Why Jeff Bezos is backing this millennial founder’s Indonesian start-up

Billionaire?Amazon founder Jeff Bezos?made his first investment in a Southeast Asian e-commerce start-up last month.

But it’s in not?one of the region’s?billion-dollar unicorns.?It’s in a mom-and-pop shop start-up?that’s been around for less than two years.

And?its founders? Some of?Bezos’?former employees.

Read the full article here on CNBC Make It.

“It was?incredibly?fortunate and a huge fan boy moment for me,” Ula CEO Nipun Mehra, 40, told?CNBC Make It.

Business inspired by Bezos

Indonesian?e-commerce start-up?Ula is a wholesale marketplace aiming to modernize?the country’s millions?of mom-and-pop?kiosks, or?warungs, by providing inventory and delivery services as well as financing.

Founded?in January 2020?by CEO Mehra, the company has thrived under a pandemic-induced shift to digital,?so far?raising?over?$117 million in funding?from big names?like?Tencent?and?Lightspeed Venture Partners.

One among them is Bezos, whose family office Bezos Expeditions invested an undisclosed sum after one of the start-up’s early backers told him about Ula.

The traditional way of doing e-commerce doesn’t work ... So you have to find other ways of doing it.

Though Mehra has never met the billionaire founder, he worked under him as a software engineer at Amazon’s Seattle headquarters before joining e-commerce giant Flipkart in his native India.

Like Bezos, Mehra yearned to be an entrepreneur. But it wasn’t until years later, while working?as an investor at Sequoia India,?that?he saw an opportunity to adapt the traditional?e-commerce model for a new market: small?food?kiosks?in Indonesia.?

“The typical Amazon, Flipkart — or here in Southeast Asia we have Shopee, Lazada, Tokopedia and so on — has been more on the non-food side. Food is a very different way of running things,” said Mehra.

“Usually in emerging economies, their income?profile is such that they have to?buy frequently and in small baskets. The moment you get into that dynamic, the traditional way of doing e-commerce doesn’t work. You can’t deliver a three-, four-, five-dollar basket to somebody’s home and do it profitably ... so you have to find other ways of doing it.”

Adapting e-commerce for Indonesia

Indonesia, with its vast population and fast-growing economy, is seen as a huge opportunity for entrepreneurs and investors.?

Central to that are the country’s?millions of neighborhood kiosks, which sell fast moving consumer goods, like drinks and packaged food, as well as household items.

They’re an integral part of society,?especially in the smaller cities and provinces outside?the capital?Jakarta, accounting for almost three-quarters (72%) of the country’s?$47 billion?consumer goods sales.

Yet many still rely on traditional means?of?replenishing their supplies by shuttering their stores when they visit?wholesalers?to stock up wares.?

They are very limited by the physical footprint that they can access.

“They are?essentially run?by one or two people,?who act like consumers. They own the?business;?they need to?procure?things for themselves to sell,” Abheek Anand, a managing director at Sequoia India, one of Ula’s investors, told CNBC Make It.

“For them to tap?into offline supply chains is actually very?inefficient. They?have to?go to the local market, spend hours figuring out what to buy, where to buy it from. By and large, they are very limited by the physical footprint that they can access,” he added.

Drawing on Amazon expertise

Mehra?wanted?to simplify that process by creating a business-to-business platform that would enable stallholders to order?stock at competitive rates and have it delivered to their store for a small fee.?

So,?he called on?his?contacts in the e-commerce space to help him realize the vision.?

His?former colleague from Amazon,?Alan Wong, Riky Tenggara from Lazada, and Procter &?Gamble executive?Derry Sakti rounded out the founding team.

“We’ve?learned all this stuff in Amazon, we’ve learned all this stuff at business school. How do we bring some of that into this little smartphone and help them both make more money as well as save more money?,” said Mehra.

Powering up in the pandemic

The business got off to a steady?start. But within months of launching in January 2020,?the pandemic hit, making demand for services like Ula more urgent.?

Lockdowns made it harder for stallholders to source goods?from wholesalers,?even as customer demand for daily essentials grew. That caused many mom-and-pop shops to pile onto the platform.?

The need in the market just completely switched.?In lockdown, your first?priority?is to get?your food, is to get things that you consume.

“The need in the market just completely?switched.?In lockdown, your first?priority?is to get?your food, is to get things that you consume,” said Mehra.

The founders?responded?quickly,?onboarding?tens of thousands of stallholders and expanding their?team of?15 to 400 across Indonesia, Singapore and India.?That rapid growth caught the eye of investors, helping them to?attract their?first round of investment?within?six months.

“The most exciting addition to the company is Jeff Bezos, who’s invested, which is obviously nice validation for the business. But there are a number of?other really smart people who have joined us along the way,” said Sequoia India’s Anand.

An ambitious growth agenda

In October 2021, Ula closed its?Series B?round, raising?$87 million. Mehra?said the?cash?will?go towards expanding its existing marketplace offering, as well as launching a so-called buy now, pay later service to provide stallholders with?small loans.

Within the next 18 months,?the CEO?hopes to quadruple the number of?merchants Ula works with from?70,000 today to 300,000. He also hopes to?help merchants?expand into new?categories?such as apparel and technology, with the ultimate goal of doubling their income.?

That is what will lead to a new form of retail. Not something which we have seen in the U.S. ... It will be an Indonesia-specific, unique solution.

“Why restrict yourself?to the items that are in your store? Why can’t you order everything that your customer needs? Why can’t you be that channel?,” he said.

“In?my mind,?that is what will lead to a new form of retail. Not something which we have seen in the U.S., not something?which?we have seen in China. It will be an Indonesia-specific, unique solution.”

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