Tokopedia CEO William Tanuwijaya: Large Capital is Necessary

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  • TEMPO.CO, JakartaWilliam Tanuwijaya thought of ways to ride on the recently viral #10YearChallenge on social media, as this year marks the 10th anniversary of Tokopedia. On August 17, 2009, he was one of only four people operating the company, together with co-founder Leontinus Alpha Edison, one engineer, and one customer service employee. They launched the marketplace site from their homes—some of them renting a room in a house.

    William, 38, wanted to compare those conditions with the one they are in now. Tokopedia has become Indonesia’s largest online shopping site with some 90 million users a month, five million sellers, and 2,600 employees. This tech company is one of Indonesia’s four so-called unicorns: startups that are valuated at over US$1 billion. Tokopedia’s valuation is estimated at US$7 billion or around Rp102.5 trillion, the highest in Indonesia. “Too bad we weren’t obsessed with taking photos at that time, so it’s difficult to find pictures,” he said, Laughing.

    William and his friends still do not have much time for taking pictures. He continues to be busy with looking for investors for his venture. Every year, Tokopedia clinches fresh injections, among others from investment companies from Japan, South Korea, India and the US. “I still want investors from abroad, so it opens up our horizon,” William says.

    One strategic step he took was to invite Agus Martowardojo—Bank Indonesia governor from 2013 to 2018, finance minister from 2010 to 2013, Bank Mandiri CEO from 2005 to 2010—to become chairman of his board of commissioners three weeks ago.

    On midday Saturday two weeks ago, William spoke for almost three hours with Tempo journalists Arif Zulkifli, Sapto Yunus, Reza Maulana, and Angelina Anjar at his office on the 52nd floor of the Tokopedia Tower in south Jakarta. He described the road towards building Tokopedia, his childhood in Pematangsiantar, North Sumatra, his time working at Internet cafés as a university student, and the time a potential US investor declined to work with him because his English was not fluent.

    Where did you get the idea for Tokopedia?

    I had the idea to build Tokopedia in 2007. I was thinking about how much more expensive merchandise was in Pematangsiantar compared to in Jakarta. I also saw urbanization as a never-ending, vicious circle. Those who start a business in the regions would surely expand in larger cities. Meanwhile, everyone is connected through the Internet. I wanted to create a marketplace where transactions can be done via the Internet. But at that time Kaskus and Tokobagus have already existed. But they operated more like classified ads, so there was a problem with trust. There is a chance that buyers have already transferred money, and the seller disappears. At that time, Internet transactions were still regarded as riddled with fraud. I wanted to build trust without the necessity of buyers and sellers meeting each other. This way, urbanization is no longer necessary. People from the regions could still enjoy the same prices.

    What inspired you?

    I was inspired by Google and Facebook. They were able to start up a huge industry because they sought out investors. So I built a platform, then looked for investors. But from 2007 to 2009, I kept failing.

    Why did investors not join at that time?

    There were five reasons for that: no Indonesians had made it in the Internet business, global competition, no family that could back-up failed investments, education, and experience in building an enterprise. While studying Information Technology at the Bina Nusantara  University, I worked as a clerk at an Internet café in Kemanggisan, West Jakarta. So when asked what business venture I had run, I answered that I was a freelancer while working at the Internet café. I fell in love with the Internet. I even say I am an Internet café graduate, (laughs).

    What did you learn while being a clerk at the Internet café?

    I’m a bookworm. Any information is available on the Internet. Then I learned how to design websites. My income from being a clerk only paid Rp10,000 a day. However, through website designing and creating company profiles, I was able to fetch Rp300,000. That wasn’t bad to keep me going.

    How did you finally succeed in getting investors?

    Victor Fungkong, my boss, gave me the capital. At that time, I had already worked for his content-provider company for two years. I told him that instead of using paid text messages, people could get information on demand through the Internet. Internet use kept getting cheaper, so that more and more people were using it. He was kind enough to provide capital in February 2008. We were given space on the fourth floor of his home office in Patal Senayan, Central Jakarta.

    What did you do after you had some capital?

    I went back to my campus, the Bina Nusantara University, and took part in a job expo. I rented two booths so it appeared prestigious, (laughing). There were only two of us minding the booths, me and the co-founder. Not one person signed up in the two days we were there. The bank booth in front of us got thousands of applicants.

    I started with another recruitment approach by speaking in small classes on my campus and shared my experience in building a startup. I had to wait one or two years before those classes graduated and those people to join us.

    Why did you choose August 17 (Indonesia’s Independence Day) to launch Tokopedia?

    So that the whole of Indonesia indirectly wishes us well, (laughs). At that time, there were only four of us: me, the co-founder, an engineer and a customer care person. On August 16, we were at our respective homes and rental rooms. At exactly midnight, we launched our Tokopedia site.

    Were there transactions right after that?

    Before launching, we already partnered with 70 sellers. We took advantage of the momentum of our launch. In the middle of 2009, Indonesia suffered the bomb attacks on Jakarta’s Ritz-Carlton and JW Marriot hotels. Then there were netizen campaigns with the hashtag #WeAreNotAfraid (#KamiTidakTakut).  

    We told t-shirt sellers at Tokopedia about that, and they started creating. So the search engine optimization was good.

    Did the market react positively?

    Tempo was the first media to cover us, a week after our launch. We were puzzled because we never publicized it. We were spread on two pages, which is not bad. Tempo readers who were business owners signed up, and it snowballed. So we have to be thankful to Tempo, (laughing). Victor Fungkong wanted his investment of Rp2.5 billion to be returned in two or three years.

    Did you reach that target?

    That was an early commitment. When we had only used Rp1 billion in the first year, we already got new investors. So we never had to fully utilize that initial investment. For early investors, such as East Ventures and CyberAgent, this was the best investment of their lives. At the time, they had invested someone or two billion rupiah but the valuation kept going up. Now Tokopedia is already a multi-billion-dollar company.

    Why do you use foreign investors?

    In 2010, giants like eBay and Rakuten entered Indonesia. On paper, we did not stand a chance to compete against them. I realized that I had to open up our horizons. We couldn’t just have limited capital. Luckily, that year Yahoo! acquired Indonesian startup Koprol. Indonesia was described as this gold mine for global investors, after China and India. Many American investors came to Jakarta. I had the chance to meet with them, and that was great. But after five minutes with me, they asked me to leave. They said: “You’re wasting our time. I don’t understand what you’re saying.” Luckily, the next potential investors were from Japan and South Korea. Their English was as horrible as mine, (laughing). So we got capital from East Ventures in 2010, CyberAgent in 2011, Net Price in 2012, Softbank Korea in 2013, and Softbank and Sequioa Capital in 2014.

    What is Tokopedia’s current valuation?

    The media prediction is that it was US$7 billion, or Rp102.5 trillion, in the middle of last year. But now it has already grown further. Actually, valuation should not be used as a measurement for achievement.

    What is your share in Tokopedia?

    I have been a minority shareholder since the very beginning. I started out with 10 percent. As a minority shareholder, it was difficult for me to attract global investors.  

    However, I was lucky to meet investors who build up their own business from the bottom up. Once they believed in our vision and mission, they offered a solution.

    One of them is the rejuvenation of management shareholding. There is a program for management stock ownership. Every six months we issue new shares to be given to our top achievers (William mentioned his current ownership in Tokopedia off the record).  

    As a minority shareholder, how do you ensure management control? I have veto rights. For example, if there is an acquisition offer from another company, I am the only one who can decide on that. If I don’t want to do it, even though other shareholders are 100 percent behind it, it can’t go through. Those offers have come numerous times, but I’ve always declined.

    Why?

    Our vision and mission is safeguarded as long as we remain independent. Therefore, we have to create local leaders. They should also become shareholders. I may hand over my veto right to the next CEO.

    Can Indonesian unicorns still be considered local with their large foreign capital?

    We have to separate between capital and control. I always publish Tokopedia investors and their value. When they invest their money in local enterprises, they trust that Indonesia is able to compete on a global level, and is not just a merely a market country. What they invest is working capital for local companies. I believe that we should not lose control, but we also should not be against foreigners. In fact, we compete against them daily. We need transfer of technology and horizons.

    Read the full interview in this week's edition of Tempo English Magazine