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GoPolitics: Gojek founder joins Indonesian cabinet

Nadiem Makarim leaves ride hailer's board as competition with rival Grab intensifies

Nadiem Makarim, co-founder of the Indonesian ride-hailing and online payment startup Gojek, is now joining the government.   © Reuters

JAKARTA -- Nadiem Makarim has long been close to politicians. But now the charismatic co-founder and CEO of Gojek, the Indonesian startup valued at over $10 billion, is taking the unusual step for a tech entrepreneur of actually going into politics himself.

Makarim was with Joko Widodo, also known as Jokowi, when the Indonesian president visited Silicon Valley in 2015 on his first state visit to the U.S. In the final stretches of his 2019 campaign, Widodo even attended a Gojek event where he congratulated the company on becoming Indonesia's first "decacorn," a private company worth more than $10 billion.

This week, though, Makarim made the rare move of accepting Widodo's request to join his new government as Minister of Education and Culture.

Makarim's personal calculations for accepting remain unclear.

Widodo has long said he wants to increase the role of entrepreneurs in his cabinet, and Erick Thohir, a local media tycoon, has also joined Widodo's government.

As a result of his change in position, Makarim will step down from Gojek's board and give up all operational and executive roles at the company, although he will keep an undisclosed stake as a "passive investment."

Yet, at the same time, he hails from a powerful Indonesian family and clearly remains ambitious.

"My mission at Gojek was always to show Indonesia on the world stage," he said this week after accepting the cabinet post. "So this is a continuation of that mission, but now for the country on a larger scale."

Certainly, the timing of the departure of the 35-year-old Harvard Business School alumnus from the company he nurtured from humble beginnings in a tiny South Jakarta office is fortuitous, in some ways.

Gojek is being challenged in its home turf Indonesia by Singaporean rival Grab. (Photo by Akira Kodaka) 

It comes just as the WeWork fiasco is deflating valuations throughout the tech sector. In addition, Gojek faces challenging times both at home and abroad.

In Indonesia it is reportedly losing market share to Singapore-based Grab, the SoftBank-backed startup founded by Makarim's personal rival Anthony Tan, who was a class mate at Harvard.

Grab already holds a 64% share of Indonesia's ride-hailing market, according to the U.K.-based research firm ABI Research, although Makarim has played down the significance of Grab's advance, previously saying that ride hailing "represents less than a quarter of our overall gross merchandise value."

Potentially more worrying, though, is Grab's growing presence in payments, which Makarim had earmarked as a revenue generator and described as "the glue that connects all of [our] services together."

Ovo, the payments company partly owned by Grab, holds a 37% share of Indonesia's digital payments market by transaction value, according to unverified internal central bank data widely cited by local media, and Ovo is also rumored to be in merger talks with Dana, a local rival, which could boost its market share by another 10 percentage points. By contrast, Gojek's payment gateway GoPay itself reportedly holds a 17% market share.

However, the market share data is contested. Research by FT Confidential Research last year said that GoPay "was used by almost three-quarters of mobile payments users in the three months to the end of September." Bank Indonesia has also said it "has never issued or published individual data."

Either way, domestic competition is mounting. At the same time, challenges are growing overseas where Gojek's strategy, much like Grab's, is to use its popular ride-hailing service as a hook to lure customers into its super app ecosystem.

But in markets like Vietnam, a rush of newcomers is making it hard to establish clear, market dominance.

"The fragmentation of Southeast Asia can make it challenging to become the true super app with sufficient scale. Super app depends on scale. You need a lot of people using the same thing," said Kuo-Yi Lim, co-founder of venture capital firm Monk's Hill Ventures. "But when [in] every country you may be number two and number three and number four, it's tough."

Gojek also still needs to roll out GoPay overseas.

All this is not to say that Makarim's departure is a decisive blow for Gojek -- although Garda, a union that claims to represent ojek, or motorcycle taxi drivers, across the country is unhappy.

It has threatened to stage protests and reject Makarim as a minister because they say he failed to address the issue of drivers' low pay, DealStreetAsia reported, adding that the new education minister owns an estimated 2 to 3% in the company.

At the top of the company, though, there will be continuity after the transition. Andre Soelistyo, currently the president of Gojek and formerly of private equity group Northstar, will become co-CEO alongside co-founder Kevin Aluwi.

In an email to staff on Wednesday, Makarim said of the new co-CEOs that he had "complete faith not just in their technical skills and ability to execute flawlessly, but also in their integrity."

Investors in the company also seem unruffled.

Hian Goh, partner at Openspace Ventures, a Gojek investor, said: "The fact that the transition has been so smooth and the succession has taken place without much fanfare is a testament to the depth of the management team and the resilience of the company and the people running it today."

And despite the challenges it faces, Gojek still seems able to raise money, despite the WeWork fiasco that has put the valuation of all tech startups under the microscope.

A triumvirate of Mitsubishi companies -- Mitsubishi Motor, Mitsubishi Corp and Mitsubishi UFJ Lease and Finance -- invested in Gojek in July this year. Japan's state-backed Cool Japan Fund has also invested about $50 million as part of Gojek's ongoing Series F round.

Such concerns, however, may soon fade from the front of Makarim's mind as he enters the hurly-burly of political life.

'It's not about you' -- so goes one of the core Gojek values," as he wrote to staff in an email on Wednesday.

"Gojek thrives on talent and if Indonesia is to produce more high quality talent, the country's educational system is going to have to undergo a transformation," he said. "That's why, when I received the mandate to be the Minister of Education and Culture, I knew it was something I had to do."

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