With $750M new funding, Grab looks to further Asian expansion, new business models

After months of negotiation, which have so far fueled speculations about new capital infusion, Southeast Asia’s (SEA) leading ride-hailing platform, Grab, has officially announced its latest funding round: US$750 million — a round led by Japanese conglomerate SoftBank, along with both new and existing investors. This brings the ride-hailing startup’s cash position to around US$1 billion, and increases its valuation to a range of US$2.3 to US$3 billion. With the new over-subscribed funding round, Grab is now the second most valuable startup in Southeast Asia, after Garena, which is reportedly worth US$3.75 billion. According to the company, it intends to utilize the new resources to further expand its presence in the region, particularly in Indonesia, which is the biggest market by population in the SEA. Grab also plans to explore new business models, including enhancing the capabilities of its mobile-based payment service GrabPay.

Heightened competition in Southeast Asia

This funding news comes right after several developments in the ride-hailing industry in the region. Global leader Uber recently made news after selling its Uber China subsidiary to its biggest competitor in the country, Didi Chuaxing. According to Uber, the strategic exit enables it to focus resources and efforts elsewhere in the region, Southeast Asia included. Another notable development is Indonesian transport startup Go-Jek’s raising of US$ 550 million in venture capital in August, which enables it to enhance its technology, as well as build on new business models. These underscore the tough competition that ride hailing or transport network services are expected to face in the region.

New business models

Having mentioned Garena, it’s also worth pointing out how that particular company quadrupled its valuation in just two years while it diversified its business. Initially launched as a game development studio, Garena has subsequently expanded into digital content, e-commerce and digital payments. Grab’s strategy will be similar, as it leverages its platform in providing more value to customers. For instance, it plans to grow GrabPay throughout the region beyond its current iteration, which only serves as a payment gateway for Grab rides. With digital payments being a lucrative market, it’s likely that Grab will explore more disruptive payment schemes that offer seamless mobile payments to users. “As a start, Grab has partnered with Mandiri, Indonesia’s second largest local bank, to offer a mobile wallet service,” Grab says in its announcement. “In Indonesia, we are also long-term partners with Lippo Group, with whom we are implementing an e-money payments platform that will enable users to use GrabPay at Lippo’s department stores, hypermarts, cinemas, coffee shops and e-commerce platform.” This enables Grab to ride on the strong e-commerce trend in the region, with a global market estimated to expand to US$ 2 trillion by 2017, and with SEA digital payments reaching $200 billion by 2025.

Disruptive and data-driven technologies

More than ride-sharing and digital payments, Grab is banking on its machine learning platform as a driver for success in the region. In addition, its familiarity with the Southeast Asia market will give it a competitive edge. To wit, Grab utilizes its data gathering efforts in developing back-end routing capabilities, proprietary point-of-interest mapping and car pooling. The company has also been collaborating with the World Bank in providing data for traffic studies.

The takeaway

Southeast Asia is a lucrative market for disruptive technologies, although nuances will mean that startups need to be familiar with the local and regional contexts, in order to gain traction and success. If anything, Uber’s exit in China might be indicative that global brands cannot simply capitalize on growing fortunes in the region without a more in-depth knowledge of the market. The regional market dynamics call for more focused and familiar approaches. With Grab’s new funding round, it strengthens its position and capability not just as a transport network provider, but potentially a bigger platform and enabler for disruptive businesses built around mobility, data and collaboration.

J. Angelo Racoma

I am a storyteller for startups and enterprises. <!--more-->I am a storyteller for startups and enterprises. I help brands and businesses engage and connect with audiences through effective content s

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