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Pathao's Future After Pathao, Go-Jek Strategic Marriage

Pathao, the unofficial leader in bike-hailing space in Dhaka, has reportedly raised a strategic investment of US$2million from GO-Jek as part of its series A funding round. Previously, we reported that Pathao was in talks with a number of investors to raise investment.

This is an important event which will have significant impacts on not only ride-hailing space in Dhaka but also on the overall startup ecosystem in the country.

This news came in a time when bike-hailing is a hot topic in Dhaka. Competition has intensified. Uber has launched Uber Moto essentially to stay relevant to the ongoing conversation. Every player is spending heftily in offering promo-code and other benefits to attract bikers and riders both.

The reality of ride-hailing is that it is a competitive and complex business globally. There are a lot of overlaps, particularly in terms of investment. Take a look at the investors in some of the Southeast Asia’s ride-hailing startups: Grab, Softbank is an investor, Ola, again Softbank is an investor, Softbank is now in the process of investing around US$10bn in Uber, Did Chuxing, China’s ride-hailing giant, has an investment in Grab and so forth.

Dhaka is still at the relatively early stage of the game. India’s Ola plans to enter Dhaka market early next year and Uber is likely to push its Uber Moto service further in the coming days. Uber also plans to launch its Uber Eats and other services.

Go-Jek has built a successful business in Indonesia despite steep competition from Grab and Uber. Go-Jek has done a lot of things right starting from scaling its scooter platform fast, making best of its local knowledge and building a successful aggregator platform that not only serves your ride-hailing needs but also allows you to avail other services using the same platform. As The Conversation reports:

With the current version of its app you can organize pickup by scooter or car, book a truck to move boxes, book movie tickets, get groceries delivered from the local market and, even, have a masseur and beauty therapist waiting for you when you get home.

This has made Go-Jek into a robust aggregator that benefits from scale and can effectively retain its users for more than one reasons. Compared to that, Uber and other available services apparently failed to scale fast enough to effectively challenge Go-Jek.

Another significant contributor to Go-Jek’s success has been its ability to build the largest bikers community faster than everyone else in the market. Again from the Conversation:

“GoJek’s better understanding of the local market and its ability to get scooter owners onto its platform meant it was able to get to “scale” more quickly than Uber, which entered the market late. In startup business language a company is scaling when its revenue is growing without it having to increase operational cost.

Second, in dense urban environments, such as Jakarta, scooters offer a much better and more flexible mobility solution. Third, GoJek rapidly built on ridesharing to integrate a broad range of personal services onto its app.”

Pathao is a two-sided aggregator platform. Its success will depend on effectively wooing both sides of the platform. For now, when Pathao is yet to scale to other services, bike-sharing is the most important thing for the company.

Customers will essentially use the platform where they can get rides at a price they think right and bikers will join the platform where they can have maximum rides and earn more.

The immediate challenge for any ride-hailing service is to make sure that it has enough bikers on its platform who serve riders well. Almost all the serious players in Dhaka are now trying this with promo-code and offering other benefits to bikers and riders. The real challenge, however, will be to still attract both riders and bikers when you stop offering discount or cash back.

Go-Jek’s investment into Pathao will enable Pathao to take advantage of these insights and apply that in Bangladesh. Pathao already has a solid logistics operation and it has been experimenting with Patha Mart, a shopping platform.

There are a lot of similarities between Dhaka and Jakarta, both cities suffer from congestion and density. Pathao will definitely benefit from taking the Go-Jek playbook and contextualizing it in Dhaka.

Mohammad Ruhul Kader is a Dhaka-based entrepreneur and writer. He founded Future Startup, a digital publication covering the startup and technology scene in Dhaka with an ambition to transform Bangladesh through entrepreneurship and innovation. He writes about internet business, strategy, technology, and society. He is the author of Rethinking Failure. His writings have been published in almost all major national dailies in Bangladesh including DT, FE, etc. Prior to FS, he worked for a local conglomerate where he helped start a social enterprise. Ruhul is a 2022 winner of Emergent Ventures, a fellowship and grant program from the Mercatus Center at George Mason University. He can be reached at ruhul@futurestartup.com

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