According to the data from the Ministry of Cooperative and Small and Medium Enterprises, in 2018, Indonesia is home to nearly 64.2 million micro, small, and medium enterprises (MSMEs). The sector employs more than 116 million workforces and accounts for more than 60.5% of the country’s gross domestic product. Yet, according to Indonesia’s Fintech Lending report by PwC, 74% of MSMEs remain unbanked. One of the reasons is that most MSMEs don’t have a reliable financial report with an accounting standard that can be used to assess creditworthiness.
Several companies have been delving into this particular matter. One of them is BukuKas (PT BeeGroup Financial Indonesia), a mobile app company that provides a simple and easy-to-use bookkeeping solution for MSMEs merchants to monitor their sales, profit, and receivables. It’s a common practice that mom and pop stores usually let their customers owe money for goods purchased. One of BukuKas’ features helps track this kind of transaction, and automatically send reminders to customers via WhatsApp when their debt is due. By using BukuKas, merchants only need to input their transactions and the app will calculate them, thus avoiding errors while saving time from doing tedious manual bookkeeping.
Cofounders of BukuKas Krishnan Menon and Lorenzo Peracchione, who lead the company as CEO and COO, are long-time friends. They are experienced in the ecommerce scene and as entrepreneurs themselves. They first worked together in 2012 at Lazada Indonesia, a Southeast Asian ecommerce, where they had been involved with small to big businesses enrolling under the brand. They have also learned the pain points and challenges in the money management of small businesses in the region. From Lazada, Krishnan then founded Fabelio in 2015, one of the early and largest players in the Indonesian furniture ecommerce. It secured a $6.5 million series B funding in 2018 and an estimation of $10 million in funding over four rounds. Meanwhile, Lorenzo drove the entry of Singaporean cosmetics startup Luxola in Thailand. In 2015, Luxola was acquired by global luxury retail powerhouse LVMH and rebranded into Sephora, which brought Lorenzo to lead Sephora’s ecommerce business in Southeast Asia.
“Most people start a business out of passion and observation. However, they tend to be late to realize that it requires solid cash flow management and money management. And that’s when they start struggling. That’s why we thought, why don’t we create something simple and easy so people can manage their businesses better. To help these small businesses, which are the economic backbone in Indonesia or any other country,” says Krishnan.
The duo had discussed the idea of building technology to help the unbanked SMEs in Indonesia for a long time, Krishnan recalls, but it was solidified in mid-2019. To clearly understand the situation and build the right product for the market, they asked more than a thousand MSMEs about their pain points in running a business. They launched BukuKas on December 1 and operated in Jakarta before opening up the business nationwide. In the first couple of weeks, BukuKas went from door-to-door to offer the app to merchants, but the method was costly and ineffective. So they switched to promoting the app on digital channels, and that’s where they began to get significant growth.
Today, six months after its launch, BukuKas claims that the number of registered merchants has crossed 400,000. The merchants are coming from 750 cities in Indonesia, with 80% are based outside Jakarta. Within the first quarter of 2020, the transaction value had surpassed $150 million. Most businesses using BukuKas are micro and small scale. The merchants run various businesses from fashion, food & beverages, groceries, to phone credit resellers. The users are young people between 25-35 years old. This group is ready to try technology solutions as long as they are simple enough.
“We have users with different levels of online penetration in their sales. Some of them are almost fully online, some are only 10% to 20% online, but they all almost fully recognize that online (platform) represents a big opportunity,” Lorenzo adds.
Krishnan and Lorenzo have a big picture of what they want BukuKas to be in the future for users. Data from all transactions collected by the app can be processed into additional insights and given back to the merchants to improve their business further. Using machine learning and AI, it can recommend better ways to procure products, manage stocks and expenses, and even to apply for loans at banks, Krishnan says. For now, Krishnan and Lorenzo haven’t monetized the app yet, but they believe that there are many ways to do it while scaling up.
“It can evolve into many different directions, from banking and payment services to digital commerce services,” Krishnan says.
Therefore, the team plans to focus on improving its products first, to make sure it really answers to merchants’ needs, all while keeping the app simple. Since everything is severely impacted by COVID-19 pandemic, BukuKas has been prioritizing helping their merchants to stand again once the pandemic is over.
In late April, BukuKas announced raising an undisclosed amount of seed funding, which Krishnan says could be one of the largest seed rounds in Indonesia. Sequoia Capital India led the round through its Surge accelerator program, of which BukuKas is a participant from April 2020. Other investors include Credit Saison, Hustle Fund, Whiteboard Capital, and 500 Startups, as well as more than 20 angel investors such as Christian Sutardi of Fabelio, Edward Tirtanata and James Prananto of grab-and-go coffee chain Kopi Kenangan, and Patrick Walujo of Southeast Asia private equity firm Northstar Group.
“The core idea here is that we are building something very fundamentally strong for the future. So we don’t have pressure on immediate cash flow, because we’ve been fortunate to be backed by really strong people. And our belief is to do something really good for the user, and all the money-making opportunities will show up,” says Krishnan.
A similar app in India, Khatabook, recently raised its $60 million series B funding led by Eduardo Saverin’s B Capital Group. It functions as a digital ledger for small businesses and accepts online payments. Only one and a half year since its inception, Khatabook has gained more than 8 million merchants. Meanwhile, in Indonesia, similar app BukuWarung also recently raised an undisclosed amount of seed funding led by East Ventures.