Even as COVID-19 threw the normal life out of gear and felled businesses around the world, two-year-old Indonesian startup GudangAda achieved a rare feat.

This online B2B marketplace for FMCG products not only posted an envious growth, thanks mainly to a steep rise in e-commerce activities, but also successfully secured two rounds of investments, that too in quick succession.

Within just a month of raising a seed funding round led by Alpha JWC and Wavemaker Partners in February, it filled its coffers with a massive US$25.4 million Series A led by Sequoia India and Alpha JWC — taking its total raise to over US$35 million.

The Jakarta-headquartered startup, led by Founder and CEO Stevensang, is currently in talks for US$75 million Series B round.

In this interview, Stevensang talks about his startup journey, the company’s goals and future plans, as well as the online B2B industry for FMCG products in the archipelago.

Also Read: Are B2B marketplaces finally entering their boom time in Asia?

Edited excerpts:

Started in 2018, GudangAda achieved a rare feat of securing two round of funding in quick succession. How did you manage to maintain the investor interest intact? What is your magic formula?

Luckily, we’ve been receiving a good number of inbound investor interests and our early investors were also very helpful in making introductions.

I think our magic formula is our rate of business growth itself. Since launching in early 2019, in our early days, our transaction volume had more than doubled every single month, until hitting US$1 billion GMV in the first 12 months.

Since then, we have managed to double many of our operational metrics every quarter this year despite COVID-19.

You worked with Orang Tua Group for 25+ years before starting GudangAda. Do you think your entry into the startup scene should have happened much earlier?

It depends on how you want to see it. I personally think that I joined the startup scene at the right time; my 25 years of experience gave me unique perspectives into the industry pain-points with strategic insights to solve them.

In this industry, having a good relationship and building trust with wholesalers and retailers are key to success.

My experience combined with GudangAda’s proven business model have created successful relationships and trust. This has been the strong foundation of our sustainable growth to date.

Also Read: How emerging markets can become green economies

So, yes, my past experience was important for our initial launch but it was really GudangAda’s proven business model that enabled our business to scale up fast until on-boarding more than 50,000 key wholesalers and 200,000 total merchants today.

What was the motivation to start GudangAda? What were the gaps you found in the offline FMCG industry that you thought should be plugged using tech?

It all started with a concern about the future of traditional traders in the midst of digital era. Indonesia is the largest archipelago in the world and this causes inefficiency in the supply chain, bringing logistics cost up to 24 per cent of the country’s GDP, one of the highest in the world.

The FMCG supply chain from manufacturers, distributors, wholesalers and retailers are facing a high operating cost and a low productivity due to inefficient operational structure and shortage of qualified salesmen.

Wholesalers as the key player in the industry mostly run their business in a passive approach, which shrinks their business and they are not able to expand their customer base and categories.

Retailers are also facing challenges to discover the right products at the right time and right price.

GudangAda empowers all FMCG players by providing a marketplace platform that helps them to transact in a faster, cheaper, smarter and bigger way.

GudangAda has already found a place in the startup scene in Indonesia, given the pace of growth. Do you think it has the potential to be the next Unicorn?

We are working hard and very excited to fulfil our mission to empower the supply chain players and traditional traders in Indonesia.

Being a unicorn means committing to rapid growth, building the right product, securing the right investment, and creating a space to scale. Judging by our current momentum, I am optimistic we will get there in the near future.

You are a deep-pocketed player (having raised over US$35 million in just under a year). Why do you need this much money and why do you need to keep raising money by diluting more equity?

As we follow an asset-light model with high capital efficiency and very manageable expenses, we have a multi-year cash runway today and are reaching profitability soon next year.

We generate diverse revenue streams today from marketplace commissions to various service fees, including principal distribution, logistics and more.

Our targets for the short- and mid-term are to continue scaling current operations, solidify GudangAda logistics services, launch new business initiatives (for example, various partnerships across our supply chain and ecosystem), tech capabilities (we will be renewing our app) and enhancing product features.

We will also use the funds for recruitment as we are expanding our team to help with the strategy and operations.

What is the size of the total addressable market in Indonesia? How much market share do you have?

It is a US$100-billion industry for FMCG and staple foods in Indonesia.

We can’t disclose our market share. However, we have close to 300,000 merchants with ~100 per cent of FMCG key wholesalers.

How intense is your competition with the likes of Tokopedia and Bukalapak? How did you manage to find a place among them?

We do have some advantages in this competition because we have built a long-term relationship and trust with key wholesalers. We also apply a neutral third-party model to empower them instead of replacing them.

Also Read: Understanding the culture of relationship-building in Asia

Our close relationships are shown in recent activities where we worked closely with traditional traders to provide them with 200,000 masks so they can work safely.

We have been also actively giving the market insights and predictions regularly, so they can overcome the challenges caused by COVID-19.

Additionally, the FMCG and staples industry is huge enough and relatively untouched by technology.

So, with more players coming in, it will increase awareness and accelerate the tech adoption and help the traditional traders transform their business faster.

Did you face any challenges from the offline industry at the beginning of your firm? How did you manage to convince customers about the benefits of partnering with you?

Our core philosophy is not to disrupt the industry but to empower every player in the market.

I would say that the biggest challenge we face is technology adoption — most of the traditional traders are not tech-savvy. This means we need to use personal approach to educate them about the benefits of going digital. This is where strong relationships and trust are highly needed.

We have a strong team (over 600 sales people) in the field who consistently educate our members and potential members about GudangAda benefits. We have a regular training for all our members so they can optimise our service at their maximum advantage.

We assure them that we are not disrupting their supply chain but instead focus on digitalising the process for maximum growth and efficiency. With this approach, we aim to digitalise 100 per cent of the industry in the next three to five years.

As for the benefits, we enable faster transactions, offer competitive prices, smart analytical insights, more product selections and business partners to transact with (close to 300,000 members in more than 500 cities).

We also build a data-driven marketing and sales approach to help their business grow effectively. We empower the sourcing and the sellers all together.

There are 60 million MSMEs in Indonesia. How do you plan to exploit this fast-growing industry which employs about 95 per cent of the employment?

Our vision is to build a solid B2B e-commerce infrastructure in Indonesia so that traditional traders and the whole supply chain players can grow their business effectively, which eventually will grow the economy as a whole.

GudangAda is the solution for these MSMEs as we provide the full ecosystem services — from sourcing, selling, buying, logistics, to payment.

While raising Series A, Gudangada said it plans to use the capital to also launch new services. What are these new services? Do you intend to venture out to new areas?

After the series A funding, we have expanded to reach more retailers and brand owners. We have also launched GudangAda logistics services to help our members become more efficient with their delivery operational costs

As for category expansion, we are now working to expand from FMCG, staple to other categories such as house-ware, consumer electronics, office stationery, etc.

I learn you are in talks for Series B funding. How much do you plan to raise and from which investors? Do you expect your current backers to return to invest?

We are targeting a next round of US$75 million or more, as a solid next step for extending our ecosystem build-up to empower Indonesia’s B2B e-commerce with omni-channel services for the entire supply chain.

Also Read: What does it take to raise Series B funding? Learn from Gilmour Space and Bambu

We will officially launch it in the coming months. Having said that, we welcome any interested partners who would like to start knowing us early.

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Image Credit: GudangAda

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