Startup Digitizing MSMEs BukuWarung Aims Unicorn Status

A financial technology (fintech) startup that focuses on digitizing stalls, BukuWarung recorded a series A funding of US$ 60 million or  IDR 854 billion.

This fresh fund was obtained from venture capital companies from the United States (US) Valar Ventures and Goodwater Capital.

The fresh funds were also obtained from several individual investors (angel investors) such as former GoPay CEO Aldi Haryopratomo and fintech founder Klarna Victor Jacobsson.

BukuWarung CEO Abhinay Peddisetty said the funding from Valar would support BukuWarung to scale the company into a unicorn. “This will help us,” he said, quoted from KrAsia, Thursday (10/6).

Moreover, one of the investors, Goodwater Capital, supports unicorns such as South Korean e-commerce Coupang, which recently listed its initial stock, or IPO, on the US stock exchange.

Investors Interested in Startups that Digitize MSMEs

Abhinay assessed that investors are interested in funding startups such as BukuWarung because the number of stalls digitizing businesses in Indonesia is increasing.

The Ministry of Cooperatives and Small and Medium Enterprises (Kemenkop UKM) noted that there were four million MSMEs that had just entered the digital platform in the past year. So, the total is around 13 million.

While in Indonesia, there are 64 million MSMEs and contribute about 61% of the country’s gross domestic product (GDP).

“Digitalization of SMEs and warungs is a long-term game and it’s still early days,” said AC Ventures managing partner Adrian Li. AC Ventures was one of BukuWarung’s early investors.

“BukuWarung shows strong execution and appeal to products, as it serves 6.5 million MSMEs , said Adrian.

BukuWarung also processes annual transactions of around US$ 1.4 billion or  IDR 19.9 trillion. The company is on track to process more than US$ 10 billion or  IDR 142 trillion of annual transactions by 2022.

BukuWarung’s technology allows merchants to store all types of transactions including debts, expenses and sales. Merchants can also manage stock, create invoices, send payment reminders, collect payments using invoices, and pay suppliers.

In addition, monitor cash flow through business reports. In February, BukuWarung also received funding from Silicon Valley-based venture capital Rocketship.vc.

Co-Founder and President of BukuWarung Chinmay Chauhan did not specify the amount of funds obtained from Rocketship.vc. He only said that the value was greater than that obtained from the Y-Combinator.

Banks and Fintech Collaboration Needs to be Accelerated

Collaboration between banks and fintech needs to be accelerated to encourage the growth of the digital economy. Both of them have their own strengths and weaknesses, so collaboration is needed to cover the shortcomings between the two parties.

Deputy Director of the Payment System Policy Department, Ricky Satria, said that banks have challenges in meeting the behavior development of millennials due to the old culture in banking itself. Meanwhile, fintech products and services develop according to customer needs.

“This collaboration is very important because for this bank it’s a matter of reputation to be able to serve the needs of customers, open to competition. With collaboration, capital expenditure and business process costs will be lower, and increase access to customers in new markets,” said Ricky in a webinar, Thursday (10/6).

Ricky added, there are four collaboration models that banks and fintech can do. First, the channeling model or channel. This is the most common model today where banks channel credit through fintech. An example is the collaboration between BNI with Grab and Gojek.

Second, the supplier model where banks invest in developing services similar to fintech as BRI did in developing the Ceria application. Third, the satellite model where banks form venture capital companies that can freely invest in fintech companies.

The fourth is the merger or acquisition model, as did Akulaku, which acquired the shares of Bank Neo Commerce and Kredivo, which acquired the shares of Bank Bisnis Indonesia.

The strengths of the bank include having a broad customer base, having a reputation for trust and stability, having experience in communicating with regulators, having complete products and services, and having effective risk management.