Kargo Technologies, an Indonesia-based logistics startup, has raised $7.6 million in its seed round of funding, led by Sequoia Capital India. The investment round also saw Uber founder Travis Kalanick’s 10100 Fund join the funding round, along with Patrick Walujo, the co-founder of Northstar Group.
Kargo is a digital freight marketplace that plans to connect Indonesian shippers with carriers, reducing the friction and opacity that exists within that country’s freight market. With a population of over 260 million and a GDP growth rate of 5.1 percent in 2018, Indonesia is an emerging powerhouse in southeast Asia. Indonesia seeks to put its logistics industry in the spotlight as companies look to improve efficiency within the ecosystem.
As is the case in several countries around the world, the growth of e-commerce has created a never-before strain in the Indonesian logistics sector. A 2018 McKinsey & Company report on Indonesia shed light on how e-commerce is powering the future of retail in the country, and thereby the possibilities it is creating – in terms of helping thousands of small and medium enterprises grow, work opportunities and eventually economic growth.
The country has around 30 million e-commerce patrons now, with the number growing approximately 12 percent every year. The potential of this development is endless, and so are the logistics complications if supply chain stakeholders are lethargic about their operational efficiency.
Kargo Technologies seeks to act on the promise the country holds by digitizing freight matching and eliminating the middlemen in the process. Tiger Fang, Kargo’s co-founder and CEO, was a general manager for Uber in western China, before he became one of Uber’s earliest employees in southeast Asia, helping launch the on-demand cab hailing company in Indonesia, Thailand and Malaysia.
Kargo’s other co-founder and CTO is Yodi Aditya, who incidentally had a logistics and freight exchange platform with the same name – kargo.co.id, which he left to create Kargo Technologies. Interestingly enough, Aditya’s new startup venture would possibly have to wrestle for market share with his previous company.
“Kargo’s platform is designed to solve the problem of unreliable availability, opaque pricing and lack of trust with payment cycles with an easy-to-use mobile app,” said Fang in a statement.
One of the problems that is unique to Indonesia is its geographic spread. The country is comprised of over 17,000 islands with nearly 1,000 of them permanently inhabited. Moreover, a majority of the islands are not interconnected, which leads to logistics breakdowns, as most of the cargo has to be ferried or sent via air.
Road infrastructure is poor, which is especially true on islands far from the Java region. The Jakarta Post estimated that shipping a gallon of water would cost 40 percent more to send from Jayapura to Timika (280 miles) than from Jakarta to Surabaya (480 miles). This is because there are no roads connecting Jayapura and Timika, with people being forced to take a ferry and circle around the whole island to reach either of the cities – even though both of them are situated on the same Papua island.
Nonetheless, the Indonesian government is now improving the infrastructure by building several highways across the larger islands, which has partly contributed to its rise in the Logistics Performance Index rankings to 46 from 63 last year, out of 160 countries that participated in the World Bank survey.