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The case for Grab

March 8, 2016

grab-case

As the only series A investor in Grab (formerly GrabTaxi), we’d like to take a look at what makes this company so unique, and why we would bet on Grab again, if we had the chance. Of course, we’re biased, but we think there’s much to be said for the model that Anthony Tan and Hooi Ling are executing with their team and what it tells us about Southeast Asia as an evolving massive sub-continent.

Grab leads the charge for an evolving sub-continent:

  • Singular company in a fractured region
  • Augmentation over disruption
  • Regional cosmopolitanism
  • Southeast Asian futurism

It may sound like mumbo jumbo at first, but let’s dig into what each means.

A singular company in a fractured region

 

What keen observers will note, when looking across the consumer on-demand transportation markets, is that each market had its own competitor before becoming eventually dominant. Uber has Lyft. Ola had TaxiForSure. Didi Dache had Kuadi Dache. In Asia, the two larger apps acquired the smaller players. And Uber is still facing off against Lyft in the long haul. Grab, on the other hand, went virtually uncontested as its Rocket Internet-powered competitor, EasyTaxi, never really took off the ground enough to warrant an acquisition. It appears Grab was fast enough to realize its regional isolation (being sequestered in Malaysia and Singapore). It knew it had to get out of homebase quick.

This isn’t surprising, the USA, China, and India are contiguous markets. You could argue that Indian states and American states are so diverse and locally governed that they don’t represent a monoculture. But they are still government by one federal body. For an industry with as powerful of incumbents as taxi corporations, that matters a lot.

Grab had to adapt a fast-working multi-country strategy right off the bat, while its compatriots and competitors focused on one-country strategies, and winning over their governments accordingly. Only Uber has a similar approach, but spread worldwide from Europe to Southeast Asia.

Two vastly different multi-country strategies

 

The difference between Uber and Grab is deeply rooted in their philosophies about how Southeast Asia works.

In the case of Uber, as its latest logo change indicates, Uber is interested in every market in the world as being as local as possible in terms of brand and some services. Southeast Asia is a market where Uber executes the same business model with localized brandicaligarnng. But in terms of business model, Uber remains fractious. It unlocks new labor (new Uber drivers) while taking customers away from existing labor (existing taxi drivers).

In a world as diverse, politically complicated, and fresh as Southeast Asia, it’s no wonder Grab evolved its partnering mentality.

This is vastly different from others, whose mantra takes an anti-regulator stance whereas, from day one, Grab was pro-regulator. It solidifies Grab in the region as a partner and leader, instead of a dilinquent.

Partnership: augmentation over disruption

 

In our research, there are over 25 major taxi companies across Southeast Asia, from Bluebird to Vinasun to Comfort Delgro. These companies are spread across the region with varying degrees of development. Some taxi companies are large multi-million (or billion) dollar conglomerates and others are struggling to enter the market. The result is a varying degree of quality, supply, and innovation. Grab optimizes this existing inventory instead of disrupting it outright.

On one side, Grab aids existing taxi companies to access new customers, provide a sleeker user experience for customers, and gives drivers a feedback mechanism to improve their services. On the other side, Grab leverages this to enter new markets like GrabCar and GrabExpress, expanding the offering horizontally. Therefore, Grab, in its ideal case, would become the one-stop shop for transportation of all kinds, from people to objects.

The above is quite different from a zero sum game that many are oft to describe the American logistics game. Grab doesn’t seek to end the taxi companies. It seeks to augment them. It seeks to grow with them.

This mentality also translates to Grab’s approach to the regional powers.

Regional cosmopolitanism

 

When I asked Anthony about their relationships with governments across the region, he said:

“In Singapore, we were among the first to be awarded the Certificate of Registration for Third-party Taxi Booking Apps. In Vietnam, GrabCar now operates legally pursuant to an exclusive pilot partnership with the Vietnamese government. In the Philippines, GrabCar was the first ride-sharing app to be legalised in the Philippines, when GrabTaxi and GrabCar became the first transport apps to be registered under the new Transport Network Company regulations. In Indonesia, GrabBike and GrabCar operate under properly licensed entities, obtained through government endorsement. We continue to collaborate with the Indonesian government on its efforts to promote safe and localised innovation by transport network companies. In Phuket, the governor officially endorsed the launch of GrabCar.”

And the list goes on. It’s not shallow either, Anthony goes on to say that Grab will openly share Grab data with governments via the World Bank’s OpenTraffic platform. It’s part of the effort to make good with local governments by helping them with traffic congestion.

The point here is that Grab has learned to be highly collaborative very early, even with governments. When you couple this with Grab’s relationship with taxi companies and consumers, it’s clear that Grab is a B2B2G2C company (Business to business and government and consumer). By choosing to be hyperlocal, it has chosen to be multi-layered, and borderline schizophrenic.

Grab has to juggle multiple identities and positions at once, which means at its core, it must have a strong sense of self. This strong brand identity is a matter of survival for Grab, lest it be crushed under its own schizophrenia, and it also makes Grab a unique case study for where Southeast Asia is headed. It represents a regional cosmopolitanism. The mission of affordable rides for all is essentially a philosophical standpoint that the company is ushering into the region. Grab is saying these kinds of rights are universal to the region. It’s a futuristic vision for Southeast Asia.

Southeast Asian futurists

 

Futurists, on Wikipedia, are defined as people who “who engage in interdisciplinary and systems thinking to advise private and public organizations on such matters as diverse global trends, possible scenarios, emerging market opportunities and risk management.” This is precisely the place Grab finds itself. It is a virtual shepherd for a new way of life for Southeast Asia.

According to Grab, 190 million people in the middle class in 2016 will grow to 400 million people by 2020. In other words, today there are still hundreds of millions of people not in the middle class. Smartphone adoption, although growing faster than the middle class, is also not at 100% penetration across the region. It’s not clear if the speed of growth will continue (or how exact it is, remember that reliable data on the Southeast Asian is scarce), but the fact is Southeast Asia’s middle class is accelerating quickly. And the middle class is customarily at the forefront of adopting new technologies. No wonder Grab is emphasizing the middle class numbers.

It also means Grab, and company’s like it (hyperlocal, futurist, and cosmopolitan) will come to define Southeast Asia in the 21st century as the middle class emerges.

It’s a weight on Grab’s shoulders, being the most well funded and fastest growing consumer-facing startup in the region.

But it’s exactly why it makes the company so compelling.