Ula Secures $20M Funding to Grow Indonesian E-commerce Marketplace

Over the last ten years, companies like Tokopedia, Lazada, and Shopee have established an online shopping presence in Indonesia, enabling consumers across the archipelago to purchase goods digitally. However, similar to other Southeast Asian nations, a significant number of small businesses and traditional stores in Indonesia continue to encounter difficulties in securing inventory and accessing working capital, and they largely depend on established supply chain networks.

In 2019, Nipun Mehra (previously with Flipkart in India), Alan Wong (formerly of Amazon), Derry Sakti (who led operations for consumer goods leader P&G in Indonesia), and Riky Tenggara (an ex-Lazada and aCommerce executive) began investigating ways to resolve these issues.

“Similar to the situation in India, a large portion of the Indonesian retail sector remains fragmented. Consider the fresh food category; numerous farmers sell to intermediaries, who then distribute to local markets. From these markets, goods are passed to smaller wholesalers, and so on. The chain involves many different parties,” explained Mehra, who also has experience with Sequoia Capital India, in a discussion with TechCrunch.

Mehra, Wong, Sakti, and Tenggara jointly established Ula in January 2020. Their goal with Ula is to streamline the sourcing and supply chain process for small retailers, creating a single platform to meet all their needs.

Despite the challenges presented by the pandemic, Ula successfully gained traction in the Indonesian market last year and currently serves over 20,000 stores. This progress has naturally attracted the attention of investors.

Ula announced on Thursday that it has secured $20 million in Series A funding. The funding round was spearheaded by existing investor Quona Capital and B Capital Group. Sequoia Capital India and Lightspeed, which contributed to Ula’s $10.5 million Seed round in June of the previous year, also participated in this Series A round.

“When examining the entire retail value chain, particularly for essential items like fast-moving consumer goods, staples, and fresh produce, it’s clear that it’s highly fragmented,” stated Ganesh Rengaswamy, Managing Partner at Quona Capital, during an interview. “The market has evolved to allow for more efficient consolidation of both supply and demand. Ula is working to rebuild the retail distribution system, incorporating substantial technological advancements. It’s linking major suppliers with the smallest retailers and end consumers.”

Furthermore, Ula is offering working capital to these small retailers, who often operate businesses connected to their homes, enabling them to purchase new inventory without waiting for customer payments. (This is a significant issue for micro-retailers in Asian markets, as they frequently maintain strong customer relationships and extend credit, leading to delayed payments.)

“Providing seamless payment options and offering credit to retailers to improve their cash flow management are essential elements of contemporary digital commerce,” Rengaswamy noted. For Quona, which has invested in numerous e-commerce and fintech companies in Asia, Ula fulfills both of these criteria.

Mehra indicated that last year was primarily focused on expanding the Ula team and developing the underlying technology. The company now intends to utilize the new funding to reach a greater number of small retailers and broaden its operations throughout the country.

Indonesia will remain Ula’s primary market. The potential within the region is substantial, with retail spending projected to exceed $0.5 trillion in the next four years, according to Kabir Narang, Founding General Partner at B Capital Group, in a press release. Traditional brick-and-mortar retail currently represents almost 80% of the total retail market, as estimated by various sources.

Ula currently concentrates on the FMCG, food, and vegetable sectors, but plans to expand its product range to include clothing and, eventually, electronics.

Additional notes from my research:

• Similar to many other startups in Asia, Ula relies heavily on a field sales force to promote its services and onboard new stores. Mehra emphasized that the key to growth is identifying retailers who are highly satisfied with the service and encouraging them to share their positive experiences with others. He attributes this insight to the founders of Indian business-to-business e-commerce platform Udaan – Amod Malviya, Vaibhav Gupta, and Sujeet Kumar – with whom he previously worked at Flipkart. The Udaan founders have also invested in Ula.
• Electronics is a popular category for both B2C and B2B e-commerce platforms. Mehra explained that the startup has always considered expanding into electronics but chose to prioritize other categories initially to test the supply chain network.
• Indonesia is comprised of over 17,000 islands, but the majority of the country’s GDP is generated by a small number of islands, including Java and Sumatra.
• I asked Quona’s Rengaswamy to compare the e-commerce and payments landscapes in India and Indonesia. He stated that India has made greater progress in establishing frictionless payments. However, this has created opportunities for startups in Indonesia to address additional challenges.