GrabTaxi's scale proposition

The meeting with fleet number five took an unexpected turn when the founder brought up Tan's grandfather, who was a leading figure in the Japanese auto industry. "He went upstairs and brought back a gold-plated model car," Tan recalls. "He said, ‘Your grandfather gave me this. Nobody wanted to finance my first 40 cars, but he did. So I will support you.'"

This gave GrabTaxi - known in Malaysia as MyTeksi - the traction it needed and the company has barely looked back. One year after launching in Kuala Lumpur the start-up entered Manila. Twelve months on from that, it is present in 15 cities across Southeast Asia with a staff of 200.

The app - which allows users to book taxis operated by any provider, identifying which cars are nearest and which are most reliable, based on variables such as distance, amount of traffic and consumer feedback - has been downloaded onto more than 1.2 million devices. More than 250,000 passengers use the service at least once per month, while over 20,000 taxi drivers have registered with it.

"We are doing a booking every two seconds and we see ourselves getting to two bookings every one second. We want to be in every major city in Southeast Asia," Tan adds. The company decides where to go based on mobile phone penetration, the fragmentation of taxi services and the average fare, of which it takes a 5-10% commission.

Tan seeded the business himself and then received a Series A round fromTemasek Holdings-owned Vertex Ventures. Just over a week ago, it was announced that GGV Capital would lead a $15 million Series B round, alongside Vertex and Chinese online travel platform Qunar. The latter was brought in for its experience scaling and localizing a business, which lies at the heart of the GrabTaxi approach.

Rapid expansion is seen as necessary to head off the legion of local copycats, but no one else has succeeded in going cross-border. Tan puts this down to availability of capital - salaries are the big burden when opening in new cities - local knowledge and local teams. Most of GrabTaxi's senior representatives in each market were recruited through the Harvard network.

Tan sees this as a key differentiator between GrabTaxi and global giant Uber. While the latter seeks to replace local taxi fleets with its own high-end service, the former works within existing systems. Thanks to the tipping function that allows users to pay a above the standard rate based on how quickly they need to be somewhere, drivers who use GrabTaxi earn 30-300% more per day, Tan says. "When we pitched this to HBS it was a for-profit social enterprise."

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• Topics
• Technology
• Southeast Asia
• Early-stage
• Venture
• Temasek Holdings
• GGV Capital
• Vertex Management (II)
• Venture
• Technology
• TMT
• Malaysia
• Singapore