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Sharing Economy

Grab receives $1.46 billion from SoftBank Vision Fund

Latest fundraising round of Southeast Asia's super app tops $4.5bn

Indonesia is Southeast Asia's largest ride-hailing market and home to Grab rival Go-Jek.

SINGAPORE -- Grab on Wednesday announced that it has secured $1.46 billion in new funding from the SoftBank Vision Fund as it seeks to strengthen its market share in the region and fend off rival Go-Jek.

The provider of Southeast Asia's largest ride-hailing app has now raised more than $4.5 billion in its latest fundraising round. Other investors in the Series H round include Toyota Motor, Microsoft and Ping An Capital.

"This investment will help the company explore exciting new opportunities across on-demand mobility, delivery and financial services as it continues to grow its offline-to-online platform across Southeast Asia," said David Thevenon, a partner at SoftBank Investment Advisers.

The announcement comes at a critical time for the fledgling industry. Analysts see the upcoming initial public offering of Lyft, a U.S.-based service, as the first major test of whether ride-hailing companies can maintain their lofty valuations in public markets. In its recently filed prospectus, Lyft revealed an operating loss of nearly $1 billion in 2018.

"It's not just Go-Jek and Grab, there has been a bubble on startup companies worldwide for the past 10 years," said Park Byung Joon, associate professor from the School of Business at Singapore University of Social Sciences. But "the world's mood has changed a little. Many firms have to show the potential and profitability now."

He added that Grab can still raise money "as long as its investors still believe [in the business model] and that it will become profitable. But given Grab's model currently, I don't see how it can start showing profitability anytime soon."

Grab said in a news release that it plans to use a "significant portion" of the fresh proceeds in Indonesia, where it intends to further expand GrabFood and GrabExpress and roll out new services. According to research firm Kantar, GrabFood is the second largest food delivery service in Indonesia, with 44% of respondents to a survey saying it is the one they use most often.

Grab is bringing more than food deliveries to the home market of Go-Jek. Earlier this month, it announced it is putting a research and development center in a smart city just outside of Jakarta being developed by Indonesian group Sinar Mas. Grab said it will use its R&D facility to test new transportation-related technologies.

Both Grab and Go-Jek are racing to be Southeast Asia's No. 1 super app -- and both are attracting eye-opening amounts of cash. In the first half of 2018, 83% of funding in Southeast Asia went to four companies -- Grab, Go-Jek, an esports provider known as Sea and the Lazada shopping portal -- according to a report by Cento Ventures.

Go-Jek recently raised $1 billion from investors including China's Tencent Holdings. Last month, it formed a joint venture with Thai startup Get to gain a foothold in Thailand's growing, multimillion-dollar food delivery market.

SoftBank Group has been Grab's biggest investor. Before the latest announcement, it had poured $1.2 billion into the company since 2014. During the recent October-December quarter, it transferred its Grab stake to the Vision Fund, a nearly $100 billion fund backed by Saudi Arabia, for $1.5 billion. SoftBank said the increase was based on the company's fair value.

SoftBank has similarly invested billions of dollars into ride-hailing companies Uber Technologies, China's Didi Chuxing and India's Ola. The massive size of its investments has raised concerns among some analysts that it is driving up the valuations of loss-making startups.

In a recent interview with the Nikkei Asian Review, Grab CEO and founder Anthony Tan said revenue has doubled to $1 billion and that some markets are already profitable.

Nikkei staff writer Wataru Suzuki in Tokyo contributed to this story.

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