Majoo, Indonesia's Answer to Shopify?

What's going on: Indonesian software startup, majoo, receives USD 10 million in funding from local and foreign investors.

What does this mean: majoo is founded in 2019 by Adi Wahyu Rahadi, who has 20 years of telco and IT experience at Telkomsel and Link Aja.

• It has a software-as-a-service business model, offering micro, small and medium-sized businesses (MSME) an end-to-end software platform for managing their business in return for a monthly subscription fee starting from Rp 129.000.

• Software features include online cashier, inventory, payroll management, marketing, and accounting — an all-in-one digital solution for managing your business.

• As at July 2022, majoo has 35,000 customers spread across 600 cities, gross transaction value of USD 970 million, and boast a growth rate of 800% during the pandemic.

• Its customers are diverse, ranging from restaurants to convenience stores, laundromats, and barbershops.

Details: This is a Series-A funding round for majoo.

• Investors include prominent names in Southeast Asia venture capital scene, such as AC Ventures, Quona Capital, Xendit, and BRI Ventures (Bank BRI's venture capital arm).

• The company plans to use the fresh capital to further develop their product offering, expand to new cities, and form strategic partnerships for growth.

• Latest product feature helps businesses create an online website that connects to major e-commerce marketplaces like Tokopedia and Shopee.

Why it matters: The race is very much on to digitalize MSMEs. Micro enterprises —businesses employing less than nine employees and selling locally — comprise 98% of Indonesia’s economy. Inventory management and cash flow issues commonly plague MSMEs.

Companies like majoo provide the infrastructure for small businesses to reduce operational costs and reach new customers by digitizing their operations. Moreover, by digitizing their financial records, businesses can have easier access to bank loans and credits.

But the competition is heating up.

Gojek acquired digital cashier provider Moka in 2020, while earlier this year, startup BukuKas raised USD 80 million with plans for market expansion. Both are direct competitors to majoo, offering online tools for small businesses. This funding round enables majoo to compete with its more well-capitalized rivals. Expanding their customer base will also improve their unit economics, as software development and other fixed costs are spread over a larger number of customers.

Yes, but: What's the difference between software companies like majoo and e-commerce marketplaces like Tokopedia? Business model is the key here.

• Tokopedia charges merchants a percentage commission on each transaction (also known as take-rate, currently at 2.9%). The higher your sales, the more commission Tokopedia earns.

• majoo charges merchants with a fixed monthly fee that does not scale as revenue grows.

Another key difference: Tokopedia owns the customer relationship (customers can visit your store only through the TokPed app/website). majoo enables you to build your own website and have direct access to customers. Tokopedia is similar to Amazon's e-commerce model, while majoo adopts Shopify's infrastructure playbook.

While the business model is different, both serve the same purpose: Making it easier for businesses to sell online.

The big picture: Indonesia's digital economy is worth USD 70 billion and expected to more than double by 2025 with an annual growth rate of 20%.

• The pandemic has accelerated the adoption of online shopping, as e-commerce grew 52% in 2020-2021. MSMEs will increasingly go digital to capture this wave of new internet-savvy consumers.

• Demand will continue to be strong for businesses that help this transition and provide the infrastructure that enables online selling. E-commerce marketplaces, software platforms, and fintech companies will look to exploit this opportunity.

• Expect more influx of startup investment into this space.

Until next time...