Andy Gordon

Gojek and Tokopedia Merger Creates Investment Opportunity

The merger of two major Asian companies this week barely made a ripple in the U.S. But it’s huge news in Asia — and even bigger news in Indonesia, where they’re based. The two companies merging, Gojek and Tokopedia, are fast-growing and ambitious. They’re both seeking an edge on their bigger rivals. And they’re both number two in their respective markets. 

I’ve been following both Indonesian companies since their earliest days. Gojek was founded as a courier and ride-sharing service in 2010. It boasted 20 motorbike drivers at the time — it now has two million drivers. Taxi motorbikes are pretty common in Indonesia. I took a few myself when the company I owned had an office in Jakarta. Gojek launched its app in 2015 and now operates in Vietnam, Singapore, Thailand, and the Philippines, in addition to Indonesia. But it shares the Indonesian market with Grab — a bigger ride-sharing company that hails from Singapore.

Tokopedia (“toko” means store or shop in Indonesian) began in 2009. Over the last decade it has grown into Indonesia’s version of Amazon, a massive e-commerce marketplace with 9.9 million merchants active on its platform. It’s the second-most visited e-commerce site in Indonesia, behind Sea Group’s Shopee.

Gojek’s valuation is about $10.5 billion. Tokopedia’s valuation is $7.5 billion. That doesn’t necessarily mean that the merger will be valued at $18 billion. Neither company has commented on the valuation of their merger yet. But it could be more than the combined value of the two companies.

It should be more when you think about it. This merger sets up a host of synergies. Gojek drivers, for example, will be able to deliver even more Tokopedia packages. The merger should increase the value proposition of both companies and result in an overall higher valuation. 

And it’s nicely timed. The two companies will form the GoTo Group as a result of their merger. GoTo then intends to do a dual listing, joining both the Indonesian and the U.S. public stock exchanges later this year. 

If things go according to schedule, you’ll be able to invest in GoTo before the year is over. The question is, should you?

Comparing markets is a good place to start. GoTo operates across a large portion of Asia, which has a total GDP of $31 trillion. By comparison, America’s GDP is $21 trillion. But GoTo is unlikely to make headway in China and Japan. The combined GDP of China and Japan is $19 trillion. So if you eliminate that from the mix, the more realistic size of the markets GoTo operates in is $12 trillion. 

But these market numbers don’t tell the full story. Asia’s economies are growing more quickly than ours. Its middle class is in the midst of a growth surge. And the younger customer base is growing too. Meanwhile, America’s middle class is shrinking. 

GoTo’s upside is probably far higher operating in Asia than in the North American market. But is it worth an $18 billion — or higher — price tag?

Compared to recent major initial public offerings (IPOs), GoTo’s capitalization won’t be prohibitively expensive. Airbnb’s IPO had a valuation of $47 billion. Rocket Companies’ was $36 billion. DoorDash’s was $39 billion. Snowflake’s was $33 billion. The list goes on. 

And with GoTo, you’re really getting two companies for the price of one. 

Oftentimes, what makes overseas startups attractive is not only the untapped growth markets they operate in, but that many of them go public at a much earlier stage than U.S. companies. Non-U.S. startups still have plenty of growth ahead of them post-IPO. That dynamic has pretty much disappeared in the U.S. 

Though neither Gojek or Tokopedia are particularly young, their strong growth phase should still have a long way to go. After all, Singapore’s ride-sharing company Grab is reportedly seeking a valuation of $40 billion for a possible IPO (a big jump over its current $16 billion valuation). And Grab is still growing at a fast pace. What’s more, Asia is decidedly not a one-winner-take-all market for these rapidly growing startups. There’s plenty of room for GoTo to establish itself.

The upside is there. Compared to other startups that are close to going public, the investment opportunity is intriguing. I could see an investment doubling or more in the next five years. But it doesn’t compare to the upside of early-stage startups. Late-stage companies planning to IPO have limited ceilings. Even the overseas ones are no longer an exception. 

I’ve begun to look for similar startup opportunities in Asia but at a much earlier stage. I recently interviewed the founder of Chatbiz, for example. It’s a seed-stage company operating out of Bandung, a three-hour drive from Jakarta. Chatbiz (now raising on Wefunder) enables businesses to take orders and accept payment on WhatsApp. And it wants to extend its reach beyond Indonesia.

I’ve just begun my search. Asia is full of interesting startup opportunities. You can tap into these opportunities at the IPO juncture…  or much earlier for increased upside. The choice is yours.