Grab, Inside Out: Singapore Unicorn's Big Foray Into Investing in Startups
Singapore's Grab earlier this year launched its investment platform, Grab Ventures, focused on tech, logistics, mobility, payments, food and groceries, and other on demand services
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While Uber and Lyft's initial public offerings were making headlines day after day earlier this year, Singapore's biggest ride-hailing, Grab, was quietly working on growing its footprint in Indonesia, expanding into Vietnam with a $500 million investment, and bolstering its new startup accelerator program, Grab Ventures.
Over a year old, the company launched the investment vehicle to primarily put money in growth-stage startups, especially those focused on tech, logistics, mobility, payments, food and groceries, and other on demand services.
However, tech remains its hottest pick.
"We're a tech company through and through," says Chris Yeo, head of Grab Ventures, talking to Entrepreneur at a fireside chat in Hong Kong. "Right now, we're in a space where technological disruptions happen often, and "disruption' is one of our core principles," he added.
The accelerator is a way for Grab to invest in companies that could potentially become strategic partners for its "super-app", an all-in-one regional mobile application for cabs, food, medicines, groceries – basically anything "on demand'.
Currently, its portfolio includes GrabWheels, an e-scooter hailing service, Kitchen by GrabFood, Drive.ai, an artificial intelligence-related autonomous vehicle company, and HappyFresh, an independent online grocery delivery service that received investment from the company in April this year, at a valuation of $20 million, according to data aggregator Crunchbase.
While all of these fit into Grab's suite of services perfectly, the company prefers taking a minority stake, over acquisitions, to perhaps test waters before diving in completely.
"We can't take a lot of financial risk, and so, we are strategic with our investments," Yeo says.
"With any company, we first like to take a test drive – if it does very well, we invest. If it goes moderately well, we could maybe do a commercial partnership, so both Grab, and the startup can benefit from it."
The company infuses capital into a startup in three ways: by venture building, where invests in businesses that are strategic for Grab, but still quite a few steps away from its core operations; through its scale-up program, and then through the normal venture capital or traditional route, Yeo said.
The advantage in being a part of Grab's startup club is that the company has been there, done that.
"For example if a local player wants to go to other parts of Southeast Asia, Grab can help the company do that - we've done all the hard work already. So we scale national champions to regional champions. And that's how their business grows. Because when our startups grow, it benefits us as well," Yeo said.
And even though most of the company's investment decisions are made keeping the larger ecosystem in mind, there are no constraints on startups having a clientele outside of Grab.
"Grab Ventures is a minority investment vehicle. So our startups all essentially do have their own customer bases, and business models outside Grab. We house them, accelerate their businesses, and then help them scale," says Yeo.
"We don't want businesses that succeed only for Grab - we want them to thrive outside the Grab ecosystem as well because we're putting money into it. They must be successful in their own right. Otherwise we would just acquire them, instead of investing time and money."
Yeo says on a personal level, he first likes connecting with the founders more than with the business.
"I have to buy into the founder and the co-founder first. So even if they fail, but I believe he or she is a good founder, I'll reinvest in his next venture."
The second thing that he looks for while making investment decisions is if the founders are sure of what they are signing up for.
"I always ask the founders "why are you talking to me?', because strategic investors are very different from other investors. I always say to them "you are seeking strategic investment from Grab, rather than the several other traditional financial investors that are all excellent as well.' I need to be very clear that they understand their decision, if we decide to invest," Yeo says.
Hitching a Ride on Grab's Huge Mobile Platform
Every investor and startup relationship is predicated on give and take, and Grab's biggest strength is its mobile internet platform, which has 140 million downloads across several Southeast Asian geographies – an enviable exposure not every startup gets.
"We have a strong consumer platform, and an equally strong merchant platform. So whether it's a B2B startup, or a B2C startup, we can unleash potential synergies," Yeo says.
He adds that Grab's tech architectures are designed to quickly onboard new startups and partners, which then lets the businesses show proof of concept quickly – a valuable proposition to any new company looking to get its feet wet quickly.
"We've clearly said that Grab focuses very much on transport, food, payments and financial services, and logistics. We're laser-focused on those areas, and it's our core. For everything else, we partner with startups," Yeo says.
Grab Ventures already has a strong foothold in Singapore, Indonesia, and other Southeast Asian markets, which it clearly has a preference for, because synergies are apparent and immediate, Yeo says.
Europe, China, India are some of the other markets the company has investments in, although those are mostly for enabling technological innovations.