AVCJ Awards 2022: Exit of the Year – IPO: GoTo

Openspace Ventures saw something in Indonesia's GoTo when the super app was basically a call centre motorbike service with a vision for something bigger but no precedent to follow. That investment came in late 2014, when Openspace was a VC unit of Northstar Group.

Fast-forward eight years, and the mobility, commerce, and financial services platform is regularly cited as evidence that Southeast Asia's start-up and digital business scene has come of age.

The company's IDR 15.8trn (USD 1.1bn) IPO in April 2022 represented a landmark event. Moreover, coming on the heels of a INR 21.9trn Jakarta offering by e-commerce player Bukalapak, it bolstered the regional venture capital thesis. Regional technology IPOs are now on the cards.

Or are they? This is a difficult time in the cycle to wax poetic about unicorns going public, especially in developing markets. GoTo's stock has fallen 69% since the IPO, giving the company a market capitalisation of IDR 118.3trn as of late January. For long-time believers making a handsome exit like Openspace, it sours a deserved victory lap for all parties – especially the employees.

"We continue to make good money even at these price levels, so we can't be the most upset, and our LPs are sitting on very positive returns. But it's not fair to the thousands of team members internally who priced options at the beginning and worked hard on this over the years," said Shane Chesson, a co-founder of Openspace.

"They're seeing that the progress they are making is being harshly undervalued. That's the most painful part."

Still, the unfortunate timing, in some ways, highlights the IPO as a branding and deal-structuring effort. This achievement came from a company that was only recently dismissed as a poor cousin of Uber, which was still operational in the market when growth started accelerating.

"The fact is, they were able to become Indonesia-wide in only a few years, show margin progression out of COVID-19, and then put this listing together in a market that was already turning down. The management team deserves full credit for that," Chesson added.

Building firepower

There's more to GoTo's post-IPO blues than a global tech rout, however. Years of intense competition with Singapore-headquartered counterpart Grab morphed into a capital-raising war with significant collateral damage.

From the GoTo camp, Grab was seen as pursuing a brute force approach to outspending its opponents, backed by a risk-happy SoftBank Vision Fund among other big cheque writers. Indeed, it was Grab that acquired Uber's Southeast Asia business in 2018, thereby intensifying the rivalry.

GoTo raised about USD 5bn under the name Gojek and another USD 1.3bn in pre-IPO funding after merging with Vision Fund-backed e-commerce unicorn Tokopedia in 2021. Tokopedia had raised almost USD 3bn before the merger. Grab raised around USD 15bn before listing on NASDAQ via a merger with a special purpose acquisition company (SPAC) in December 2021.

For GoTo, this led to an unwieldy and fragile cap table. In addition to Vision Fund, names in the mix included Alibaba Group, Temasek Holdings, Tencent Holdings, Google, BlackRock, KKR, Warburg Pincus, Sequoia Capital, Astra International, Capital Group, JD Group, Facebook, Primavera Capital Group, Fidelity International, Ward Ferry, Abu Dhabi Investment Authority (ADIA), and DST Global.

These investors – each of which enjoyed at least a partial exit in the IPO – clearly recognised Gojek and Tokopedia as Indonesian champions and believed in the country's long-term consumption and services narrative. But the market conditions at the time of IPO as a merged entity did not support such a large proportion of the cap table being global tech investors.

Several of these investors were expected to back a secondary offering that didn't happen after an eight-month lockup expired in November 30. It's a matter of speculation to what extent the ensuing selling pressure has come from those large shareholders, given that relatively short-term traders were also a significant presence. But the question remains whether GoTo stayed private too long.

Ecosystem angle

Should the company have been more cautious with its spending in competition with Grab? Should it have secured a more productive overall cost position prior to IPO in a tough market? Chesson recognises hindsight in these areas will be instructive for the market going forward but he doesn't lose focus on the long-term outcome in terms of ecosystem development.

"In the last 12 months, Southeast Asia has been one of the busiest sources of tech IPOs globally in one of the worst environments for tech IPOs in over a decade. These companies are leaders and they're on track to be very important parts of the regional economy, but the listing processes and their traction toward being large, listed companies are not one-directional," he said.

One need look no further than Openspace's portfolio to understand the net impact of GoTo on the broader Southeast Asian start-up scene. Five companies in the VC firm's second and third funds were started by entrepreneurs who learned their trade at GoTo. More importantly, they did so leveraging logistics, payment, and go-to-market infrastructure established by their former employer.

This goes some way in explaining why market perception of GoTo already appears to be in recovery. The stock climbed 25% from the first session of 2023 to January 26, when it was trading at IDR 115 as of midday. So, as a postscript to the GoTo story, will the past few weeks of selloffs tarnish the company's or Southeast Asia's brand value to a meaningful degree?

"Hopefully, this is not the only postscript," Chesson said. "I think a lot of investors seeing this stock market performance will understand the specifics involved and that there's still a great opportunity for GoTo, Indonesia, and Southeast Asia more broadly. For some, the short-term lessons of this will mean they'll need more evidence before redeploying. Others will see a longer-term lesson."

Pictured: Shane Chesson of Openspace Ventures and GoTo's George Aluwi at the AVCJ Awards

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• Topics
• Southeast Asia
• IPO
• Technology
• Indonesia
• GoTo
• AVCJ Awards
• Openspace Ventures