s a game and food stalls so the family can come in and enjoy the day. We have a safety driving course. You have to pass the safety standards.
Unlike our competitors, we uphold that safety standard. If you are in Indonesia on a bike, it is very different level versus a car. In a car there is a metal sheet between you and another car. On a bike, it’s just you and the road. We are the only ones that have insurance and a full safety driving course.
SL: How big is Indonesia for you now? That’s obviously the most populous nation in South East Asia, but does that mean it’s where you can make the most money? Is winning Indonesia crucial to build a big company in South East Asia?
AT: One in nine smartphone users are on Grab in South East Asia. Yes, Indonesia is the fastest growing market, but in terms of revenue, it’s not our largest market compared to other countries.
Indonesia, Vietnam, Philippines are going to have 100 million new smartphone users in the next five years. So yes, we are gaining quite a bit of traction. What we are seeing is interesting but it’s far from where it needs to be.
SL: How do you think about this company in terms of how long it will take to build a big company that justifies nearly $700 million in capital from major investors? Is it ten years? Longer? Is this your life’s work?
AT: We see ourselves as a Tencent for South East Asia. We see ourselves first and foremost as a tech company. The main problem we are solving is people transportation. To do that we are solving other problems. We are the only app built in South East Asia to be able to take credit card payments, debit card payments, cash and even local bank payments. We are integrated into the top three local banks.
A lot of our competitors use one map system and assume that works. Bikes don’t use car mapping systems. There are roads they aren’t allowed to go on. They can’t get on the highway. You have to have a different navigation just for bikes.
How we think about it is, first we are a technology company. As time goes by, we are solving other large problems the same ways we are solving people transportation now.
Beyond valuation or the market cap, how do you go about building a great technology giant in South East Asia? [It takes time and patience.] Consider Softbank. They’ve gone very long on Asia. When people were selling Alibaba stock, Masa was buying more. I feel comfortable with them. They are very long in the investment. He believes we are here to change South East Asia. We are here to solve real problems, not just make money. We want to be known as the company that changes South East Asia.
Having sophisticated investors like these coupled by our own philosophy created that long term view we need for creating a great company.
SL: Can you talk about the role Rocket Internet has played in South East Asia? They are one of the biggest international players that also believes in the potential of the market, but people feel very conflicted about them and their tactics.
AT: I can’t speak on behalf of Rocket, but when they were competing against us, I do believe our competition made us into a much better, stronger company. I do believe what doesn’t take you out makes us stronger.
They came in with all kinds of tactics and money and huge advantages. They had more capital and more sophisticated talent and a lot more Internet experience than we did. But they didn’t understand local. When they realized that, they left South East Asia completely.
And I think because that’s happened it’s really showed that we can outmaneuver companies that are bigger with more capital and that have all this Internet experience. What we also learned was the power of local-ness. It has a tremendous premium to it.
All that reinforced what our core strengths were. It helped us double down on how to do business. It was a good thing they came to South East Asia.
SL: We’ve touched on so many things that are incredibly hard about building this company, the payment systems, the language and cultural differences, competition. Is there one single biggest challenge that worries you?
AT: Yes, it is the mindset, if it’s one thing.
So the real problem is that a lot of South East Asians have always been looking overseas. They are looking to Google, they are looking at Facebook. They always have this subservient attitude to technology. They create all these mental blocks even before trying.
Look at China in comparison. When you talk to [Baidu’s Robin Li] or [Alibaba’s Jack Ma] or any of those guys they will never say things like, “Oh, I will lose to Amazon.” or “I will lose to Google.”
They would never say that. They say, “We are mighty and we are going to be number one.” Robin will never introduce himself as “The Google of China.” That mentality is a huge advantage. We don’t have that yet. We see that growing. Enough of the “I am whatever of Southeast Asia.”
Look at our competitors. Imitation is the sincerest form of flattery. They are adopting motorbikes or our offline marketing or our cash on delivery system. We can create local innovations that local people and local customers appreciate. Let other people copy us. Let other people see that we really can innovate, and let them create from behind.
That mindset will turn over time. But it’s something we have to overcome.