Uber rival Grab is raising at $2.3B valuation, reportedly burning $35M a month

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Grab, the company that rivals Uber in Southeast Asia, is in negotiations to close a new round of funding that could value it as high as $2.3 billion, multiple sources close to talks told TechCrunch. Grab was valued around $1.5 billion-$1.6 billion last August when it raised $350 million.

The Wall Street Journal and Bloomberg this week reported that existing investors Didi Chuxing and SoftBank may lead a $600 million round of new financing. The sum could reach $1 billion after a second close.

Grab has been in discussions with potential investors to raise money for a number of months, but the round is not yet closed, sources told TechCrunch. That target valuation of $2.3 billion, however, is subject to some secondary share sales from existing backers, we understand, which, once blended, could lower the figure.

In the world of ridehailing apps and fast-funding, Singapore-based Grab — which offers licensed taxis, private cars and motorbike taxis in six countries — hasn’t raised at the frequency of others. Its last financing came in August 2015 when it closed a $350 million Series E round. That included money from Didi and sovereign wealth fund China Investment Corporation (CIC), among others.

Unlike Uber, which has seen numerous investors decks and financial presentations leaked over the years, precious little is known about the internals of Grab’s business.

According to documents from Grab investors dated last year — circulated for potential secondary share sales — which were viewed by TechCrunch, the company was forecasted to burn $111 million in Q3 2015 — that’s more than $35 million per month. The same data revealed that Grab had $606 million in cash on its books after it closed its Series E round.

A Grab spokesperson told TechCrunch that the company has not yet touched its Series E money.

The projections we viewed estimated that Grab would make $31 million in annual net revenue for 2015 — that’s the total amount of money it keeps from the transactions on its platform. That figure was forecast to grow to $193 million in 2016 and $526 million in 2017.

Grab has never revealed the number of trips it completes each day across Southeast Asia. The same documents forecast that the company would reach 400,000 daily trips by December, with a target of 3.5 million rides per day by the end of 2017.

Grab declined to comment on the content of the documents.

An uncertain alliance

It’s notable that news is now leaking out that both Didi and SoftBank are reportedly investing in this round, considering the wider state of play in Asia at the moment with both companies.

SoftBank has pulled back on its overseas deals since Masayoshi Son decide to remain head of the company longer than planned, a move that saw his once heir apparent Nikesh Arora depart. In addition to cutting back on investments in India-based startups, SoftBank sold off a portion of its stake in Alibaba and its holdings in games firms GungHo and SuperCellA big move to buy ARM was viewed by analysts as a shift in strategy to invest in proven companies.

For Didi, a further investment in Grab comes as doubts have been cast over its alliance with Grab, Lyft and Ola — the so-called Anti-Uber Alliance — following a deal to buy Uber China announced this week.

As part of that acquisition, Didi is investing a reported $1 billion into Uber’s global business, while Uber CEO Travis Kalanick and Didi Chairman Cheng Wei will join each other’s boards. That deal appears to conflict with the alliance, since their opposition to Uber is the common factor that underpins their union.

Lyft — which took a $100 million investment from Didi last year — told The Wall Street Journal this week it will “evaluate” its partnership with Didi “over the next few weeks.”

Grab took news of the Didi-Uber deal more positively, with CEO Anthony Tan telling staff it is proof that a local rival can beat the U.S. ridehailing giant.

“They’ve lost once, and we will make them lose again,” he wrote in a company-wide memo obtained by TechCrunch.

Tan and Grab’s competition is about to get stiffer, though. We reported last week that Uber is pushing new services aggressively in Southeast Asia, a region that has been a distant priority to its businesses in China and India, and Tan himself told staff that he expects Uber to increase its focus on Grab’s home turf.

Uber is just one of the problems when it comes to Indonesia, the country Grab recently said is its largest based on rides. Motorbike taxi on-demand startup Go-Jek, which claims a fleet of 200,000 drivers, today closed $550 million in fresh investment at $1.2 billion valuation. Internal documents show the company completed 256,000 rides per day, as of April 2016.

Grab faces its own challenges, too. Tan has spoken about the difficulty of hiring talent in Southeast Asia, and retaining hires is likewise a test. Numerous former Grab staff told TechCrunch that the company is struggling to motivate and retain its workforce, particularly those in technical positions.

Specifically, the introduction of a bell curve assessment system — a model in which companies discard their least effective staff — has had a detrimental impact on morale, we were told. While popular in Silicon Valley, that style of management hasn’t been embraced by many startups in Southeast Asia.

Other sources called Grab’s management ineffective and their policies haphazard, and claimed that the office it opened in Seattle in January is symptomatic of its struggle to attract and retain talent in Southeast Asia.

Another challenge for the company is that it started out offering rides with licensed taxis, which are significantly less lucrative than Uber’s rides, for example. For its GrabTaxi licensed taxi ride service, Grab charges only a booking fee of $1-2, with the driver keeping the fare in full. Uber takes a variable cut of each ride it facilities, typically as much as 30 percent.

Grab addressed this gap when it started a private car business — Grab Car — three years ago, which uses Uber-style pricing; however, it is somewhat cannibalized by the GrabTaxi service. According to data shared by Grab investors, the GrabTaxi service accounted for 70 percent of all Grab trips taken in July 2015. The figures will have changed since then, although the lower-profit taxi business is likely still dominant.

Grab said last month that its GrabCar and GrabBike services account for “the vast majority” of trips it processes in Indonesia. The company did not provide a raw figure to support that statement, and it said that it does not break down out its ride per day or revenue figures across the region.