Category: Tech news

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Competition continues to heat up in the food delivery wars. In the latest development, Uber today announced that it has acquired Postmates in a $2.65 billion, all-stock deal. It plans to run the business alongside its own food delivery business, Uber Eats, keeping the Postmates app running while merging some of the tech and delivery operations at the back end — for example, by having drivers delivering orders for both businesses.

The deal confirms reports that emerged last week, and got re-reported last night with more financial detail, that Postmates and Uber were in negotiations. That deal itself sprung up in the wake of Uber failing to acquire another competitor, Grubhub, which was instead acquired by Europe’s takeout behemoth Just Eat Takeaway for $7.3 billion.

“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery—they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19. As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100% year on year. We’re thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country,” said Uber CEO Dara Khosrowshahi in a statement.

“Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand. Joining forces with Uber will continue that mission as we continue to build Postmates while creating an even stronger platform that brings this mission to life for our customers. Uber and Postmates have been strong allies working together to advocate and create the best practices across our industry, especially for our couriers. Together we can ensure that as our industry continues to grow, it will do so for the benefit of everyone in the communities we serve,” said Postmates co-founder and CEO Bastian Lehmann in his statement.

Uber in its news announcement described Postmates as “highly complementary” to Uber Eats, citing the two companies’ differing geographic focuses and target demographics and noting that Postmates has strong relationships with small- and medium-sized restaurants and other businesses that are loyal to the Postmates brand, which covers not only food but delivery of other items, too.

On the other hand, Uber noted that together they’ll build better tools and technology for their merchant and restaurant partners, and that these will have a wider user base now to tap. That last point somewhat contradicts the lack of overlap between the two, so we’ll have to see how that actually plays out.

The all-stock deal valuation that Uber is paying out is a slight bump on Postmates’ last valuation of $2.4 billion, which it reached in September 2019 on the back of a private equity round (it had raised just over $900 million in total over 10 years). But with the “money” all in paper, it puts a lot of pressure both on Postmates and Uber to continue to deliver on growth — pun intended.

For Uber, Uber Eats has been one good news story amid what has otherwise been a very tough life as a publicly listed company. That predicament has taken on a more critical edge in recent months through the COVID-19 pandemic.

In its last quarterly earnings results, the Uber Eats business grew 52% and managed to somewhat offset a big decline in its ride-hailing revenues. In both cases, you can draw a line from the results to social distancing requirements that people have been following around the world: consumers have been staying home more and ordering take-out food to be delivered to them; and at the same time they have been staying away from shared, small spaces, such the ones that you might encounter in an Uber ride. However, with the boost at Uber Eats, the company lost $3 billion last quarter.

The trend of those numbers is one reason why Uber has been looking to expand its food delivery business. The other is the one that has been motivating the larger consolidation trend in food delivery, and that is the principle of economies of scale and how that plays out in terms of operational expenditures, with single drivers able to cover more restaurants and orders, and also the costs of operating the business.

The wider business model requires a lot of subsidising to grow, so taking out a competitor somewhat reduces that kind of costly competitive pressure. It doesn’t eradicate it completely, though: DoorDash and Grubhub (now supercharged with Just Eat Takeaway profits and financial muscle) are still around and will represent strong alternatives both for consumers and restaurants looking for delivery partners.

The public markets is a tough place to play out a growth story for a company that is still profoundly in the red like Uber. In that regard, it’s an ironic place for Postmates to land.

The latter had also been eyeing up a public listing, going so far as to confidentially file for an IPO in February 2019. “Choppy” market forces got the better of it, however, and it put off the plans. Although there were rumors even as recently as last week that the company was still considering this option, in retrospect, that was quite possibly a report planted and spun by those hoping to hedge a better deal out of Uber.

 

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Indonesia is not only Southeast Asia’s most populated country, but also one of the world’s fastest-growing economies. But many people, especially outside of major cities, still lack access to basic financial services like bank accounts. Payfazz is one of several tech startups focused on solving that problem by finding innovative ways to give more Indonesians access to financial services. The company announced today that it has raised a $53 million Series B led by B Capital and Insignia Ventures Partners.

Previous investors, including Tiger Global, Y Combinator and ACE & Company, also returned for the round. New backers include strategic investor BRI Ventures, the venture arm of BRI, one of Indonesia’s largest banks. Payfazz’s last round of funding was a $21 million Series A announced in September 2018, led by Tiger Global. Its total raised to date is now more than $74 million.

Founded in 2016 by Hendra Kwik, Jefriyanto Winata and Ricky Winata, Payfazz is an alum of Y Combinator’s accelerator program.

There is a growing list of Indonesian financial tech startups, including Modalku, KoinWorks and Kredivo, that focus on consumer and small business financing, while larger and more diversified tech companies like Gojek and Grab are working their own online payment tools and other services. Payfazz differentiates with a portfolio of mobile services that make it easier for Indonesians to handle routine financial tasks, including bill payments and loans, even if they live in rural areas without banks. The company says it currently serves 10 million monthly active users, and plans to expand its offerings to include more digital financial products.

The company uses a network of financial agents to reach customers because many banks don’t open branches in rural areas, Kwik told TechCrunch. “Due to high fixed costs, traditional banks find it economical to operate only in cities and urban areas with high density and foot traffic,” he said. “This leaves a huge unfulfilled and underserved banking need in rural areas where banking access is very difficult.”

Payfazz’s network currently includes about 250,000 agents, most of whom are located in small stores. Users deposit cash with the agents, who serve as go-betweens with banks. This allows Payfazz’s users to have a balance they can use to pay phone, electricity and other bills. Payfazz also recently launched loans and payments for offline retailers.

Kwik said Payfazz built an agent network because even though smartphone penetration is high in Indonesia, many people haven’t used direct digital banking services before, so talking to a Payfazz agent helps familiarize them with the process. Because most of its agents are based out of warung or kirana stores, or neighborhood shops that sell food and other necessities, they are easier for people in rural areas and small towns to access than banks, ATM machines or convenience store chains.

“Our agents are small businesses and people who have lots of traffic from rural areas’ populations in their places. It can be warung and kirana stores, telco stores, small restaurants or even someone’s house,” Kwik said. “They are the perfect profile to become our agents because they’re ubiquitously distributed and have high coverage in rural areas.”

He added that Payfazz also gives agents an opportunity to earn extra income. Payfazz takes a 0.5% to 1% commission on every transaction, and agents are allowed to set the margins they charge customers for transactions, usually between 5% to 9%. Before signing on an agent, Payfazz screens them using KYC (“know your customer”) and verification technology to gauge trustworthiness, traffic and sales potential.

While Grab Financial and other Southeast Asian fintech companies may eventually become Payfazz’s competitors, Kwik said he currently sees them as potential partners.

“The reason is simply because most of these providers still focus their market and resources in the cities and urban areas, like many of the traditional banks. Meanwhile, Payfazz focuses all its market and resources in rural areas,” he added. “Payfazz can help other banks and financial service providers to expand their reach to rural areas and capture hundreds of millions of users and billions of dollars of revenue opportunity there.”

In a statement about the funding, Insignia Ventures founding managing partner Yinglan Tan said, “We have been privileged to have supported Payfazz since their early days. We believe that this path to taking their fintech ecosystem from Indonesia to the rest of the region will meet the pressing needs of many more of Southeast Asia’s digital consumers, and are excited to see how Hendra and the Payfazz team will build on top of the portfolio of services that millions of Indonesians are already using.”

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