Billionaire Amazon founder Jeff Bezos has
just made his first investment in a Southeast Asian e-commerce start-up.
It was incredibly fortunate and a huge fan boy moment for me.
But it’s not one of the region’s billion-dollar unicorns.
It’s a mom-and-pop shop start-up that’s been around for less than two years.
If I look at last month’s numbers, we’ve grown more than 200 times.
And it just so happens that some of the founders are Bezos’ former employees.
I wrote a memo, which is a very Amazon style thing to do. You don’t send a deck;
you send a written note. Wow, so taking a leaf out of
the leadership book from Jeff Bezos seems to have
paid dividends there. It’s inspirational.
Indonesian e-commerce start-up Ula is a wholesale marketplace aiming
to modernize the country’s millions of mom-and-pop kiosks, or warungs,
by providing inventory and logistics services, as well as financing.
Founded in January 2020 by CEO Nipun Mehra, the company has thrived under
a pandemic-induced shift to digital, so far raising over $117 million in funding
from big names like Tencent and Lightspeed Venture Partners.
One among them is Bezos Expeditions,
whose billionaire owner was told about Ula by one of the start-up's early backers.
In a region where Amazon has limited presence, Jeff Bezos’s investment
of an undisclosed sum through his family office can be seen as a vote of confidence.
Nipun previously worked at Boston Consulting Group and Indian e-commerce giant Flipkart,
but he started his career as a software engineer at Amazon in 2004.
If you’d have asked me at that time that there would be a day, you know, 15 years later,
where this moment would come, I would have probably been like it’s a dream.
Despite never meeting Bezos, Nipun yearned to be an entrepreneur, just like him.
It was during his time as an investor at Sequoia India when he saw an opportunity to adapt the
traditional business-to-consumer e-commerce model for a new market: small food kiosks in Indonesia.
The B2C angle, the typical Amazon, Flipkart, or here, in Southeast Asia,
we have Shopee, Lazada, Tokopedia and so on, it has been more on the non-food side,
primarily. Foods is a very different way of running things. Usually in emerging economies,
their income profile is such that they have to buy frequently and in small baskets.
And the moment you get into that dynamic, the traditional way of doing e-commerce doesn’t work,
because you can’t deliver a three-, four-, five-dollar basket to somebody’s home and do
it profitably and sustainably, so you have to find other ways of doing it.
Indonesia, with its vast population and fast-growing economy,
is seen as a huge opportunity for entrepreneurs and investors.
Central to that are the country’s millions of neighborhood kiosks,
which sell fast moving consumer goods, like drinks and packaged food, as well as household items.
They’re an integral part of society,
especially in the smaller cities and provinces outside the capital Jakarta,
accounting for almost three-quarters of the country’s $47 billion consumer goods sales.
Many rely on traditional means of replenishing their supplies
by shuttering their stores when they visit wholesalers to stock up wares.
Abheek Anand, a managing director at Sequoia India, one of Ula’s investors, explained more.
They are essentially run by one or two people, who act like consumers. They own the business;
they need to procure things for themselves to sell. And for them to actually
tap into offline supply chains is actually very inefficient. They have to go to the local market,
spend hours figuring out what to buy, where to buy it from.
Nipun wanted to simplify that process by creating a business-to-business platform
that would enable stallholders to order stock at competitive rates
and have it delivered to their store for a small fee.
So, he called on his contacts in the e-commerce space to help him realize the vision.
His former colleague from Amazon, Alan Wong, Riky Tenggara from Lazada,
and Procter & Gamble executive Derry Sakti rounded out the founding team.
The traditional store owner, they’re on YouTube, they’re on TikTok,
they’re spending time on WhatsApp. They’re digital. They’re more digital than many of us.
So how do we bring that advantage and say okay, we’ve learned all this stuff in Amazon,
we’ve learned all this stuff in business school. How do we bring some of that
into this little smartphone and help them both make more money as well as save more money?
The business got off to a steady start. But within months of launching in January 2020,
the pandemic hit, making demand for services like Ula more urgent.
Lockdowns made it harder for stallholders to source goods from wholesalers, even as customer
demand for daily essentials grew. That caused many mom-and-pop shops to pile onto the platform.
The need in the market just completely switched. In lockdown,
your first priority is to get your food, is to get things that you consume.
The founders responded quickly, onboarding tens of thousands of
stallholders and expanding their team of 15 to 400 across Indonesia, Singapore and India.
That rapid growth caught the eye of investors,
helping them to attract their first round of investment within six months.
To Nipun’s credit, he’s been able to get a lot of momentum very early and clearly a
lot of other investors are seeing that. The most exciting addition to the company is Jeff Bezos,
who’s invested, which is obviously nice validation for the business. But there are a number of other
really smart people who have joined us along the way.
To date, Southeast Asia is home to 35 billion-dollar
startups, of which three-quarters (76%) are from Indonesia and Singapore. Of them,
26% are in the financial technology sector, 20% are in e-commerce and 11% are in logistics.
In October 2021, Ula closed its Series B round, raising $87 million.
Nipun said the cash will go towards expanding its existing marketplace offering, as well as
launching a so-called buy now, pay later service to provide stallholders with small loans.
What is to come is what we call the working capital problem. That’s something which we
are building. Working capital helps you expand how much you can keep in
your store and therefore you will not run out when the customer needs something.
The foundations are there, the customers want the service.
What we need to do now is continue to build on it.
Within the next 18 months, Nipun hopes to quadruple
the number of merchants Ula works with from 70,000 today to 300,000.
He also hopes to help merchants expand into new categories
such as apparel and technology, with the ultimate goal of doubling their income.
Why restrict yourself to the items that are in your store? Why can’t
you order everything that your customer needs? Why can’t you be that channel?
And those are tougher problems to solve and will take longer. But, in my mind,
that is what will lead to a new form of retail. Not something which we have seen in the U.S.,
not something which we have seen in China. It will be an Indonesia-specific, unique solution.
It’s a bold goal for any entrepreneur, let alone one building in the midst of a pandemic.
There will always be uncertainty in life, there will always be risk in life. You just have to
say I’m going to try this and I will deal with whatever comes.
And I’m sure that if you’d known that a pandemic was a few months around the corner,
you might not have started this time either but you still managed.
That is true too. That is true too. So in that sense the timing was perfect.
Perfectly bad, but it seems to have worked out. Perfectly bad, correct.