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Interview

WeWork meltdown hasn't changed Grab's plans, co-founder says

Southeast Asian unicorn sees sustainable model in providing social value

Grab co-founder Tan Hooi Ling speaks at the Nikkei Global Management Forum in Tokyo on Oct. 29. (Photo by Karina Noka)

SINGAPORE -- The co-founder of Grab, which has become one of Southeast Asia's most valuable tech startups in just seven years, says the group's ride-hailing and payment business can help society while making financial sense.

Tan Hooi Ling stressed that the ideas of a "path to profitability" and "sound unit economics" -- phrases often heard in the valuation debate over U.S. tech groups like Uber Technologies and WeWork -- are "not new" to Grab.

The high-profile setbacks suffered by these companies "have not disrupted anything in terms of how we are thinking about the future," Tan said in an interview with the Nikkei Asian Review last month in Tokyo.

Grab's operations today span rides, food delivery and mobile payments, providing income opportunities for over 9 million people in Southeast Asia, she said. Back in 2012, Tan and her Harvard Business School classmate Anthony Tan -- who are not related -- founded a taxi booking app later called Grab in their home country, Malaysia, to solve "a very big problem of safety."

"If you Googled the world's worst taxis seven years ago ... the first two pages would be Kuala Lumpur," said Tan, one of Asia's most prominent young female business leaders.

The idea came from their Harvard class about building business at the base of the pyramid, she said. This concept focuses on serving and benefiting low-income markets, often in developing countries.

"We realized that you could build sustainable businesses that were profitable as well as businesses that had the double bottom line [by providing] social economic impact and value to the customers we are serving," she said.

The business that Grab intends to build must have two bottom lines, Tan said. While the company "needs to be sustainable financially," she said, it also "needs to add value in many different ways ... economic value, social value and education value."

Grab expanded rapidly, backed by smartphone penetration in the region. The company entered the Philippines, Singapore and Thailand in 2013, with Vietnam and Indonesia following in 2014.

Payment and food delivery services launched in 2016. Grab reached a big milestone last year as it acquired Uber's Southeast Asia business. The company has drawn investment from major sources such as Japan's SoftBank Group and Toyota Motor.

Grab now operates in eight Southeast Asian countries. The 9 million people -- one in 70 residents of the region -- who have earned income through the company's platform include ride-hailing drivers and restaurant partners of its food delivery service.

Grab's "Social Impact Report" released in September said the company contributed $5.8 billion to Southeast Asia's economy in one year. Some restaurants doubled their sales through the startup, the report said, while 21% of the drivers did not work before joining Grab.

The company also launched Grab for Good, a program designed to help 8 million people acquire digital literacy.

Grab explains its contributions to society as the company grows larger and faces greater scrutiny from authorities, investors and consumers. Regulators worldwide are increasing oversight of digital consumer services such as ride-hailing.

Singapore's competition watchdog fined Grab last year when it raised fares after acquiring Uber's local business. California in September enacted a state law requiring companies like Uber and Lyft to treat drivers as employees, eligible for benefits and wage protections.

But similar laws in Southeast Asia are unlikely in the near future, Tan said, as ride-hailers in the region help many drivers improve their income through joining the platforms.

Tan acknowledged the importance of safety rules, and said Grab is working on regulatory issues.

"We've actually been having ongoing conversations with many different regulators," she said. "A lot of the things that you've been having conversations about are things that we propose. For example, in Singapore, we actually were the first to offer insurance and health care solution plans for drivers before it was regulated. Then regulations came in, and we offered even more."

Grab already is profitable in "more mature businesses in our more mature markets," Tan said, but the company still invests a lot to acquire consumers and partners in new businesses, backed by a strong cash position.

The company was last valued at $14.3 billion. Grab is conducting a Series H fundraising round. Tan said an initial public offering "is not a specific milestone that we're aiming for. It is one of many potential paths and strategies we can take."

Southeast Asia's internet economy will grow to $300 billion in 2025 from $100 billion in 2019, a recent report from Google and Singaporean state investment company Temasek Holdings projects.

Grab will capitalize on the digital growth, Tan said, providing multiple services as a so-called one-stop superapp.

The startup has said it will continue focusing on Southeast Asia, citing the many people who have limited access to financial or other services.

"We have already been able to help" change the lives of Southeast Asian people, Tan said, but Grab wants to help "even more."

Additional reporting by Kentaro Iwamoto in Singapore.

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