Photographer: Dimas Ardian/Bloomberg

Friends at Harvard Turn Rivals Over Ride-Hailing Apps in Asia

Five years ago, Nadiem Makarim was at Harvard Business School when he struck up a friendship with Anthony Tan. Close in age and from neighboring parts of Southeast Asia, they dreamed up business ideas for school projects. Both were itching to start their own companies.

They ended up founding parallel businesses in their home countries. Makarim developed a mobile app for booking motorcycle rides in Indonesia; Tan started a similar service for taxis in Malaysia. Today the HBS graduates have each found success—and they're on a collision course.

Makarim's Go-Jek has become one of the most popular ways to get around in Indonesia, especially in a traffic-snarled city like Jakarta. Tan's GrabTaxi Holdings Pte found similar success with cars and is pushing aggressively into motorcycle rides, setting up shop in Indonesia. Both are also eyeing package-delivery services.

Competition has taken its toll on the relationship. The former classmates aren't talking anymore, Makarim said.

"It’s hard when you’re competing with a friend," said Makarim, now 31. "I understand that business is business, something you’re just going to have to adjust to." Tan, 34, and his company—renamed Grab—declined to comment for this story.

A Go-Jek rider drives a customer through the streets of Jakarta.
A Go-Jek rider drives a customer through the streets of Jakarta.
Photographer: Dimas Ardian/Bloomberg

Go-Jek has already become a household name in its home country. The startup's app has been downloaded more than 11 million times and it has more than 200,000 motorbikes. Its name is a play on ojek, the Indonesian word for the motorcycle taxis that crisscross Southeast Asia's most populous nation.

Makarim's business is an adaptation of the car-hailing service pioneered by Uber Technologies Inc., the most valuable startup in the world. But the San Francisco-based company is now mimicking Go-Jek as it expands in Asia. Uber just started motorcycle services for the first time, beginning in Thailand and India. Like Uber, Go-Jek takes a commission on every ride it books. Makarim declined to disclose the startup's revenue.

While there's no faster way to get around Indonesia's towns and cities than on the backseat of an ojek, Go-Jek has managed to make them even more useful. Go-Jek customers can summon rides, or send drivers to pick up or deliver food and groceries. Go-Jeks can bring a masseuse or beautician to a customer's doorstep. Companies can hire one of the startup's 5,000 truck drivers to haul goods. Small, local shops are banned from selling alcohol; booze on a bike is the perfect solution.

"What Go-Jek has really shown is that if you can take a proven business idea and localize it in the right way at the right time—with good capital behind it—you can grow faster than you can imagine," said Adrian Li, managing partner of Convergence Ventures, which backs early-stage tech startups in Indonesia. The firm isn't an investor in Go-Jek.

Go-Jek CEO Nadiem Makarim.
Go-Jek CEO Nadiem Makarim.
Photographer: Dimas Ardian/Bloomberg

Both entrepreneurs are from prominent families. Tan's father is one of Malaysia's richest men and the head of Tan Chong Motor Holdings Bhd., Nissan Motor Co.'s sole distributor in Malaysia. Go-Jek's Makarim has a pedigree that stretches from Harvard Business School and McKinsey & Co. to a grandfather who was part of the delegation that won Indonesia's independence from the Netherlands in a 1949 conference at The Hague.

Still, Makarim struggled to keep Go-Jek afloat before the business caught on. For the first three years, Go-Jek was just a call center, arranging couriers in Jakarta. Everything was manual; employees called motorbike drivers one-by-one until someone accepted an order. Makarim worked at other startups so he could keep the startup alive.

It was only in 2014 that Go-Jek's CEO decided to introduce a mobile app, with backing from private equity investor Northstar Group. When that debuted in early 2015, the service was so popular Go-Jek couldn’t cope with demand. "We didn’t even have time to sit back and think about how to optimize our system," Makarim said. Everything that could go wrong, did.

Go-Jek saw app downloads jump to 4 million in six months, and then to 9 million by the end of that year, triggering widespread outages. Makarim started hiring programmers in Indonesia to stabilize the service, ultimately acquiring two Indian startups to bolster Go-Jek's engineering ranks.

In December, Indonesia's trade minister banned the use of personal vehicles for public transport. That triggered public outrage, with #SaveGojek quickly becoming a Twitter trend. President Joko Widodo, who is banking on technology to reinvent Indonesia's $888 billion economy, quickly reversed the ban. Apps like Go-Jek need to be managed, not banned, said the president, who has said that he wants to create 1,000 startups and a $130 billion digital economy by 2020.

The controversy hasn't settled down. Just this week, taxi drivers staged mass protests against ride-booking services, bringing Jakarta traffic to a halt.

Go-Jek drivers check their smartphones in Jakarta.
Go-Jek drivers check their smartphones in Jakarta.
Photographer: Dimas Ardian/Bloomberg

Makarim's fallout with Tan, along with the protests, is part of a bigger battle to grab a piece of Asia's booming on-demand markets.

Surging smartphone ownership is fueling the growth of on-demand transportation services. Indonesia had 343 million mobile phones in 2014, surpassing its population of 254 million, according to Kleiner Perkins Caufield Byers. The number of smartphone users, still a fraction of the total, is projected to top 100 million in 2018.

To stay ahead, Go-Jek is raising hundreds of millions of dollars in new financing. Its backers also include Sequoia Capital and Yuri Milner's DST Global. Go-Jek is aiming for a valuation of $1 billion. "We will be a unicorn very soon," Makarim said. Grab, whose investors include GGV Capital, SoftBank and Vertex Venture, was valued at $1.5 billion in December 2014, according to CB Insights.

"Go-Jek is a precedent-setting homegrown company that made it out," said Thomas Tsao, a managing partner at Gobi Partners, one of the first China-based venture capital firms to have made inroads into Southeast Asia by backing 22 startups, but not Grab or Go-Jek. "Its success will spur the success of other companies."

Makarim agrees. The rivalry between Go-Jek and Grab, as well as with Uber, is helping to drive growth in the region, he said.

"We would not be where we are today without them—they are the ones that pushed us," Makarim said. "I'm sure we will look back in 10 years and laugh about it."

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