Indonesia’s most popular ride-hailing app Go-Jek is in negotiations with two of the world’s largest investment firms, KKR and Warburg Pincus, to raise funds totaling $400 million. This financing round will see Go-Jek’s valuation increase to an estimated $1.2 billion, making it the biggest startup to date in Indonesia, as well as the largest fund-raising round in Southeast Asia.
According to Wall Street Journal, Private equity major Kohlberg Kravis Roberts (KKR) is set to be part of this round, and may invest $100 million in the region for a minority stake in the Indonesian startup. Industry executive said the bulk of the remaining amount for this financing round is slated to come from Warburg Pincus.
The market buzzed about the company’s latest funding for the last two weeks, but Go-Jek remained silent on the issue. KKR’s investment in Go-Jek is likely to come from its $6 billion pan-Asian fund, which it closed in 2013. This would be the first time for both KKR and Warburg to invest in the ridesharing market, which until now was dominated by venture capital firms.
Since the app is launched in 2015, Go-Jek is now estimated to have more than 200,000 drivers operating in 10 cities.
It offers more than just motorcycle taxis, and has been expanding services to on-demand groceries, cleaning, door-to-door masseuses, and couriers among others.
Go-Jek has been facing stiffer competition from Singapore-based transportation service app Grab, a regional transport service major which has also been intensively expanding its services and network, via partnerships with local companies. This week, Grab signed an agreement with Indonesia’s Lippo Group to develop an e-money payments platform. The partnership is an extension of a strategic deal signed between the two companies in March this year.
Go-Jek generates revenue from a commission charged for fares; a common model across most ride-hailing service providers. In addition, they often offer drivers cash incentives to maintain low fares and retain them on their platform. However, such subsidies have also driven up customer acquisition costs and expenditures, with many transport services seeking to reduce the subsidies paid out. Grab’s CEO, Anthony Tan, has already reported that its services in some cities are seeing profitability.
A version of this appeared in Deal Street Asia on July 27. Read the full article here.