Indonesia’s two most valuable startups - Gojek and Tokopedia - announced their merger, on 17 May 2021, to become GoTo Group, followed by plans to go public by the end of 2021.
Earlier this year, in January, both companies started negotiating the deal, which led to an $18 billion merger after a similar attempt to merge Grab and GoJek. As a result, we are witnessing the most significant event in the Indonesian startup ecosystem so far.
This combination between the super app Gojek and e-commerce giant Tokopedia plays a significant role in the dynamics of the domestic market and the Southeast Asia region, and even the rest of the world.
The decision for Indonesia’s most prominent startups to partner up probably came as a result of Grab’s announcement to go public in the United States (US) earlier this year in April. After all, Grab’s move to go public via SPAC will secure a lot of capital, fueling their product diversification and market share across Southeast Asia.
In turn, by merging these two big companies, would reach a similar scale and diversification of products, hopefully leading to profitability.
- Summary of Gojek’s history
- Summary of Tokopedia’s history
- GoJek and Tokopedia’s Merger: GoTo Group
- Implications to local, regional, and international audience
- Closing thoughts
Before the merger, the two companies already had a great relationship. Andre Soelistyo, CEO of the now GoTo Group, pride this event in a statement,
“Today is a truly historic day as we mark the beginning of GoTo and the next phase of growth for Gojek, Tokopedia, and GoTo Financial.”
As such, It’ll be helpful to first understand the backgrounds of these unicorn startups.
Summary of Gojek’s history
Founded in 2010 by Nadiem Makarim, Gojek is an on-demand, multi-service tech platform that provides access to a wide range of services, including transportation, payments, and logistics. With the principle of using technology to improve users’ lives, Their once ordinary app has transformed into a Super App with more than 20 services established in five countries in the Southeast Asian region.
Exponential growth for the company also started in late 2014 when it received the first round of funding from NSI Ventures. Since then, they have raised a total of $5.3B of funding over 12 rounds.
Also from Crunchbase’s database, Gojek has 32 investors backing the company, and among the list are top investors like GCI, Google, Tencent, and Sequoia. To expand their ecosystem, they have also acquired 13 companies, including Moka and WePay, while also invested in several companies like Bank Jago and LinkAja.
Summary of Tokopedia’s history
Tokopedia is an Indonesian technology company with a mission of democratizing e-commerce through technology. Co-founded by William Tanuwijawa and Leontinus Alpha Edison, Tokopedia started as a marketplace that connects businesses to consumers.
With its rapid growth, Tokopedia’s e-commerce services have allowed hundreds of thousands of Indonesian small and medium-sized enterprises (SMEs) to send millions of products every month to their customers throughout Indonesia.
Tokopedia has expanded its services to fintech and payments, logistics and fulfillment, and many more. Tokopedia has raised a total of $2.8B of funding over 11 rounds backed by major investors such as Google and Alibaba.
GoJek and Tokopedia’s Merger: GoTo Group
The merge comes not too long after Gojek’s largest competitor, Grab, announced it would list in the USA via a merger with a special public acquisition company (SPAC), bringing the valuation up to $40B.
As TechCrunch commented, that could be easily “world’s largest SPAC merger...”
While Gojek is valued at US$10.5 billion, and Tokopedia was last valued at about US$7.5 billion, Grab will still end up with considerably more resources. In turn, the merging of the companies makes a lot of sense, as it will help all parties involved to compete more fairly.
Thereafter, the largest shareholders of GoTo Group would be:
- Pacific Century Group
The merger is basically phased one of the new company’s plans; their next step will be to proceed with an IPO and a dual listing in New York and Jakarta.
However, GoTo still has a tough competition to fight, besides Grab. Sea Group’s rapid development in its e-commerce Shopee poses a threat as a direct competitor in Indonesia.
Shopee’s vast presence in the region and its ambition to diversify its services to food delivery would most probably drive GoTo to bring more innovative products and better rates. That applies to all tech players in the market. More, better-resourced competition typically brings prices down and quality and innovation up.
Implications on domestic, regional, and international audience
With all these changes happening, you might be wondering how those market dynamics will affect startups and SMEs across the region. What are the implications on the tech ecosystem of the SEA region?
As it comes to their home market - Indonesia, we expect that GoTo Group will boost economic growth further. The newly established company will serve as a platform for small businesses to learn from and integrate with.
Consumers will have access to a wide variety of products, and SMEs will be able to accelerate their journey to digitalization. As Dewi, Cofounder of UKM Indonesia, argues:
“... the integration of the two giants allows small businesses to more easily understand digital transactions.”
Perhaps the most impactful change will be the example those companies will set for young entrepreneurs in Indonesia. As the saying goes, success breeds success. Founders in Indonesia will realize that the ceiling is pretty high, and it’s possible to build massive, successful businesses despite all challenges they face operating in an emerging market.
As a massive market, Southeast Asia has given birth to many unicorns, leading the digital economy growth across the region. The rise of GoTo will inevitably worry many of those players competing for one way or another in the tech ecosystem of Southeast Asia.
Combining e-commerce, on-demand, and financial services, GoTo emerges as the first platform in Southeast Asia to host such a range of services under one brand. In turn, they may decide to expand more aggressively out of Indonesia, where the company has a pretty solid position and considerable market share.
Given valuations in the current market, it will be interesting to see how the IPO will boost the valuation of GoTo and Grab. After all, they compete in the backyard of Sea Group with a market cap of $120B.
Not to mention that now, players like Alibaba, Tencent, and ByteDance will be paying close attention to the 12th biggest startup in the world.
While it’s too early to say what will happen next, such significant events in the ecosystem are great for the tech community and will have a lasting impact. As both companies are getting ready to go public, we will see many employees, executives, and investors liquidating their ESOPs, creating a lot of wealth. In turn, if we consider what happens in more mature ecosystems like the states during such events, we will see a wave of new startups, business angels, and in general, capital that will be invested back into the ecosystem. That will create more jobs, attract talent from abroad, and create innovation to address challenges across all developing economies in Southeast Asia.
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