posted on 31 Jul 2021
As Grab plans to list on NASDAQ through a USD 40B SPAC deal with Altimeter Growth Corp., we strolled down memory lane and reminisced the company’s early days. Beyond any doubt, Grab has truly disrupted several sectors and developed strong moats across multiple markets.
Many of us know Grab as Southeast Asia’s SuperApp. However, this wasn’t always the case - especially not when we first invested in Grab, formerly known as MyTeksi. In retrospect, the early product is barely recognizable today. Back then, MyTeksi only focused on disrupting the ride hailing landscape and had no concrete plans to move into last-mile deliveries, digitalizing food vendors, and most recently, launching a digital bank.
Back in June 2013, we partnered with Grab as their first institutional investor. Today, we share some snippets of our Investment Memo and thoughts on their transformational 8-year journey.
We recommend Vertex Ventures SEA & India to invest USD 2.15M in GrabTaxi at a USD 9M pre-money valuation. Upon the completion of this investment, a new company called GrabTaxi Pte Ltd will be incorporated in Singapore as the holding company for all existing and future operating companies in different regions. Currently, the existing company, MyTeksi Sdn Bhd in Malaysia is fully owned by the Founder (Anthony) and his family members. The shares of MyTeksi will be swapped for shares of GrabTaxi Pte Ltd such that MyTeksi becomes a 100% owned subsidiary.
GrabTaxi’s mission is to be the leading “book-a-ride” service provider in the ASEAN region by leveraging on the smartphone adoption wave and eliminating the inefficiencies faced by both passengers and drivers. It aims to provide a seamless booking and ride experience in its target markets.
GrabTaxi’s core product is its cloud-based ride booking app, easily available on smartphones for both drivers and passengers. It allows real-time bidding and booking of taxis, real-time location tracking (including auto-detection of pick-up points), and predetermined fares (no rigged meters).
To many passengers, GrabTaxi represents safety. GrabTaxi goes the extra mile to:  screen drivers (including background checks if possible),  send the driver’s name and photo upon successful bidding, and  allow riders to share locations in real-time with their loved ones.
In the same vein, Grab enables its drivers to earn more with fewer hours of work by improving the utilization of idle inventory.
Globally, the ride hailing industry is massive but inefficient. Passengers are frustrated due to the inconvenience and lack of trust while drivers don’t make enough money. The new model of booking taxis through smartphone apps instead of call centers solves these issues and has been proven in the US, Europe, and China (Hailo, My Taxi, Uber, Didi etc).
Southeast Asia (SEA) ride hailing market, in particular, is fairly nascent due to high fragmentation, unbalanced supply/demand patterns, and low income. GrabTaxi is leading the transformation by:
The SEA market is large (our estimate of the current addressable market is at ~USD 700M/year) and will continue growing as the region experiences high economic growth and speeds up its technology adoption. Given that the book-a-ride business model has been successful in more developed markets, we believe this can be replicated in SEA and will gain widespread adoption from this point forth.
Founder and CEO, Anthony Tan graduated from the University of Chicago and worked at Indus Capital, Lazard, and Renault before returning to help manage his family business – Tan Chong Motor, a distributor of Nissan vehicles in this region. He subsequently completed his MBA at Harvard Business School, where he met his co-founder, Tan Hooi Ling. The duo wrote a business plan for a mobile app that connects ride seekers directly with taxi drivers closest to their location. After conceptualizing Grab, they participated in Harvard Business School New Venture (NVC) competition in 2011 and emerged as a runner-up. With the USD 25,000 from NVC and his funds, Anthony and Hooi Ling launched MyTeksi mobile app in June 2012.
GrabTaxi first launched its services in mid-2012 in Kuala Lumpur, Malaysia – under the name of MyTeksi. At present, the team has been quite focused on signing up fleets, taxi cooperatives, and independent drivers; onboarding ~2,000 drivers. Unique bookings were also growing healthily – reached 96,386 unique bookings in May.
Despite being a nascent market, out of 84,000 downloads, ~24,000 unique users made at least one booking, boasting a healthy conversion rate of 28.5%. May 2013 saw ~11,600 monthly active users. Their month-on-month (MoM) growth is attributable to multiple key initiatives executed by the management team, one of which includes partnerships with telecom companies to resell data and smartphones to taxi drivers facilitating downloads and app usage.
Further analysis on the cohorts has revealed a growing superuser behaviour. The percentage of heavy users (>9 bookings/month) increased from 1% to 14% within a year, with average bookings going up from 11.7 to 19.0 per month. This trend of increasing usage is consistent with light users (1-2 bookings/month) and medium users (3-8 bookings/month) where average bookings increased from 3.74 to 4.61 per month.
GrabTaxi finished the previous year (2012) with a revenue of USD 134,559. However, the bulk of their revenue came from reselling handsets and data packages to drivers. Currently, GrabTaxi is expanding its service to other cities in Malaysia and will enter the Philippines (Manila) by the end of this year (FY2013). In the following year, Anthony and his team will quickly expand into other markets in the region – starting with Vietnam (Ho Chi Minh City) and Thailand (Bangkok).
Given its early traction from booking transactions, we view GrabTaxi as not just a ‘ride-hailing’ company but rather, a company with huge monetization potential to venture into the data analytics of passengers’ behavior. More importantly, GrabTaxi is not just a single-country opportunity but one that aspires to be SEA’s regional champion.
Our investment in Grab was no easy feat and comes with some uncertainties:
1. Competition from overseas established players
It will be difficult but not impossible for players like Hailo and MyTaxi to start operating in this region. Unlike the US or Europe, it takes connections and local understanding to succeed in SEA. This will take time for them to get it right. GrabTaxi has a strong head-start with deep-rooted partnerships in major SEA countries. Capitalizing on this, the company will “run as fast as it can” to stay ahead.
2. Potential intervention by government bodies
This business model could also run the risk of government intervention should the market becomes crowded and messy. In China, Beijing recently stepped in due to the messy and unruly market – for instance, drivers did not respond to bookings unless passengers offered to tip. GrabTaxi intends to prioritize being a socially responsible company and help raise drivers income while solving passengers frustrations.
GrabTaxi is a promising young company with a bold vision to disrupt SEA’s taxi business. The SEA market is still nascent, fragmented and non-homogeneous. It takes good connections and an intimate understanding of each local market to be successful. We are impressed by the young and capable management team, and together with Anthony’s vast network, we believe GrabTaxi is uniquely positioned to be the next regional champion.
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