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The Story and Strategy behind Tokopedia

Ahmad Zamroni / Forbes Indonesia.

In October 2014, website Tokopedia made history by raising funds of $100 million from Japan’s SoftBank and U.S. venture firm Sequoia Capital, making it the biggest Internet investment in Indonesia, and probably the biggest in Southeast Asia. The transaction is notable on two other fronts. One is the status of the investors, both of them high-profile global Internet investors, proving that Indonesia is now showing up on global investment screens. The second is the size of the investment, which implies a valuation for Tokopedia at $250 million at the maximum, according to Internet investor Andi Boediman, director of Ideosource.

The investment makes Tokopedia perhaps the most valuable website in Indonesia. The last big high-profile deals, those for news site Detik and social site Kaskus both happened in 2011, and at much lower valuations, according to Andi. The whole of Detik was sold for perhaps $50 million and Internet investment firm GDP Venture bought a majority stake in Kaskus for about $30 million, according to him.

What makes Tokopedia so valuable? One reason could be the Alibaba effect, which did the largest ever IPO for $25 billion in September 2014. Alibaba’s online marketplace model has some similarities to Tokopedia. Like Alibaba, Tokopedia doesn’t sell its own goods, but provides a marketplace for those who want to sell online. Sellers can open their shops on Tokopedia for free. “So the one thing needed from sellers is their time. They don’t need to make a website. Just put their products on our platform, and we have lots of visitors, like a mall,” says William Tanuwijaya, who co-founded the site with Leontinus Alpha Edison, both 34.

The two started Tokopedia in 2007. At the time William was an IT and business development manager for a content provider company PT Indocom Mediatama and Leontinus was a general manager at the same firm. At the time, William was also a moderator for online community (that no longer exists). As a moderator for community, William saw a lot of buyers complaining about online transactions. The biggest complaint was about goods that were never delivered even though the money had been transferred. At the same time, those wanting to open an online shop had no capability. Looking at these opportunities, William and Leon told their boss Victor Fungkong to set up online marketplace business called Tokopedia.

Victor was not wholly convinced, so he introduced the pair to those who might be prospective investors. From 2007 to 2009, the two were unable to find any investors. “You better off not wasting your time” is what one prospective investor told them at the time.

Then finally in 2009, their boss Victor put in Rp 1 billion and the two founded PT Tokopedia. Victor at the time owned 80% of the firm, while the two each got 10%. William became CEO and Leon COO (the shareholding after the investment is now known). “Although Tokopedia was underestimated, I hope we could make history in Indonesia’s Internet business,” says William.

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