Q&A: Go-Jek's Nadiem Makarim

Q: How difficult was it to launch Go-Jek in 2011 and how does the environment then compare to now?

A: When we started, I used my savings, borrowed from family and friends, and basically bootstrapped it, but given the cost of labor in Indonesia, I was able to sustain the business completely self-funded for three years. Because the starting costs are so small, Indonesia is one of the best places to test and prototype a business model. Now it would be harder because there are three leading players in the ride-hailing business in Indonesia - Uber, Grab and us - and we are all well-capitalized and the scale is so big. If I was starting Go-Jek today it would not be Go-Jek.

Q: Does that also apply to the different verticals Go-Jek is moving into?

A: It's tricky because of the network effects of fundraising across all business models as opposed to raising capital for a single business model. Each of our divisions is kind of run independently but there is so much synergy on the backend - it is an overwhelming competitive obstacle. Competitors may also copycat us in terms of verticals beyond ride-hailing and then there will always be more start-ups and more money chasing opportunities in each vertical. But the chances of becoming number one are slight.

Q: What factors do you consider when expanding into new verticals?

A: We look at two things: whether it classifies as a big spend for Indonesia's middle class; and whether it can be synergized with our core business, Go-Jek drivers. We want to add more services so the existing fleet maintains its loyalty to us. We will soon be in 14 verticals and the possibilities are limitless. We have already amassed a huge number of loyal customers and the cost of not trying is sometimes greater than the cost of trying. We see the Go-Jek app as a big playground to test digital ideas. Not all of them are going to be successful and we are fully cognizant of that, but we think we could easily get into the 20s of distinct products.

Q: The payment business, Go-Pay, works across all the verticals. Was introducing it always part of the plan?

A: No. Go-Jek makes it a point to not have a long-term plan. We have our six months to one-year goals, but in the tech industry things change every six months - there are external factors like competition and new technologies springing up. Go-Jek excels at knowing what it doesn't know and being able to pivot quickly and select new products and when we see the market moving. We are in a very privileged position given our user base to be able to move markets to where we want to take them. Go-Pay is an example of that.

Q: What kind of growing pains does Go-Jek experience?

A: Every possible scaling challenge it is possible for a tech company to face we are facing right now: scaling up the technology fast enough; hiring senior engineers fast enough; dealing with hundreds of thousands of drivers and their expectations; maintaining a balance between supply and demand while maintaining the income of drivers; maintaining a company culture when growing so rapidly in terms of headcount; hyper-expansion into multiple cities and standardizing operating culture across those cities. But the best learning happens when you are slightly struggling a bit. We try to bite off slightly more than we can chew in order to maintain our commitment.

Q: How much pressure is created by the amount of marketing expenditure required?

A: It's part of my job that stresses me out the most. We could use that money for far more innovative purposes, but because competition is so aggressive we have to match others' spending to protect market share. Our investors understand the business is extremely capital intensive and they have given us full freedom to decide how to defend and increase market share. I think part of the challenge is not just depending on the huge amount of capital we have raised, but to think how we can find an advantage from a product and execution perspective.

Q: In China, competition in the ride-hailing space has been eased through mergers. Do you see the same happening in Southeast Asia?

A: Given the fact all the players are highly capitalized and the prospect of one or several parties dying is almost an impossibility at this stage, at some point, if we are going to make money, it is likely there will be change in the market. Whether it happens sooner or later I have no idea. It is definitely not something we would consider while executing our current strategy.

Q: You have made four acqui-hires of engineering teams in India. How important have these been?

A: Those deals came about after initially working with those companies on an arm's length basis. We liked them and they liked us, so we said, ‘Why not join teams?' The diversity of product is just so big, from an engineering perspective it is unparalleled: no company in the world has more of these large online-to-offline verticals combined into a single platform. For them, GO-JEK is an amazing playground of challenges they would like to take on. As a result of these acquisitions, the scalability of our operations has been exponentially increased.

Q: How much government support is there for start-ups?

A: An e-commerce roadmap is being rolled out, which I think will support the industry, but I have yet to see any policies make a significant impact, negative or positive. What is good is that the government is very pro-tech right now. It understands that innovation outpaces regulation, and is therefore open-minded and flexible in adjusting regulatory structures to wherever technology evolves to.

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