Grab launches venture arm to 'transform South-east Asia'

[SINGAPORE] In a bid to seek out South-east Asia's next tech "unicorn", Grab on Tuesday launched Grab Ventures, joining the ranks of Google, Rakuten and other major tech companies that have carved out their own venture or innovation arms.

Grab chief Anthony Tan unveiled the company's initiative to develop innovations in-house, pursue strategic partnerships and groom South-east Asia's next generation of startups valued at US$1 billion or more.

Speaking at the Innovfest unbound tech conference, he said that Grab wants to create 100 million micro-entrepreneurs in the region as it celebrates its sixth birthday.

"We can transform South-east Asia together. Let's show the world that startups from South-east Asia can solve real world problems like poverty and hunger."

Grab's move with Grab Ventures follows its recent monetisation of GrabHitch (formerly a non-commercial carpool service) and its launch of Grab&Go (a service where riders sample and purchase snacks and beauty products during rides) - which hint at the pressure Grab is facing from investors to realise more revenue possibilities and to secure its position as South-east Asia's most valuable startup, observers told The Business Times.

Li Jianggan, chief of business consultancy firm mworks, said: "Without Uber in the picture, and before Go-Jek enters Singapore and other South-east Asian markets, I believe Grab is under investor pressure to demonstrate more revenue possibilities."

Last week, Grab said it would implement a 10 per cent platform fee on all GrabHitch rides from June 1 to help fund its operating expenses and invest in product enhancements. It was a move that puzzled the ride-hailing community, given that GrabHitch was launched over two years ago as a non-commercial social carpool service to let drivers keep the full amount paid by riders.

Mr Li, who was formerly the Asian head of Easy Taxi, said: "Again, without competition, I think Grab needs to test its revenue limits by charging for services which were previously free.

"This will determine how sexy its story is when it eventually files for an initial public offering (IPO). Such tests would be difficult to do in a competitive environment."

Lee Der-Horng, director of the NUS-LTA Transport Research Centre, noted that the platform fee would not significantly affect Grab's driver base. "Keen GrabHitch drivers will not leave the service simply because of this small sum, as most of them are not treating the service as their source of income, not even revenue."

Grab Ventures will do two things:

Through Velocity, Grab will partner some eight to 10 Series B startups over the next two years, and may invest in those that exhibit "strong synergies" with Grab; sectors in focus include transport, food, logistics and financial services.

BT understands that Grab Ventures manages an open-end fund, and is open to partnering venture capitalist firms to provide capital for its portfolio startups.

In Singapore, Grab has partnered government agencies such as the info-communications Media Development Authority of Singapore and Enterprise SG, to tap their expertise in areas such as capability development, global market access and regulatory support; EDBI, the investment arm of the Singapore Economic Development Board, has also joined as an early partner.

Grab Ventures' portfolio now includes Drive.ai, a California-based self-driving technology startup; iKaaz, an India-based payment experience startup; Kudo, an Indonesian payments startup which Grab acquired in 2017; and GrabCycle.

Chris Yeo, head of Grab Ventures, told BT that Grab wants to expand its online-to-offline solutions: "If there are existing tech companies already doing that, we'd rather partner them than build (the technologies) ourselves."

mworks' Mr Li said: "Any big tech company will need to make its position more secure. That means expanding its offerings to its core user base, forming an ecosystem with it at the centre, and actively seeking and weeding out potential threats. For example, Alibaba bought food delivery company Ele.me to expand its offerings; Facebook bought Instagram and WhatsApp."

Arvind Sankaran, venture partner at Jungle Ventures, added that the execution of innovation roadmaps at "future-oriented companies like Grab" is expected to be multi-sourced; such companies undertake internal innovation by finding and retaining top talent, and enter into joint ventures such as with Credit Saison, and corporate venture arms.

"While it will help Grab stay on or ahead of the disruption curve and continuously strengthen its competitive moat, it is critical that the focus of Grab Ventures be very precise, driven by a strong thesis and high conviction, so that such activity does not become a distraction," he said.

Mr Li agreed that while Grab needs to establish a "very entrenched ecosystem" to compete with potential deep-pocketed competitors, "doing too many things at the same time" will be a test of the management's focus.

He warned: "It will be hard to coordinate many business areas, with each having its own objectives and key performance indicators."