With rapid urbanization and increasing affluence of its 634 million population, the Southeast Asian market has provided start-ups with robust yet hyper-competitive growth opportunities. It leads to the toughest competition for talents for companies to scale their businesses.
"In a lot of markets that we operate in, including Indonesia, Thailand, and sometimes Singapore, we are playing in markets where there are tech giants like Go-Jek, Grab, and Uber who have no qualms paying a large amount of money to hire talents," said Aaron Tan, CEO of Singapore-based automotive marketplace Carro, in an interview with China Money Network on the sidelines of the 2019 RISE technology conference in Hong Kong last week.
"It is very hard, at least from a CEO point of view, to continuously hire my middle-management and senior-management people," said Tan.
Carro commenced operation in 2016 and operates an automotive marketplace and financing start-up that offers a full-stack service covering online vehicle trading, an in-house financing solution, an on-demand roadside recovery platform, an in-house car care workshop, and a suite of after-sales services.
The company, headquartered in Singapore, has expanded into Thailand and Indonesia in 2017. With the burgeoning economy in emerging markets across Southeast Asia, Carro is seeking to grow its presence across Southeast Asia with the next focuses being Malaysia and Vietnam. It is also seeking to expand to motorcycles, a popular transportation tool in the region.
In May 2018, Carro closed US$60 million in a series B funding round jointly led by SoftBank Ventures Korea, Insignia Ventures Partners — the firm founded by ex-Sequoia Asia partner Yinglan Tan — and Facebook co-founder Eduardo Saverin’s B Capital Group. Overall, Carro has raised over US$100 million.
Carro CEO Aaron Tan previously spent time at Singtel Innov8 and is one of a trio of co-founders. Singtel Innov8 is a corporate venture capital fund wholly owned by the Singtel Group, the largest mobile network operator in Singapore.
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Q: Tell us a little bit about Carro, and how did you develop the platform into its current size?
A: Carro is Asia’s largest marketplace for cars. We are specialized in the wholesale marketplace. We call ourselves "Alibaba for cars," because what we do effectively is that we built a two-sided marketplace where we have sellers from all walks of life — corporates, consumers, dealership — selling to a whole multitude of smaller used car dealers. That is how we started the business in 2016. In 2017, we moved on to offer a full-fledged multi-financing business, providing loans, insurance products, warranties, and most recently, we started to deliver after-sale services.
Carro recorded about US$700 million worth of transactions in 2018. We managed to grow the company so quickly within the last three years because: Firstly, the market is booming. Secondly and more importantly, we have been able to stay ahead of the competition in an area that expects readiness from the team, fundraising, and execution. The last thing I want to add is that we focus a lot on the second and third-tier cities, not only first-tier cities like Jakarta and Bangkok. Today we have presences across Indonesia, Singapore, and Thailand, soon to enter Malaysia. Generically, that is how we’ve been scaling up the business across regions.
Q: What is the most difficult thing that you had to do, and what is the toughest moment in this process?
A: We deal with all kinds of stuff every day. The truth is operating in emerging markets will always see things pop up randomly. For instance, we have some challenging internal issues like frauds conducted by company employees who might have been working with us for half a year or one year. The dilemma is if I want to put them all in jail, or I want to do what an old Chinese saying goes "Shayi Jingbai (杀一儆百)," which means we need to strike a balance and put at least one of them to jail as a warning to others?
Meanwhile, we also face some external challenges including how to hire the best talents. In a lot of markets that we operate in, including Indonesia, Thailand, and sometimes Singapore, we are playing in markets where there are tech giants like Go-Jek, Grab, and Uber who have no qualms paying a large amount of money to hire talents. It is very hard, at least from a CEO point of view, to continuously hire my middle-management and senior-management people. That is why my talent group is always smaller than those of the large tech giants. We try to compensate it by providing better career progression and more opportunities for talents to actually operate and execute as individuals.
Q: What are some tips you can give to other start-ups in terms of raising capital?
A: As a company, we have been quite lucky — I would say that we are probably among the top 10 or top 15 well-funded start-ups in Southeast Asia. We have raised more than US$100 million. Our largest investor today remains to be SoftBank Ventures, together with other investors including Insignia Ventures Partners, and B Capital Group, which are a group of fairly good and famous investors in our series A and B rounds. Honestly, it has a lot to do with my background. I was a venture capitalist by training, and it has been my profession for almost ten years. As a result, I know most of the funds well enough to give them a call and ask for their investment intentions.
But essentially, the market momentum is real. Investors like the fact that there is a lot of market demand for a product or platform like ours. Any fundraising process is down to your attraction: How well you have executed? How much attraction you have to the market? How are you going to convince investors to give you money and grow your business 10 or 100 times so that both of you can make money at the end of the day, maybe after five to ten years?
Q: What do you see Carro is going to become in the next five years?
A: We will focus on regional and global expansion. We are currently entering into markets like Indonesia, Singapore, and Thailand. We are planning to expand into Malaysia in the next couple of months and then enter Vietnam by the end of 2019 or early 2020. One part of our plan is to expand the business horizontally. And then, it is all about going deeper vertically. In that regard, we move into motorcycles, for instance, and we also move into underwriting our warranties and insurance. These are things that we are trying to get our hands on to actually get it over and down over the next few months.