S2 Episode 6: William and Patrick of Tokopedia: from Selling T-Shirts to Driving 1.5% of Indonesia’s GDP

This episode is co-hosted by my colleague Dimitra Taslim. Dimi, with the voice of a sports commentator, actually looks at investments in India and Southeast Asia for GGV Capital. 

In this episode, we have William Tanuwijaya and Patrick Cao from Tokopedia. Tokopedia is an Indonesian technology company with the largest online marketplace business and its mission is to democratize commerce through technology. The name ‘Tokopedia’ is a combination of Toko (shop) and encyclopedia. 

It was founded in 2009 by William Tanuwijaya and his best friend Leontinus Alpha Edison. According to the company, the firm’s annual run-rate GMV has reached 222 trillion IDR  (15.8 billion in USD), which would be equivalent to 1.5% of Indonesia’s GDP. It has significantly impacted the fate of many small-scale entrepreneurs since its launch 10 years ago. 89% of sellers on Tokopedia do not own a physical store and 86% of merchants are first-time entrepreneurs.

In this hour-long conversation, we covered William’s founding journey from working in the internet cafe to meeting Daniel Zhang and Joe Tsai from Alibaba, how to get a great executive team as an Indonesian company, Tokopedia’s ambition for the next 10 years, and what it means to achieve work-life harmony while running a big company.  

William Tanuwijaya is the founder and CEO of Tokopedia. He was born and raised in Pematangsiantar, North Sumatera. William has a bachelor’s degree in Information Technology from Bina Nusantara University, during which period he worked as an internet café keeper and saw the potential of technology.

Patrick Cao is the President of Tokopedia, Indonesia’s largest online marketplace, a position he has held since October 2016. Previously, Patrick worked at Formation 8 in Singapore and UBS Investment Bank in Indonesia, specializing in M&A and capital markets advisory in the TMT, consumer and industrials sectors. He received a B.S. in Business Administration from Carnegie Mellon University and currently doing his MBA program at Tsinghua University.

 

TRANSCRIPT: 

Dimitra Taslim: Today on the show we have William Tanuwijaya and Patrick Cao from Tokopedia. Tokopedia is Indonesia’s largest online marketplace with a mission to democratize commerce through technology. It was founded in 2009 by William Tanuwijaya and his best friend, Leontinus Alpha Edison. The company recorded a GMV, gross merchandise value, of $1.3 billion in May, 2019 and drove more than one percent of the Indonesian economy. The site has significantly impacted the fate of many small-scale entrepreneurs since its launch 10 years ago. Eighty-nine percent of Tokopedia sellers do not own a physical store and 86% of merchants are first-time entrepreneurs. The name Tokopedia is a combination of Toko, which means shop in Bahasa Indonesia and encyclopedia.

Hans Tung: William’s the founder and CEO. He was born and raised in North Sumatra. William has a bachelor’s degree in information technology from Bina Nusantara University, during which period he worked as an internet café keeper and saw the potential of impact of technology. Patrick is the President of Tokopedia, a position he has held since October 2016. Previously, Patrick worked at Formation 8 in Singapore and UBS Investment Bank in Indonesia. He specialized in M&A and capital markets advisory business in the TMT, consumer and industrial groups. He received a BS in Business Administration from CMU, Carnegie Mellon, and currently doing his MBA at Tsinghua University in Beijing. Welcome to the show, gentlemen.

William Tanuwijaya: Thank you for having us, Hans.

Patrick Cao: Thank you, Hans. Great to be here.

Hans Tung: I’ll start with William. How did you get the idea and the courage to start Tokopedia back when entrepreneurship or startups in Indonesia was not a phenomenon like it is now?

William Tanuwijaya: As the largest archipelago country in the world, Indonesia with 17,000 islands, it’s almost impossible for Indonesia government to be equal in infrastructure across the country.  Both me and Leon, when we started Tokopedia, we realized that where we come from, a small city outside of Java, there’s a lot of inequality issues. From where we come from, there’s a fairly limited selection for goods and when even we have that selection of goods, usually we need to pay a higher price compared to a price in a big city like Jakarta. Both of our parents saved for their whole life so they can send us to Java Island to have a better education for a better opportunity, but when we find jobs in Jakarta, we don’t want to come back to our hometown, so we start to see these vicious cycle of urbanization. And if you see Jakarta, for example, Jakarta is sinking 20 to 25 centimeters, and there’s a recent report in by 2040 Java Island will run out of clean water. This is because of the overpopulation issues and we start to see that technology should be this infrastructure that help us leapfrog and can provide equal opportunity across the island. We imagined a situation where no matter where you come from in Indonesia, you can find any product and services that you want and have a transparent price and can enjoy the same services like if you live in a big city like Jakarta. We imagine a situation where if you start a small business anywhere in Indonesia, you can grow to become a nationwide business owner. Ten years ago, we start the whole idea with that mission, to democratize commerce through technology.

Dimitra Taslim: Will, tell us a bit more about the first item that’s ever sold on Tokopedia and how do you get the seller to sell the item on the platform?

William Tanuwijaya: It’s a t-shirt with a text label of “We Are Not Afraid”. That time in 2009 when we launched the whole idea, Indonesia just got bombed by terrorism attack in two hotels in Jakarta. Internet users started to rally this movement called Indonesia Unite. The rallies are very simple, just encourage people to wear a t-shirt with a label “Kami Tidak Takut”, means we are not afraid. That time we have about 70 merchant that are listing in our platform and we think that it’s about time to launch the platform together with that movement, so we launched the platform actually on Indonesia Independence Day, 17 August 2009, and we have about 10 merchants selling this kind of t-shirt. We launched at midnight and then 12 minutes after we launched, the first item sold is that t-shirt.

Hans Tung: For you to start Tokopedia as both someone who came from a small island to go to Java to go to Jakarta to do this was not easy. At the same time, to do this as an Indonesian of Chinese descent to do this in Jakarta also is not as easy. What kind of internal growth did you have to go through in order to build this business? I remember the first time my friend from Softbank when she first met you, your English was limited. Now you speak English fluently. You came over even a third hurdle to get to where you are. Can you share more about your growth to get to where you are?

William Tanuwijaya: I’m grateful for this opportunity starting Tokopedia. Through Tokopedia, I found the purpose of my life and that’s because of a lot of failure during the time when we were about to start Tokopedia. I always considered myself as an entrepreneur by necessity and I really learned about both perseverance and serendipity through the journey as we developed the idea. The earliest failure of us starting Tokopedia is actually about trust. At that time there’s no physical community, there’s no investors community, and when we want to start Tokopedia, originally the concept is like we want to help create a platform where everyone can start a business, but when I want to start Tokopedia, this is my first business. I was starting to realize that I cannot find anyone that trusts me. At that time, the struggle was to raise capital and to ask tourists to raise our first capital. At the time, the reasons why people are not providing a capital, they would ask me about five questions. Two questions about the industry. They will ask, is there anyone that’s been successful at starting a technology company in Indonesia, and we didn’t have a role model before. The second question is like they say that Indonesia is a big market, even though all the global giants will enter the market, and how can you compete with them? They will have a capital, they will have a know-how, they will already have a lot of customers, so this is more rhetorical questions. They will also ask about my personal character. They’ll ask me which family did I come from. I come from a very humble family. My late father during that time was very sick. My mom was a stay at home mom, so if I fail, no one pick me up. They will ask me which university that you come from, and during that time I started computer science, but on my second year, because of my late father falling sick, then I needed to find a job to stay in Jakarta. My first job is to become internet café operator. They will also ask me what is my entrepreneurial background, and I never started a business before, so the industry doesn’t have a track record. My personal journey doesn’t have a track record. It was very difficult to find that trust, but then I realized that everyone is asking about my past, no one is asking about the vision, and I believe that possibly something that you cannot change, but you should be able to save your own destiny. That actually was the struggle that we faced in the early days, but looking backwards, we are very grateful that we can win that trust, so today we are not only internet changed my life, but internet changed millions of people’s lives in Indonesia. We have 6.4 million merchants now where 86% are first time entrepreneurs.

Dimitra Taslim: And William, tell us about how your story led up to the week of three proposals.

William Tanuwijaya: Another part of Tokopedia is also I learned about serendipity. There’s a saying about luck is when a person meets with opportunity. In 2014, by the end of September, I got a call from Softbank. They asked if I meet with Martha on the second of October in Tokyo. The problem is where I come from, Indonesia, you cannot just fly to Tokyo. You need a visa and a visa needs maybe five days, working days, to apply for that. The time when the call comes, we don’t have these five working days. I’m very lucky that I already got a Japan visa in my passport. The reason being is like I already booked a ticket to Osaka for the first of October with the plan to propose to my, by that time, girlfriend. The day before I go to Osaka, on the morning I got a call from our early investor. He said that the managing partner of Sequoia Capital is in Jakarta, can you meet with him for one hour? I met with Shailendra at 2:00 PM and a one-hour meeting became a two-hour meeting. By the evening when I go to the airport, I got a call from Sequoia again. They asked me if I can meet with them again on the first of October. I said that I’m on the way to the airport and I need to fly to Osaka. When I landed in Osaka on the first of October morning, it was very surprising to me to see Sequoia Capital friends and partners already waiting for me in Osaka. We had a conversation, a long conversation, by 5:00 PM I needed to dismiss the meeting. I said that I’m here to propose to a girl. I tried to find a flower shop. By 7:00 PM, I’m on my knees proposing to my wife. Luckily, she said yes, but after that I said that now I need to fly to Tokyo. I flew to Tokyo and then met with Martha on the second of October and that week is really a life-changing week for me. It’s a week of three proposals. To think about it, actually that time, Tokopedia will have a runway only by November 2014, so we have one month left and it’s just like amazing to see how it’s turn out to be, with a one month runway left, it turns out we can close $100 million.  That is really life-changing for an Indonesian internet company at that time.

Dimitra Taslim: So, hence, luck is about hard work meeting opportunity.

William Tanuwijaya: There’s a lot of preparation meets the opportunity, serendipity moment.

Hans Tung: I think luck favors the prepared, so you were definitely prepared to be able to benefit from the right breaks in life. As you scale your business in Indonesia, which hasn’t been that easy, I think that you mentioned international investors then tell you that, hey, once this works in Indonesia, that ecommerce can take off, then global competition will come to Indonesia. Alibaba invested in you and financially invested in Bukalapak, that SEA launched the Shopee in Indonesia, JD came as well. What has it been like to deal with foreign competition in Indonesia and then secondly, how has the partnership or relationship or collaboration with Alibaba group made any impact on you guys?

William Tanuwijaya: We believe that competition is the greatest gift ever for us in Indonesia and for us in Tokopedia. Not only these are all great companies that we already mentioned, only six months, when we launched Tokopedia, we already need to compete with eBay. eBay at that time is still the largest marketplace in the world. They are partnered with the local telecom company, so they already have a large distribution and good technology from the US. One year after that we need to compete with Rakuten and other companies and continuously it goes. When we first raised $100,000 we find to fight eBay and Rakuten. When we finally raised one million dollars, we need to fight with SK Planet Eleven Street. They are putting 33 million in Indonesian market. When we first raised 100 million, then eventually Alibaba acquired Lazada, which at that time is the leading platform in Indonesia. Then, when we raised a billion dollars, we need to prepare ourselves to compete with Amazon, which is close to a one trillion dollar company. We realized that capital is never about how you compete with the competition, but how you continuously have this underdog mentality. It’s not about resources that you have, it’s about how to manage the resources, the limited resources that you have. Through all of that experience, we actually learned about until your idols become your rival, there’s not secret that Tokopedia business model is really inspired by what Alibaba did in China market and how they helped small businesses to empower small businesses and become big brands. That is our mission as well, to democratize commerce to technology. Through that opportunity, we are not only until your idols become your rivals, we have opportunity too until your idols become your partners. In 2017, Alibaba eventually became our partners. They became the minority stakeholder in Tokopedia, and we can send our leadership teams to learn from China. While in the early days, people were saying that China technology company is copying US technology company, but from our personal experience, in Indonesia when we started Tokopedia, it’s this really that time machine effect. You can learn from US market, China market, India market, and there’s a time gap, so you can really benefit by copy and localize the services to Indonesia market, but even until we really learned that, China market is really a leapfrog. Now, the whole innovation has really come from China, this whole new retail model, there’s a new B2B model happening in China that is not happening anywhere else in the rest of the world. Having this ability to learn form China so closely and having Alibaba as our minority stakeholder, really is a big advantage for us in Tokopedia. We can see while Tokopedia continuously grows, but the past two years we are growing faster than before, and that is basically because of Alibaba is one of our closest partners.

Dimitra Taslim: Patrick, we actually met when you just joined, and I think that was just before you raised the really big round, and so what made you join William and his crazy journey on Tokopedia?

Patrick Cao: I think my journey into Tokopedia is a story of serendipity as well. When I was in banking in Indonesia, then that was when Tokopedia, Gojek, Grab, Traveloka were first starting to scale and become more noticeable in the Indonesian and international market. We would go to our, I guess, I’d see every month and I’d say, I’d love to bank these companies, and continuously we’d get feedback, oh, these companies are too small. I had the opportunity to join Formation in Singapore to look after that market, and even at Formation we had the opportunity to invest early into Gojek, but it took us at least a year, year and a half in order to get the IC to be comfortable investing in a country like Indonesia. There was no context. At that time, China and India were very hot, but Indonesia wasn’t on the map yet. In 2015, I got to invest into Gojek and that was a great deal for us. Then, I tried to meet with Will to invest in Tokopedia, but of course, he had great investors at that time from Softbank and Sequoia. We were not very well-known as a fund in the region and it just so happened that Will and I have a bunch of mutual friends, the founders of Midtrans, the guys from Gojek. We also have a lot of mutual mentors, and so we had a dinner and at that time, this is six months before I joined, I asked him, okay, I’d love to be able to work with you. You won’t take my money, but can I be your advisor? And Will says to me, I don’t have time for advisors, so think about it and come back in a few months. Him and I kicked this around. The investors at Sequoia shared that he had been looking for a CFO for the last seven years and then after meeting him for a long period of time, really talking to our friends, getting to know each other and getting the sign-off from my wife, then I told Will, if you’re not going to take my money, take my life, my partnership, and my time. That was three years ago.

Hans Tung: When we see Joe Tsai joining Alibaba early, and more recently see Ming Maa left Softbank to join Grab, Jean Liu to leave Goldman to join Didi, and you joining William at Tokopedia. What has it been like to see the two of you, from a personality standpoint, from a scale sensing point, from an experience standpoint, complement each other and work with each other well?

Patrick Cao: That’s a good question. I think all those folks that you mentioned are definitely role models, and I think when I was investing, I think one of the things that I realized is number one, founders have a very big burden and they can be very lonely sometimes, and so being able to have good partners that, as you mentioned Hans, can complement them, is very important. I think the second thing is that sometimes you can’t go as deep as you’d like on the investment side, and I really wanted to pick up that operating experience, and this is something that my mentors had shared with me at the time. This opportunity gave me the ability to really work with a great founder and friend that I respect a lot, but also to be able to pick up that operating experience.  I think if you look at the combination between Will, myself, and our other partner Melissa, and our co-founder Leon, we’re all very, very different, but for Will and I in particular, when I first joined, he was quite soft-spoken, very, very humble, and then if you look at, back then, ex-banker, ex-investor, I was a little bit more brash, a little bit more loud-spoken as you remember when we met in Boston.

Hans Tung: Yeah, I do remember.

Patrick Cao: My wife describes as this merge of individuals, so now Will has become a little bit more aggressive, a little bit more loud-spoken, and my wife thankfully says that I’m a lot more empathetic and a lot more humble, so I think we get that perfect combination. Then, sometimes in Tokopedia people joke that, oh, I’m his work wife, right? But I get it because the first few years, we spent, what, 80 hours per week together on planes, in meetings, trying to close the Alibaba deal. I think you get that melding of personality, but from a skill set perspective, I’ve learned a lot from Will about operations, about having really empathy in terms of leadership and people management, and I think vice versa from me we got our first financial model, we got our first business plan. We know how to negotiate shareholders agreements in a somewhat more sophisticated way, so I think it’s highly synergistic.

Hans Tung: William, what’s your perspective as a founder and what would be your advice to other founders for thinking of similar partnerships, to get someone from the investment or capital markets world to come in to be co-pilot or a President.

William Tanuwijaya:  It’s not that I was not looking at the time, so it took me seven years and this type of partnership, you need to find someone that you can trust and sometimes it’s not easy. Early stage, my struggle on raising, Tokopedia has been raising money every single year since the early days, so I personally raised money, maybe six round or seven rounds before Patrick joining me. I never went to the business school and so on and I really hate the fundraising process, but I really love the learning opportunity of it.  

Hans Tung: Well put.

William Tanuwijaya: It was always maybe all these MBA analysts and all of that and they will ask me very good questions that I didn’t know yet.

Hans Tung: As a free MBA.

William Tanuwijaya: As a free MBA, right? I just fake it until we make it. I would just right it down, for example, the first time people ask me my GMV, I didn’t know what is GMV. When the people first asked me about what is your cohort, I don’t know what cohort means, and I always said that I will come back to you later sometimes to dig more about the data and then thanks to Google now, you actually can learn about everything. Then, generally they’ll find the CFO. I always ask my board members, actually for the first five years, not only for the CFO, I also ask for the CEO. For the first five years every board meeting I always have this one slide about Eric Schmidt’s face, and I put  a text “find me this guy for Tokopedia”, because I learned how Google founders actually learned from Eric Schmidt to become better leaders and so on. You don’t know what you don’t know and until one point, one of my earliest shareholders said to me that, Will, you need to embrace this opportunity. We think that you are doing well, so unlike a US market where the industry is small, we’ll see if we can find professional leaders, but if like you see in the east side of the world, Alibaba is still run by the founders by that time, Rakuten run by the founders, Softbank run by the founders, so we think that you are just doing fine as a founder CEO. But because of that conversation I started to realize what east can learn from the west. I started to realize that a lot of companies, actually with like a Kingdom, where they really rely on the team or the queen or the founders, but if you see on the west side of the world, they are really with the company like a university.

The company is well-known because of the impact with the society like the university by the graduation. You can see that people graduate from the firm and they are continuously part of the firm and actually start another company. This kind of university concept is something that inspires me to bring in the Tokopedia. We took our time, but something from that point, I started to embrace the opportunity. I started to really look inside and continuously grew. For example, today our CEO is internal group. Melissa started as a accountant and now she’s our COO. But for the CFO I actually continuously fly around the world and I try to find someone with like Joe Tsai background because I’m also really inspired by how Jack Ma and Joe Tsai are combination. Eventually I found that person in Patrick. Early days, when Sequoia started to invest, Shailendra actually gave me good feedback that he started to realize that the Tokopedia hiring process has always tried to find someone that personally is similar with the founder. Melissa, for example, is also very similar with my personality, but then he said to me that, William, if you’re proud about your culture, it should be an open door where you can accept people with a very different background and different personality and then you start to influence each other. I started to think about it and it’s very good feedback and I start looking for a talent that is a complete opposite of my personality. At first it’s very uncomfortable, but eventually you complement each other, and I think that the Patrick combination is not only a complement skill set of what we need, it’s also really bringing a lot to the company. Since he joined we already raised maybe about $2 billion to the company.

Dimitra Taslim: I think the point on the university is so spot on. When you guys met me in Boston, you told me that there are really only a number of companies in the world where people say I’m ex-whatever, I’m ex-Google, and your vision is to say when people leave this place, I’m ex-Toko. I think that’s a great vision for a lot of people like me and many other Indonesians who are maybe educated overseas and are coming back and looking to join a company like this. My next question is on the Alibaba fundraising, and I think when we initially met, you guys told me, and we also had some feedback from the guys at Alibaba, that they felt like they were looking in the mirror when they met you and Will, Patrick. Tell us a bit more about the experience meeting the Alibaba people and what it felt like. Did it feel like you guys were meant to be tied at the hips together?

Patrick Cao: Yeah, if you think about the core fundamentals of our company and their company, you look at, for example, culture. They’ve also built a very university partnership-like model. You look at their values and I think they use different words, but the values really mirror each other. I think it was June or July of 2017 that Will and I first flew to Hangzhou to meet with Daniel, the current CEO and Chairman. We were sitting in his office and you could see Will on one side, Daniel on the other side, and they really were like mirror images of each other. As we walked out of the office I was like, man, this is really, really scary because in terms of temperament, in terms of style, even in terms of the nuances of the way they speak, and their body language was very similar. Of course, right after that, we also flew to Hong Kong in the middle of a typhoon, and then Joe invited us to his house in Hong Kong. Then we got the opportunity to spend time with him and I saw what I believe is one of my role models. And so, when you think about it from that perspective, in terms of characters and personalities, and as well as the similarities in companies, then I think that was a great match and I think to echo what Will said earlier, fight until your idols become your rivals, but if they can become your partners and your teachers as well, then I think that’s hugely valuable and it’s been a great honor and opportunity to be able to work with them and to learn from them to get to where we are today.

Hans Tung: One comment I will make is that we’ve seen that whether it’s Didi becoming partner with Uber in China or Grab becoming partner with Uber in southeast Asia, local players have to show international players that you’re strong enough to win in whole market to get the respect from the international players to realize that, hey, I cannot beat this guy, I should join him or her because then I can focus my energy elsewhere and help them to win. In your mind, to get to a partnership with Alibaba, what did you have to go through in order to achieve this optimal result?

Patrick Cao: What was interesting about that time was we had actually been talking to a number of international strategics as well as a few larger financial institutions. You’re right, Hans, we had very, very lengthy but important discussions about who that right partner would be. The way Will and I think about fundraising is it’s always about finding the next partner. It’s actually less about the capital or trying to optimize valuation. Going back to what I mentioned earlier, when you think about very core principles or the foundation of the things that you need to be successful, it’s always going to be in finding your partner or the one that is very aligned with you, that has the same culture and values, that has the same long-term perspective in terms of building businesses and growing teams. And so, when we looked at the landscape of partners that we could have, and again, we’ve already learned so much from Alibaba in terms of what Will calls the crystal ball or time machine effect, then we made the decision together as a partnership to go ahead and work with them, and I think it’s the best decision we ever made.

Hans Tung: As a follow up, many in western media tend to like to portray the reason that international players don’t win in local markets, especially in Asia, is because government support for local players, unfair competition or business practices that favor local players. In your experience in Indonesia, how have you been able to do well against foreign competition?

William Tanuwijaya: A lot is actually a local innovation, so if you think of all these global companies, when they go public they do pretty much two things. One is globalization and one is evolution. You see a margin on Alibaba today is very different with the margin of Alibaba three years ago, Alibaba five years ago, because they continuously aim for it every single year. On another side you see their globalization effort, their entrance in a different market and so on. The globalization effort, the key success is actually how well their localization have worked on that particular market. As a local player, that’s what we do well, on the localization on the learning experience that we learn from so many markets. For example, I think a lot of innovation happens for the first time uniquely in Indonesia because of the time machine effect. We realized that the time when we need to fight both Alibaba and JD, we will not have a time like in China when they get to be in front of us, like Cainiao in Alibaba or like JD to put their largest thing on full of human services and we realized that eventually our margin will end plus the market as well. With that limited capital, on a hundred million from Sequoia and Softbank, we thought the capability to beat our own logistic and fulfillment and know that one day that will be the key as a customer will expect. Then we go back to the blank canvas, we are asking ourselves one question. What do we have now that China didn’t have 5 years ago or 10 years ago? Then we realized that we have the right heading services now that competes very fierce in the market. We have Gojek, we have Grab, and we have Uber at a better time and Gojek, at that time, is discussed with Sequoia on a potential investment and we already did by Sequoia and we reached for the founders and I think about the importance of partners here. We realized that as mobility services, they also have a full creation of orders. In the morning, the drivers will have a high occupancy rate, bring people from home to work or school, and the last time bringing food to the people and so on. In the meantime, in that gap time between morning to lunchtime, lunchtime to the evening, there will be not that much occupancy for the driver. We are thinking if they can be our logistic partner, then this will become a win-win. We are at the first step along that kind of model. Ecommerce company, the right heading company, as to provide logistic services to the customer. But what happens with that today at Tokopedia, it’s 97% industry in Indonesia, and surprisingly 65% of all this made in Tokopedia will be there within the next 24 hours. This is because Tokopedia pioneering this concept and continuously improving our system. This doesn’t happen in China because Didi’s are not, Alibaba or JD, partners on the logistic front, but this can happen in Indonesia with Tokopedia because of uniquely this time was in half and time was in gap. We also, this is our evolution that we do on the payment as well. We started to see that all these southeast Asian companies tried to replicate the China playbook. Okay, ecommerce will take off and then payment will take off and all of that, but they forget that China has maybe two decades to beat all of that. In southeast Asia now, everyone raised capital at the same time, and everyone does this race at the same time. If everyone brings their own payment, then there will be no Alipay or there will be no Mastercard or Visa because there’s so many different currencies that are only in your closed ecosystem. Then, we are thinking about we should actually take a different approach, so we are actually taking ecosystem approach. We are actually knocking on doors to the partners who are willing to do the partnership model, which today we are actually working with Grab and having a payment product named OVO in the market.

Patrick Cao: I think, Hans, you also mentioned about regulatory or I guess politics. I think what’s interesting is I think in Indonesia both the government and the regulator have been very supportive of local champions like us and local entrepreneurs, but I think at the same time they’re very, very progressive from an FDI and foreign investment perspective. I think I would echo what Will said, which is that one of the other advantages is that we have that local context advantage. We have the benefit of being very, very focused and obsessed with only one set of customers, whereas some of the international players need to take a business or technology from Singapore, from the US, from China, and then try to translate and localize it for Indonesia. For us at Tokopedia, we have one app, one set of customers, and one language. We don’t even have an English version of our app, so I think that kind of focus and localization has been a big advantage for us as well.

William Tanuwijaya: We understand the government concern because this, a big opportunity, comes with a big responsibility as well. Today, this year, Tokopedia will contribute up to 1.5% of Indonesia economy as a whole, Indonesia GDP, and this number will continuously grow. Of course, as the government, they will be concerned about what if this one to two percent of economy is actually falling to the company that they cannot have a conversation with? This is actually one of the privilege to be local as well.

Dimitra Taslim: Yup. Got it. On the point of ecommerce, ecommerce as we know is such a competitive battleground. There’s so many people now raising a lot of money. I think it’s so interesting because you have you guys, obviously, support from Softbank, you have the likes of Shopee who has a lot of cash from the gaming business to fund the ecommerce business, and Lazada and etc., etc., Bukalapak as well. And so, for people who are looking at the ecommerce market, a critic might say that you guys have a reached a ceiling, and so give us a view into your future. How do you break through this ceiling? What other products, services, markets are you looking into to further increase the value that you’re adding to the ecosystem that you’re in?

William Tanuwijaya: The ceiling, we finally hit $1 billion GMB per month and starting that, we start a thing about we need to be as fast as possible. This is a matter of shifting gears that we made and if everything goes well in the next couple of months, we’ll start to hit pretty even. In 2020, this will be the year where we are pretty even, and this means that the company will no longer require external funding to continuously grow because it’s a sustainable business.  And then, since then we also stopped to play the GMB games. We have started thinking about it’s all about the impact. The internal measurement is how big in this economy will be contributed by Tokopedia. We no longer fight about how big ecommerce market sale will be in Indonesia, and how we’ll be our market sell on the ecommerce pie. We have started thinking today, Indonesia, ecommerce is only four to five percent. The big economies happen outside of the ecommerce, on the off-land space, so then we start to bridge into that. We are thinking about this pillar of evolution in the company. The first pillar is online, it’s what we did in the past 10 years. Then now, we evolve into infrastructure outside services as a logistic and a fulfillment of services, payment and financial services as services, and it is what we did with using OVO. We are starting to influence in the different logistic assets to bring a tiny of Indonesia, but combine with fulfilled by an Amazon model by providing a smart warehouse using an AI, so it can with a pretty decent for your merchants. These are all merchant services as insofar as services, but the most importantly is we start breaching to the offline space, because quite simple, in the past couple of years, I tried to comfort my uncle in my hometown to sell products online. He’s just running a small offline grocery store, so we see a lot of farmers and fishermen and so on. They will never be ecommerce players. If we want to have that, we need to have them to become a technology company. What we start to do, if you see a recent company that we acquired this year, BrideStory and Parent Story, this is because we want to reach to the offline jobs and offline profession. If you’re having a wedding in a certain city, you need all local services from that city. You need florists, make-up artists, photographer, catering venue, all from that city. The wedding is a very local services business, so that’s the reasons why we acquired BrideStory and the ParentStory. We are seeing the next 10 years will be very different with the first 10 years. The first 10 years we are not an ecommerce company, we are a technology company that help other people to become ecommerce company. The next 10 years we will have any profits in Indonesia, especially offline profession to become a technology company.

Patrick Cao: Maybe to add to that, if you think about the numbers, Will mentioned that ecommerce penetration is 4% to 5%, but you extend that to all the other pieces of our infrastructure. Digital payments is 2.2%. In terms of financial services and financial inclusion, I think it ranges between something like 30% to 40% for the bankable, not the banked. If you look at the addressable market for logistics, especially at technology-enabled logistics, that is very, very early days. Honestly for us, we honestly think we’re just getting started. Each part of our business or phases of evolution is hundreds of billions of dollars of ten and if you’re talking about single digit penetration, then we have a long, long way to go, which is why I think Will is right. We’re thinking about how we contribute to Indonesian GDP and I think each of the companies in our market are really, really also just getting started.

William Tanuwijaya: Today, Indonesia is a one trillion dollar economy and we contribute 1% to 1.5% of Indonesia economy. In the next 10 years, Indonesia will become a $5 billion economy and if by that time Tokopedia contributes 5% of Indonesian economy.

Hans Tung: Ambitious.

William Tanuwijaya: Meaning that there will be a $250 billion run rate transition happens in Tokopedia. If you use a multiplier of maybe 0.4 or 0.3 it would be already a very sensible business only focusing on the Indonesian market.

Hans Tung: In emerging market, there are so many opportunities and pain points that could be solved. The challenge is always on power organization and focus. You look at Alibaba, they spend the first five years doing Alibaba.com, helping Chinese manufacturers to advertise and attract foreign customers. Then, they spent four years building Tmall, the sea to sea platform, before launching Tmall, and they did Tmall for five, six years before they launched AliCloud. In today’s world, the time for a company expanding new business lines has shortened and gone faster and faster. We talk about SuperApp as a concept a lot, or content, both in what we put in PowerPoint online as well as in podcasts. The Chinese company are good at coming up with the SuperApp that bundles minute services within one, leveraging the high frequency of the first service to the people to try other services of less frequency. In Indonesia, you see Gojek and Traveloka and Grab becoming more of a super app approach. How do you guys think about that and does it make sense for you to continue to focus on ecommerce and focus on Indonesia to get to profitability first?

William Tanuwijaya: When we think about SuperApp, we think about our service in a more super ecosystem. The fundamental of Tokopedia is like we believe we are trying to be the most beautiful business model in the world where we can only be successful by having others to become successes too. For example, these logistic and fulfillment services, these payment and financial services, we are not trying to win by our own. We are trying to find the best partners that can compete against others. We believe that 50% if something big is more important than having 100% of something small. To your point that Indonesia unfortunately we do not have decades of time like in China to go through this five year cycle on building a new business model. Everyone raising capital at the same time and everyone trying to acquire customers at the same time, but it shouldn’t be a monopoly game. It shouldn’t be one company can profit, all of this is by themselves. We are thinking more on the partnership approach and on the super ecosystem rather than SuperApp approach.

Dimitra Taslim: Great. Thanks, Will. Another question for the both of you, Patrick and Will, how has your view on monetization and profitability evolved over the past few years and how is this linked to, if you look at this part of the world, grow factoring has become a religion and there’s not a lot of focus on profitability and even product design and product thinking. How do you balance this in such a big company, going fast versus having a really good product and focusing on the unit economics and the profitability?

Patrick Cao: That’s a good question. I think we as a commerce company know how to make money. There are many global comps out there, whether it’s Alibaba, Amazon, Rakuten, eBay, etc. That has always been in our sights and so when you think about the way that we’ve planned out business in especially the last three years, then first we were gunning for that magic billion dollar run rate, and then we’ve been lucky enough now to hit $1 billion plus per month. In terms of scale, that’s already very, very significant. I think in the next evolution of our company, it’s to basically get to $1 billion run rate in revenue and then eventually that will be the new normal. That’s how we think about it in terms of monetization or profitability, and again, the drivers are there. You can charge commissions, add services, value-added services from payments, financial services, logistics, fulfillment, cloud, customer service as a service, content engagement, etc., so we have many drivers and those are things that we use our revenue and the capital that we’ve been lucky enough to raise to be able to continuously invest. And I think as Will mentioned, we know how to get there, we know what the drivers are, which is why we’ve been able to grow our revenue this year even faster than our GMV. That will allow us to get to break even. Then, after break even, we’ll have enough cash flow to reinvest into the business the way some of our peers have done and continue to grow that pie and all those different parts of infrastructure in Indonesia.

Hans Tung: To get to a good new economics, obviously LTV versus CAC, you want that number to be as high as possible. When there’s competition, there’s funding coming to competitors in the market, the CAC inevitably rises. One way one of getting to a good new economics is making sure the user can come back more frequently and shop more frequently. For an ecommerce company, Amazon can do about once or twice a month, sometimes even more frequently. Taobao and TMALL can do once a week for consumers, but when it comes to something like Meituan, ELEME, or Uber Eats, the frequency of transaction could increase too on a daily basis, at least a few times a week. As you guys built out product and services for Tokopedia, how do you think about the importance, or not, of frequency of your usage?

William Tanuwijaya: It’s very important, so that’s why internally when we do the product development, there’s one question that we ask ourselves, how can Tokopedia be relevant for every Indonesian customer from the moment that they wake up in the morning until they sleep again at night, from the moment that baby born until they grow up, and how Tokopedia will be a part of their life. That’s why you start to see why we acquired BrideStory. There is the wedding moment in ParentStory that is a baby born until you raise your kids and so on. You see Tokopedia product development, how we’re actually going into vertical innovation. We recently launched an AI-powered typing program, so basically you can sell your used phone in Tokopedia using your current phone and then buying a new phone, but Tokopedia will do real-time fill yours in of your phone today as a direct discount to the new phones that you want to purchase. We are actually the largest digital good services in the country and because of us being run by homegrown entrepreneur, then the government partnership is very strong. For example, in west Java, we are the largest tax collection for the government online and recently the Minister of Finance actually integrate their system to our platform, so 900 government services, tax and non-tax, can be connected to Tokopedia, so very simple in Tokopedia. Then you can extend your passport and pay the fee through the Tokopedia platform. That kind of thing is very, very deep, so we are going local, we are going very deep into Indonesia, digitizing government services and so on and that’s because we think that not only the frequency of the customer can find a solution in Tokopedia is important, but because of these cross-usages, then we have a better understanding about our customer so we can proffer the better personalization and a better credit scoring model, so we can provide additional features like buy now, pay later, and so on and so on.

Patrick Cao: From the physical goods side, Hans, that’s already a weekly use case because they come three to four times a week just on the physical side. You combine that with the digital goods that Will mentioned, phone recharge, paying any of the utility bills, paying for your tax and other government services, that is at least a weekly use case. Then, if you add local services to that, then you’re starting to get to the kind of frequency that you mentioned from the more on-demand players, but for us it’s highly integrated into the physical goods commerce experience, which is why you’re able to drive frequency and push your LTV. But even on the CAC side, as Will mentioned earlier, we’ve never had the most capital, and so for us it’s not about a capital burn game, it’s about the cross-selling and use case perspective, it’s about product innovation, but also as the local champion, we are the ones that are going the deepest and broadest in the market. Will mentioned that we have 97% coverage of the Indonesian market. That is by far the largest of any peer or competitor, so we’re able to drive not just use cases, but very, very deep local penetration. I think those combinations of things with, I would say, very efficient and very innovative ways of doing marketing and promotion has allowed us to not only have the best LTV, but also the lowest CAC. I’d say in terms of quality to economics, Sequoia and Softbank and Ali continuously tell us that we are the highest quality in the country, and I think we’ll be able to continue to optimize for that.

Dimitra Taslim: Now, back on the principles for running the business, I just have a question for Will. What are some of the principal philosophies that you have in place for making decisions as a team at Tokopedia?

William Tanuwijaya: Making wrong decisions is better than making no decision at all, so that’s for one. I always believe in that university concept, so our philosophy is everyone in the company needs to have a sincerity, but at the same time have humility and a curiosity to learn like a student. Tokopedia has a preference now to hire very smart people from around the world, but when I deal with very smart people I also realize that it’s important to have humility to unlearn. Sometimes you learn certain things from a study case, an MBA or in a previous company, a certain way of work has really become a solution, but in an internet world, everything you need to be able to challenge yourself. You need to be able to unlearn before you learn something new. As a leader, a leader’s role is only one, which is creating better leaders than themselves. How do you create better leaders than yourself? You basically need to give two things, which is opportunity and trust. Sometimes you only give opportunity, but you don’t trust your leaders. Sometimes you trust your leaders, but you don’t give them big opportunity. You need to give them both opportunity and trust and let them fail. Only by failure will they grow to become better leaders. That is pretty much a couple of our philosophies that we do, but most importantly, we always believe that we can only be successful by helping others to become successful. For example, Tokopedia will never enter a 1P model, because 1P model, you will start to cannibalize your merchant, so we will continuously be the 3P model, but we believe that the market and opportunity is very, very big by continuously providing merchant services, infrastructure, and so on. You can grow to become a very successful company.

Patrick Cao: I think on the last part, in creating win-win’s and doing and building a business through partnership, not only are you sometimes taking market share from an existing TAM, but you can grow the TAM as well. As Will mentioned, 86.5% of our merchants are new entrepreneurs. That’s definitely growing the pie. And if you take that across, again, logistics and fulfillment, payments, Fintech, etc., then we can grow and build the pie together there as well with our partners to create the same win-wins that I mentioned.

William Tanuwijaya: We didn’t like the world of disruption. A lot of founders and entrepreneurs say that technology, they are trying to build this technology company, trying to disrupt certain things. Technology is just a tool. As a tool, you can think about either disruption or empowerment. In Tokopedia, we are constantly thinking about the empowerment, how we can use this technology to empower instead using this technology to disrupt.

Dimitra Taslim: Great. What would be advice for founders who operate in markets where there’s less capital access?

William Tanuwijaya: If you see all the great companies in the world, they all start as an underdog. They are not having big capitals since day one, you just need to start, and you just need to, what I initially said, dream with your eyes open, meaning what you dream, what you think, what you say, and what you do need to be consistent. What you dream, what you think, what you say, what you do need to be consistent. It sounds easy, but if you really do those four things consistently, it’s actually very, very difficult to do.

Patrick Cao: Maybe putting my investor hat on, capital is also a tool, but I think for any new founder thinking to start a business, I’d say 9 times out of 10 local champions win because the advantage that they have is really localization and really being obsessed over their customer, which means that every dollar that they raise, even it’s less, is more productive and has higher yield.

Hans Tung: If I push that point a little but further, when I look at across the board, the emerging internet companies have done quite well in Europe, in Canada, Australia, and places like that. Whereas in China or southeast Asia, it has been harder. India, it’s a draw. At least Amazon is doing relatively well in India and Walmart bought Flipkart. One could argue, besides localization, there’s some correlation between how well internet companies do and how much work/life balance there is in some of the regions where they have success or not. William, you’ve been doing this for 10 years. What is your work schedule these days?

William Tanuwijaya: This was actually our long discussion during the dinner when Patrick decided to join the company. We discussed about work/life balance and we think that there’s no such thing as a work/life balance because if you want to have a work/life balance, you need to remove something from the scale. That’s what balance means, right? You need to remove something from the scale. What we aim for is a work/life harmony and I really learned that from when I started to have my own family. There’s a quote, “Life is a constant game where you are juggling five balls at the same time,” and these five balls are work, family, friends, integrity, and health. Unfortunately, four out of the five balls are made by glass, only one ball made by rubber. If you are not careful to juggle this ball and that ball falls, if it’s a glass ball it will break apart. Only work is actually made by rubber because you can fail on your work, but if you fail in your family, maybe you can find another family, but it will not be the same. Friends, if you’re having a case that your closest friends help integrity, this is all the glass ball. When you see Steve Jobs, for example, it’s the case of a very successful entrepreneur, but arguably maybe failed on the family and failed on the health ball, because it’s a glass ball. If you’re really with a big, big company, your rubber ball actually consists of millions of glass balls. Today at Tokopedia, 5,000 employees, we are having 6.4 million merchants moving 1.5% Indonesia economy, so we cannot take that work ball easily. This is no longer a rubber ball. This rubber ball consists of millions of glass balls. If it breaks apart, 5,000 people will lose jobs, millions of merchants will lose their bread and butter, and so on. This is a big responsibility, so that’s why we are very appreciative to learn from a big company and good founders like Alibaba. Alibaba recently changed their culture, work happily, and live seriously. We find that it’s very beautiful, it’s a really work/life harmony, it’s not a work/life balance. How you can work happily but you live seriously, meaning that you really juggle these five balls equally and treat all as a glass ball. And how to do that, actually, you just need to be transparent and not take your relationship for granted. Both me, Mel, Pat, we have very supporting partners and spouses, but we are trying to involve them into our struggle. We said our struggle, we said our win, so they celebrate that win, they are involved in that struggle, and we realized that it’s not about quantity anymore, it’s about quality time. From time to time we encourage our partners to take quality time to take a leave with their partners. Happily, it’s our Tokopedia partners today, Patrick, myself, and Melissa all had kids this year and a baby.

Hans Tung: Congratulations.

William Tanuwijaya: We are really learning how to juggle this new ball again, but we are actually supporting each other on a day to day basis.

Dimitra Taslim: That‘s a beautiful adaptation of famous quote on work-life balance by Brian Dyson, right? The Ex-CEO of Coca Cola. Let’s just finish with some quick-fire questions very quickly. First one is for Will. Will, what’s the most important book you’ve ever read?

William Tanuwijaya: Unfortunately, I no longer read books. A recent movie, documentary that I found very helpful is Inside Bill Gate’s Mind.

Dimitra Taslim: I love that one too. Patrick, what is the most regularly purchased item in your life?

Patrick Cao: Wine.

Dimitra Taslim: Okay, and Will, if you could spend a day in someone else’s shoes, who would it be and why?

William Tanuwijaya: Tough question. Maybe Masa-San. I really want to see what is inside his mind.

Dimitra Taslim: Great. And for Patrick, what does success mean to you?

Patrick Cao: Living up to your fullest potential.

Dimitra Taslim: Great. This is very, very concise.

Hans Tung: Thank you very much, guys.

Patrick Cao: Thanks, Hans.

William Tanuwijaya Thanks for having us.