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Startups

Philippine answer to Grab gears up for first major fundraising

Ride-hailing startup Micab sticks with traditional taxis as it aims for 'super app' status

Eddie Ybanez, the 32-year-old co-founder and CEO of Micab Systems. (Photo courtesy of Micab)

MANILA -- When local ride-hailing platform Micab launched service in Metro Manila last year, the timing seemed unthinkable. Singapore-based unicorn Grab had just taken over the Southeast Asian operations of U.S. rival Uber, creating a powerful regional player that held a virtual monopoly in the Philippines.

But now, Micab is gearing up for its biggest fundraising to date, one expected to surpass the $2 million in investment the company has attracted since 2012.

"The next round of funding will allow us to scale up our operations," Eddie Ybanez, the 32-year-old co-founder and CEO of Micab Systems, told the Nikkei Asian Review, declining to mention the target valuation for the startup.

Micab's next fundraising is seen as crucial for the company's bid to strengthen its position at home and expand in Southeast Asia, where ride-hailing unicorns are flexing their financial muscle to gain market share while smaller challengers have struggled for space. Indonesian ride leader Go-Jek in January acquired a majority stake in Philippine financial technology company coins.ph for $72 million, according to reports, making mobile payment as its beachhead in the country that recently rejected its application for a ride-hailing license due to restrictions on foreign ownership.

Yet as Grab paved its road to dominance in the Philippines, some taxi operators felt they were taken for a ride. Cabdrivers who drove the success of GrabTaxi, Grab's initial service, were later roped into Grab's private car service, which offered bigger incentives but often left fleets of traditional taxis without drivers.

"We felt betrayed," said Bong Suntay, president of the Philippine National Taxi Operators Association.

Grab argues the Philippine transport sector is a "dynamic and open market," but Ybanez saw the friction as an opportunity.

"That triggered an opening for us, because taxi companies needed someone to enable them to compete in terms of technology," Ybanez told Nikkei.

Since entering Metro Manila last year, Micab has teamed with 50 taxi operators operating around 6,000 cars, in addition to 2,000 cars outside the capital. The company hopes to end the year with 15,000 taxis.

Since entering Metro Manila last year, Micab has teamed with 50 taxi operators that combine for around 6,000 cars. (Photo by Cliff Venzon)

Grab still partners with traditional taxis even while having a fleet of 48,000 private cars in the Philippines, and Go-Jek is raring to expand in the country despite regulatory obstacles. But Ybanez thinks taxi operators are on his side.

"I don't think the taxi companies will trust them again," he said, referring to Grab and Go-Jek. "They pirated taxi drivers, and there's bad blood already."

Ybanez said his company will not offer private cab-hailing service and will work only with taxis, Micab's original business model.

Micab was Ybanez's thesis for his master's degree in information technology at a university on the central Philippine island of Cebu. It began in 2012 as a text-based service that let passengers message a hotline to hail a taxi. When smartphone use began gaining traction in the Philippines, Ybanez and his co-founder Kenneth Baylosis, whom he met at a local startup expo, converted it into an app. Local transport companies and Cebu-based businesspeople were the early backers of Micab, which now has 80 employees with offices in Manila and Cebu.

The company has raised $2 million from angel investors, including a recent "small" investment from a Japanese trading house that Ybanez declined to identify. Micab expects to eclipse that amount when it embarks on its first major fundraising in the second half of 2019.

Micab aims to expand beyond ride-hailing, similar to the transformation of Grab and Go-Jek, which now offer services such as logistics and payments.

"We are really positioning our company as a technology company, not just a cab-hailing company," siad Ybanez ,  who is also the acting chief technology officer after his co-founder resigned from the role to focus on his own ventures. "We are an on-demand platform. We will connect consumers to service providers, like patients to doctors, couriers to shippers."

Last year, Micab set up a unit in Malaysia, where cabdrivers are protesting against Grab.

Local stakeholders are on board with Micab's expansion. The Philippine Science and Technology Department granted it 3 million pesos ($56,800) last year for research and development. IdeaSpace Foundation, an incubator backed by telecom company PLDT, also is considering an investment, President Butch Meily told Nikkei. Local taxi operators are rallying behind Micab.

"We want it to succeed," Suntay said. "It's homegrown, and it offers benefits to both drivers and operators."

But despite the Philippine pride, some Micab drivers still prefer Grab, where booking fees can reach 75 pesos compared with 20 pesos from Micab.

"I earned more from GrabTaxi, from booking fees and incentives," said cabdriver Domingo Tagal, whose current company teams with Micab.

Asked to comment, Grab Philippines hinted at securing its dominance by stepping up services. "Overtime, we've seen more drivers move to Grab due to flexibility, better earnings and offerings," it said.

Micab can hardly compete with the incentives offered by Grab, which has big backers like SoftBank Group and Toyota Motor. The startup has yet to turn a profit from the revenue generated by fees from operators and advertising on the tablets used by drivers.

Tapping the roughly 40,000 taxis in the Philippines will give Micab a steady revenue source, but not the kind of explosive growth seen by Grab.

Asked whether he is willing to sell the company to avoid being caught in the crossfire of Grab and Go-Jek's battle for supremacy, Ybanez said: "We are not in a position to exit. We are just starting. The fight isn't won yet."

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