For the better part of this year, talk has been swirling about how Grab’s upcoming Nasdaq debut will pan out for investors. In April 2021, Grab announced its plan to go public via a SPAC merger with Altimeter Growth Corp in a deal that valued the company at nearly US$40 billion.
There are a few things to understand about the company for those who are keeping their eye on Grab’s upcoming listing— perhaps even ready to purchase shares when the market opens.
Although Grab started as a ride-hailing app in 2012, it has since evolved into a bona fide super-app, diversifying its offerings inside the app to target emerging digital economy sectors, like logistics, food delivery, and financial services.
This seems to have paid off, as the super-app model is proving powerful. Think of it this way: A gig worker only requires an able body and a mode of transport to carry out various tasks and earn their keep.
A Grab motorbike driver in Indonesia, for example, can ferry people (ride-hailing), deliver food (GrabFood), deliver groceries (GrabMart), run errands for app users (GrabJastip), and even help customers do top-ups (GrabKios), all in a single day.
When drivers are more productive, unit economics are better for the platform. 59 per cent of Grab’s two-wheel driver fleet across Southeast Asia do both ride-hailing and deliveries.
By optimising its drivers’ time and enabling them to draw higher earnings, less effort has to be spent on keeping these drivers in the Grab network.
Super-app status
Unlike in the West, the super-app model works particularly well in Southeast Asia. The region’s consumers are predominantly digital natives, and lower-end Android phones with less storage are more common than iPhones. Hence they value having one app to do it all versus multiple apps for multiple uses.
This is similar to China, though one important difference is the lack of a user-to-user messaging system within Southeast Asia’s super apps. Facebook-owned WhatsApp is just too strong here already, in contrast to WeChat as a super-app in China.
Perhaps another reason for one super-app fitting this fragmented market so well is the relative nascence of the region’s tech industry. It is not easy to refine and perfect one service, much less six or seven.
The companies with a market advantage in one vertical (for example, ride-hailing) can re-invest their revenue into penetrating other verticals (food delivery and digital payments) and unlock rolling economies of scale.
More glaringly, it is simply much more convenient for users. Linking your credit card account to Grab or using the app’s mobile wallet to pay for your ride home, for instance, means that you don’t have to key in your details all over again when you want to order dinner.
You can also use the mobile wallet in-store, which means you can leave your physical wallet at home. With successful integrations like this, the experience for digitally-savvy consumers (which Southeast Asia has no shortage of) can be almost seamless.
Despite still being loss-making, Grab has a strong execution track record. For example, it first entered Indonesia in 2014 as the underdog, far behind local rival Gojek, which already had a four-year headstart. Yet, it is now the market leader for ride-hailing and food delivery in the country. The app contributed US$5.45 billion to the local economy in 2019.
The fact that many of Indonesia’s leading conglomerates have chosen to invest in Grab is a testament to their recognition of Grab’s ability to navigate complex environments and perform better than competitors.
A startup’s regional footprint is a key differentiator in a place as interconnected yet fragmented as Southeast Asia. Grab is the only player that has successfully operated a true super-app model across multiple markets.
This is important. Grab’s super-app model demonstrates its resilience. It’s not dependent on any single market or vertical, which proved important for cushioning the company through crisis periods like the pandemic. This makes it well-positioned to capture growth opportunities throughout the region.
According to the e-Conomy SEA 2021 report, core markets in Southeast Asia are expected to see double-digit growth between now and 2025, with the Philippines and Vietnam leading the charge. With Grab’s proven track record of successful localisation, we expect the company to likewise come to champion the Philippines and Vietnamese markets.
Also read: The hidden danger in SPACs. Is the hype worth the risk?
The complexity of Southeast Asia also bleeds into politics and the wider business environment. Grab has shown its ability to navigate this by forging strong partnerships with regulators like the Grab Tech Center in Jakarta.
These are all clear signals of Grab’s ability to win over regulators and cultivate a strong working relationship with the state, which is critical in a politically diverse region like Southeast Asia.
There’s no secret recipe to this, in case you were wondering. Grab’s simple formula is to show up wherever and whenever possible to help the government solve problems. For example, the company helped set up vaccination centres throughout 54 cities across Indonesia and even launched drive-through vaccination services that would provide 5,000 shots per week.
At the core of any startup success story is leadership. From my interactions with Grab’s founding members, I can tell you that Anthony Tan holds firm to his belief in building strong, intensely local teams. Grab’s leaders have a real, sincere drive to serve the communities they are embedded in.
Grab’s fundamentals are solid. With a vital mission, capable c-suite, and a proven track record, the company is set to flourish, especially when its target markets boast a young population and growing middle class.
And with Grab expected to list on December 2 in what will likely be the biggest US listing for a Southeast Asian company to date, all eyes will finally be on this region. For the increasingly packed pipeline of Southeast Asian companies planning their IPOs – this will be good news.
In Indonesia, Grab’s market debut will undoubtedly serve as a confidence booster to local unicorns as they map out their IPO plans. I believe a new era of tech investing is finally here, as homegrown giants prep to go public on the Indonesia Stock Exchange.
For global investors seeking to get in at the pre-IPO stage, form an alliance of your own with a strong local venture capital firm, ideally one with skin in both the public and private sectors.
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