Singapore-based on-demand ride service Grab today confirmed it has secured $2bn from telecommunications and internet firm SoftBank and its China-based counterpart, Didi Chuxing, as the two investors continue to expand their influence in the world’s ride hailing sector.
The funding was raised at a post-money valuation of $6bn, a source told TechCrunch, double that at which the company last raised funding, in a $750m round led by SoftBank in September 2016. Grab said in a press release it expects to raise a further $500m before it closes the round.
Grab runs an app-based service spanning 65 cities in seven Southeast Asian countries that enables users to order lifts through private cars, motorcycles, taxis or carpooling, equating to an average of almost 3 million rides ordered each day. It claims to have a 95% share of the third-party taxi-hailing market in the region and a 71% market share for private vehicle hailing.
The funding will partly be used to retain that presence in the market against both Go-Jek, the Indonesia-based ride hailing platform that raised $1.2bn in funding in May 2017, and US-based Uber, which accelerated expansion in Southeast Asia following its $7bn divestment of Uber China to Didi Chuxing in August 2016.
However, the company has grander ambitions that have perhaps been influenced by Go-Jek’s enthusiasm to expand into areas such as on-demand services, meal delivery and a mobile payment offering called Go-Pay.
Grab identified its own mobile payment product, GrabPay, as a destination for the latest funding, and CEO Anthony Tan said the company aims to make it the “payment solution of choice” throughout Southeast Asia. Grab’s top-up payment service, GrabPay Credits, has meanwhile grown more than 80% month by month since its December 2016 launch.
The expansion of GrabPay is being fuelled by an agent network Grab claims is 500,000-strong, and it sees its drivers and riders as a key element in establishing the platform, particularly with customers without access to conventional, reliable banking.
Grab’s growth in the mobile payment market has also been helped by its acquisition of Kudo, an Indonesia-based platform that allows customers without bank accounts to buy goods online, for up to $100m in April this year as part of a $700m plan to grow its online services in Indonesia, its largest market.
The company has now raised more than $3.4bn since it was founded as GrabTaxi in 2012. Its earlier investors include SoftBank and Didi Chuxing as well as online travel agency Qunar, GGV Capital, Vertex Venture Holdings, Hillhouse Capital Management, China Investment Corporation, Coatue Management and Tiger Global Management.
Cheng Wei, Didi Chuxing’s founder and CEO, said: “Starting with transport, Grab is establishing a clear leadership in Southeast Asia’s internet economy based on its market position, superior technology, and truly local insight.
“By deepening our strategic partnership, [Didi Chuxing] and Grab reaffirm our shared commitment to innovating localised solutions to global urban development challenges from the world’s fastest growing marketplaces.
“Both companies look forward to working together with communities and policymakers across Asia to fully embrace the extraordinary opportunities in the upcoming transportation revolution.”
Masayoshi Son, Chairman and CEO of SoftBank, added: “Grab is using technology to address transportation and payments, some of the biggest challenges present in Southeast Asia, and we believe Grab is a tremendously exciting company in a dynamic and promising region.”
The deal reiterates the informal partnership between Didi Chuxing, which now dominates the vast Chinese market, and SoftBank, which is flush with cash following the $93bn first close of its Vision Fund.
As stated in last week’s Big Deal, both companies are also investors in India-based Ola and Brazil-based 99, while Didi Chuxing is one of US-based Lyft’s shareholders, and SoftBank has in turn been a Didi Chuxing investor since 2015. Grab’s business model, however, makes it a different bet to the others, which are largely still pure-play ride hailing businesses.
We’ve spoken many times about how in China, Tencent, Alibaba and Baidu have respectively used an instant messaging app, e-commerce offering and search engine as the gateway to a far wider ranging offering for the mobile age, and it is not beyond the realms of possibility to imagine SoftBank sees Grab as a possible route to dominance in Southeast Asia, especially if it can build an ecosystem by taking stakes in other up-and-comers.