Indonesia's ride-hailing unicorn is racing to relevance. Go-Jek is bringing in new backers, including money from the Alphabet stable and Singapore's Temasek, sources say, as it expands its rides-to-massages model across Southeast Asia.
To ward off rivals and become a serious contender in a cutthroat business, the startup has to grow quickly. Deep pockets help.
Investors have flocked to ride-hailing startups in this region of 640 million people, the third-largest market globally after China and the United States.
Go-Jek's latest funding round, which opened last year and includes China's Tencent, will top $1 billion when it finally closes later this month, sources familiar with the matter said. The bet is that Go-Jek can stay ahead at home and also advance abroad.
The new money leaves the Indonesia-focused group valued at roughly $4 billion, the sources said, compared to more than $6 billion for regional rival Grab.
A multi-tentacled giant whose name plays on local slang for motorcycle taxi, Go-Jek dabbles in everything from shopping to roadside repairs. Indonesia is a vast market with poor logistics, and a large portion of the population lacks bank accounts.
At the same time, Indonesians spend more time on the mobile internet than anywhere else. Investor enthusiasm is understandable.
The test is whether Go-Jek can replicate its domestic strategy regionally, crowding out potential competitors quickly to win regional dominance. Keeping current customers and drivers using its network of services will be key.
The current roster of backers will help, including Alphabet’s Google and Chinese online platform Meituan-Dianping, according to Reuters.
Alphabet investment fund CapitalG just led a funding round for US ride-services firm Lyft. Unlike some comparable Chinese firms, however, Go-Jek presently lacks a clear profit-generating core.
Growth is expensive, competition tough and well-funded.
Grab is backed by Didi Chuxing and SoftBank, and its ride-hailing app was the most downloaded in Indonesia in the fourth quarter, according to App Annie - although Go-Jek had more active users. Smaller local rivals will replicate its service offerings. Drivers, start your engines.
Go-Jek began as a ride-hailing app for motorcycle taxis but has expanded into mobile payments, massage ordering, makeovers and other services. It operates largely in Indonesia, where it is the market leader. The company's chief technology officer said last month that it planned to set up operations in the Philippines in early 2018, with other Southeast Asian countries to follow.
Go-Jek investors include Tencent and JD.com, Reuters says, as well as global private equity firms KKR , Warburg Pincus and venture capital firm Sequoia Capital.
China's largest tech firms have been investing heavily in southeast Asia. Didi Chuxing, along with SoftBank, last year led a $2.5 billion funding round of Singapore-based Grab, Go-Jek's biggest regional rival.
Clara Ferreira-Marques is a Reuters Breakingviews columnist. The opinions expressed are her own.