South East Asian ride-hailing firm Grab has raised $2.5 billion in fresh funding. This is the biggest round of investment this region has ever witnessed.
This capitalization has cemented Grab’s lead over Uber in South Asia.
Grab (known as GrabTaxi) is a ride-sharing app similar to Uber. Started in 2012, it is based out of Singapore and offers services in countries like Malaysia, Indonesia, Philippines, Vietnam and Thailand. By July 2016, the company had over 350,000 drivers in its network and the app had been downloaded over 19 million times. Today, it offers private car, motorbike, taxi, and carpooling services.
Offering 3 million rides daily, it holds 95% of the market share. Due to its quick growth, it has also attracted generous funding. In 2014, it announced that it had raised $250 million series D round invested in by SoftBank Corp. In venture capital terminology, Series D round refers to fourth stage in the Seed Stage Financing cycle.
It is now valued to be more than $6 billion.
One of the key backers of Grab is Didi Chuxing, a ride-sharing company in China. It had been Didi Chuxing that had forced Uber out of the lucrative Chinese market. Uber China, having launched in 2014, could not make any profits. It also failed to cut into Didi Chuxing’s 85% market-share. In August 2016, Uber agreed to sell its business to Didi Chuxing.
Along with SoftBank, Didi Chuxing has guaranteed $2 billion in funding to Grab. Anthony Tan, the chief executive officer of Grab commented on the investments noting, “With their support, Grab will achieve an unassailable market lead in ridesharing, and build on this to make GrabPay the payment solution of choice for Southeast Asia.”
Uber remains one of the largest ride-sharing technological companies in the world but it has struggled to penetrate key marketplaces. It recently scaled back its operations in Russia and merged with its rival, Yandex. The majority of this new company will be owned by Yandex, giving Uber little control in the region. We detailed Uber’s setbacks in Russia in this article.
Even in the US, Uber continues to lose money. After turning a slight profit in the in the first quarter of 2016, Uber lost $100 million in the US in the second quarter.
South Asia is viewed as a key market for most technology companies. With over 600 million potential customers, the region boasts a burgeoning middle class.
Our assessment is consistent with what we had stated earlier. We believe that it is going to be very difficult for aggregation companies to launch global operations because they lack a management culture and do not have business operating expertise. Hence, they will find it difficult to enter markets outside the US. Grab is a local company and has a better fit culturally. Grab might have a similar problem operating in the Europe or the US.