JAKARTA – Spurred on by the inroads Singapore-based Shopee has made into the Indonesian digital marketplace, ride-hailing company Gojek and e-commerce platform Tokopedia have finally completed a long-awaited merger that will allow them to make up lost ground.

Announced on Monday (May 17), the formation of the US$18 billion GoTo Group will pave the way for an initial public offering (IPO) in Singapore and New York which is expected to raise an additional $2 billion from a growing pool of investors attracted to a market forecast to be worth $124 billion by 2025.

GoTo is twelfth on a list of the world’s highest-valued start-ups, led by China’s artificial intelligence giant Bytedance ($140 billion), American fintech firm Stripe ($95 billion) and US business magnate Elon Musk’s SpaceX ($74 billion)

“Today is a truly historic day as we mark the beginning of GoTo and the next phase of growth for Gojek, Tokopedia and Go-To Financial,” GoTo’s chief executive officer, Andre Soelistyo, 36, said in a statement capping months of negotiations over a merger representing 2% of the country’s gross domestic product (GDP).

GoTo Financial presents a direct challenge to ShopeePay, an arm of the Singapore-based Sea Group, which has seized a major share of the digital wallet business since it entered the Indonesian market in 2018 with an aggressive strategy of discounts and cashback offers.

Soelistyo will also head GoTo Financial, while Tokopedia’s Patrick Cao has been appointed president of the new group. Equally youthful Kevin Aluwi and William Tanuwijaya remain as chief executives of Gojek and Tokopedia respectively.

Taken together, Gojek and Tokopedia last year racked up 1.8 billion transactions snared among two million registered driver-partners, 11 million merchant partners and an average of more than 100 million active users each month.

Andre Soelistyo has plenty to smile about after the merger with Tokopedia. Image: Facebook

Gojek began to make money last October on the back of the Covid-19 pandemic in which its core ride-hailing business was superseded by home deliveries of food and other services as social distancing rules forced people to stay at home.

A University of Indonesia study found that food merchants under the Gojek umbrella saw their businesses grow by 35% in 2020, one of the main reasons why the informal sector has played a pivotal role in keeping the economy ticking over through the pandemic.

“That is a trend that many of us think will continue beyond Covid,” says one source familiar with Gojek’s business operations, noting how the firm collects a 20% commission on the food it delivers, as well as a small margin on transport costs. 

“The establishment of GoTo proves you can believe in an ‘Indonesian Dream’ and make it a reality,” said Cao this week. “Our goal has always been to build a company that creates social impact at scale, leveling the playing field for small businesses and giving customers equal access to goods and services.”

Analysts say GoTo may become a target of Indonesia’s state-run Business Supervision Commission if the perception grows among small-scale online vendors that the digital giant’s practices are monopolistic and muscling them out of the market. 

Soelistyo took over as CEO of Gojek in October 2019 when the start-up’s founder, Nadiem Makarim, 36, was surprisingly appointed minister of education and culture in President Joko Widodo’s second Cabinet, a post that now includes research.

The son of a prominent Jakarta lawyer, Makarim and high school friend Michaelangelo Moran co-founded Gojek as a call center in 2010, employing an initial 20 “ojek,” or motorcycles-for-hire, common across Indonesia as two-wheel taxis and couriers.

GoJek and Tokopedia will seek synergies in their merger. Image: Facebook

The idea of a call center dawned on Makarim, a Harvard Business School graduate and an ojek user himself, when he noticed the ubiquitous ojek riders spent most of their time waiting for customers, while customers wasted their time walking the hot streets looking for an ojek.

Moran, the inventor of Gojek’s distinctive logo, left the start-up in 2016, apparently to pursue opportunities in art and entertainment. He said he had seen the company grow from a small suburban house to a billion-dollar venture, “an achievement some can only dream about.”

Aluwi, another US-educated entrepreneur who joined Indonesia’s pioneering unicorn enterprise when it launched its Gojek app in 2014, is responsible for creating and managing the critical data science within the company’s ecosystem.

Starting with initial financing from the private equity firm Northstar and Sequoia India, Gojek has since attracted backing from Astra International, Indonesia’s largest carmaker, Google, China’s Tencent, Temasek, Mitsubishi, Telkomsel, WhatsApp and Paypal.

Tanuwijaya, 39, founded Tokopedia in 2009, receiving its initial funding from Sequoia, Softbank and several small venture capital firms, before Chinese e-commerce giant Alibaba weighed in with $1.1 billion in 2017, then led a second $1.1 billion funding round the following year. 

Gojek had initially spent some time exploring a merger with ride-hailing competitor Grab, but earlier this year it switched its attention to Tokopedia as a better fit.

After all, the two firms began working together six years ago, using Gojek’s ever-growing network of riders and drivers to accelerate Tokopedia’s deliveries. It also helped that executives on both sides were long-time friends.