Logistics Startups Hunted by Big Investors, from Emtek to SoftBank

The development of e-commerce is a blessing for logistics startups in the country. Big investors such as SoftBank and Emtek Group conglomerate have poured fresh funds into startup companies in this sector. SoftBank Ventures Asia and Emtek Group participated in Waresix’s series B funding in the middle of last month.

Uber founder Travis Kalanick also invested in an Indonesian logistics startup, Kargo Technologies in March 2019. Investments in startups in the logistics sector also continued to flow before and during the corona pandemic. At least 12 funding has been announced since last year.

Chairman of the Indonesian Logistics Association (ALI) as well as COO of Paxel, Zaldy Ilham Masita said that players in this sector play an important role in the digital ecosystem. After e-commerce, financial technology (fintech) and ride-hailing have been flooded with investments, now is the turn for logistics startups.

Investors have also penetrated into various logistical startup business models, both Business to Customer (B2C), Customer to Customer (C2C), Business to Business (B2B) and combined (B2B2C). “Investments are starting to enter the logistics B2B market,” said Zaldy, Friday (2/10).

Players with the B2B model make a big contribution to the industry but are more difficult to operate than B2C and C2C. “B2B requires a very large investment to develop because it has a large number of assets such as warehouses, trucks, ships and others,” he said.

Investors Are Still Eyeing B2B Logistics Startups

Even so, investors are still eyeing logistics startups with a B2B model. One of the driving factors is the digitalization of business operations so that they become more efficient. Waresix, for example, provides trucks and warehousing.

The startup is adopting technology to be able to provide clients with product distribution management solutions, from monitoring consignments across shipping lines to insights to improve efficiency.

With these services, Waresix posted positive earnings before interest, tax, depreciation and amortization (EBITDA) last year. Some of the clients he hooked up were Unilever, Indofood, Siam Cement Group, Wings, and JD.ID.

The startup company has also raised US$ 100 million or around IDR 1.4 trillion in funding since last year. Apart from SoftBank and Emtek, EV Growth, Jungle Venture, Pavilion Capital, and Redbadge Pacific are participating in Waresix’s series B funding round.

That’s one example of a B2B model startup that attracts investors. However, Zaldy predicted that players with this business model would be very dependent on Indonesia’s industrial and trade conditions after the Covid-19 pandemic.

Trends in Demand for B2C and C2C Services will Remain Good after the Pandemic

Meanwhile, the trend of demand for B2C and C2C services is estimated to be still good after the coronavirus pandemic is over. However, the overall logistics market is considered to be smaller compared to last year, resulting in a price war.

“This must be anticipated by investors, whether the logistic model they are injecting is resistant to recession or not,” said Zaldy. Mandiri Capital Indonesia CEO Eddi Danusaputro agrees that the high demand for online shopping has boosted the demand for logistics services, especially B2C and C2C.

Even so, the B2B business model that provides end-to-end services is also promising. “That’s because it can control the entire chain. However, large funds are needed for the development of the fleet and system, so it requires big investors,” said Eddi.

The same thing was conveyed by the Managing Partner of Kejora Ventures Eri Reksoprodjo. He assessed that investors are eyeing logistics startups because they support the e-commerce ecosystem. In addition, Indonesia’s population is much larger than neighboring countries such as Singapore and Malaysia.

This sustains the e-commerce business, which also impacts logistics startups. “Therefore, domestic and foreign investors are looking for startups in this sector, whether there is a pandemic or not. That’s because online business in Indonesia is very attractive,” said Eri.