The initial growth spurt in Singapore’s ride-hailing market was marked by a bruising struggle for market share between Uber and Grab. Following a truce, Grab has assumed a commanding lead. However, that has not stopped other newer, smaller players from dialling back their ambitions for a piece of the pie.
Ryde, a Singapore-based app, announced on March 8 that it is aiming for a 2022 Catalist listing on the Singapore Exchange (SGX) that will give it market value of $200 million. Founded in 2014 as a carpooling platform, Ryde says it pioneered the service a year before ride-hailing competitor Grab launched a similar service, GrabHitch.
“The Singapore government has been encouraging carpooling for the longest time, some 20 [or] 30 years. But we made carpooling work [by] being innovative,” says Ryde founder and CEO Terence Zou in an interview with The Edge Singapore.
He adds that going for an IPO is not about staking out bragging rights to make a big chapter in his journey as an entrepreneur. “I didn’t start off wanting to bring our company into an IPO, but it’s about creating value,” he says. “The markets are pretty buoyant and valuations are good. So, we want to tap the capital markets to fund our expansion, as we grow from a humble Singapore company and bring it to the next stage,” he says.
“We aim to be the first profitable ride-hailing technology company on the SGX,” adds Zou. The announcement comes on the back of Ryde turning profitable in 4QFY2020, as its gross transaction value (GTV) increased four times during the pandemic. Ryde also saw its user count grow 30% y-o-y in this time.
“We have reached a particular milestone where we just turned profitable [and] we are also cash flow positive. It was a difficult journey to get here, so it’s an opportune time as well,” notes the former adjunct lecturer at the National University of Singapore Business School.
In 2019, Ryde reportedly hit US$21.5 million in gross merchandise volume and US$2.15 million in revenue. As of last year, Ryde has reportedly raised US$9.5 million ($12.8 million) from a range of investors, including Sea. The New York-listed gaming and e-commerce giant led two of Ryde’s funding rounds in 2016 and 2017.
Ryde was valued at US$9.7 million based on the 2017 funding round. Zou reportedly held a stake of 37.6%, followed by Sea, which invested via its subsidiary Garena Ventures. Other shareholders included various other angel investors.
Ryde has appointed SAC Capital as its financial advisor. Founded in 2004, SAC Capital, a homegrown corporate finance firm, has helped shepherd 40 companies to list, raising around $1.5 billion in IPO proceeds thus far.
Equity for top drivers
Ryde presently counts over 10,000 monthly active drivers in its network. The company aims to capture 30% of the ride-hailing market in Singapore by 2023, a sector currently dominated by Grab, ComfortDelGro and Gojek.
Zou stresses Ryde’s focus on creating an “open and all-embracing” system for drivers, starting with a smaller commission charge compared to other ride-hailing platforms. “We are at 10% — and I believe the market rate is 20%,” he says.
“In this way, drivers can bring home more [profit]. We keep a very lean team and we don’t throw too much money on big marketing campaigns; you won’t see our advertisements on bus stops or on big billboards,” Zou adds.
Just recently, food delivery app Deliveroo announced plans to list in London, with a potential valuation of US$10 billion. If the IPO goes through, its riders here in Singapore could possibly receive between $370 and $18,500 in payments.
See: Deliveroo launches London IPO after business surges in 2020
In the same vein, Ryde recognises the critical role its network of drivers play. As such, it plans to offer bonuses and even shares to its top drivers once the IPO is complete. “We give whatever we can back to the driver; that has been in our DNA. How we do it, however, we will reveal a little later,” says Zou.
The company also has plans for aggressive growth. For its core operations, Ryde will hire some 100 more staff to join its current team of less than 50. “We are a technology company, so we don’t have any assets. Intellectual capital is the only asset that we have, which allows us to build a ‘bit and byte’ tech platform. Over the next three years, we will recruit more staff in engineering, design and operations,” says Zou.
Left swimming naked
To date, Ryde has matched over 16 million bookings, and its app has been downloaded close to 700,000 times. Just like other platform apps, Ryde is expanding its range of services, specifically, its delivery service, RydeSEND, touted with 50-minute guarantee.
Zou cites the “e-Conomy Southeast Asia” report 2020 from Google, Temasek and Bain & Co, which forecasts online shopping to hit US$172 billion by 2025. “We’re going to focus on quick commerce and delivery. We see that as a big growth sector on the back of the high growth in e-commerce,” he says.
“We were the first to introduce a delivery ride-hailing app, before LTA [Land Transport Authority] even allowed taxi drivers and private-hire drivers to do deliveries,” adds Zou.
In August 2018, Ryde announced its RydeSEND courier service, which was met with a warning from LTA. LTA said it was not consulted prior to the announcement and took issue with the company’s deployment of taxis and private-hire vehicles for transporting goods. The following day, Ryde excluded these vehicles from its service.
Last October, Ryde Technologies received a one-year provisional ride-hailing licence and carpool licence. This comes under new point-to-point regulations, which require operators with 800 or more vehicles on their platforms to be licensed.
The company is targeting $120m of GTV from both its ride-hailing and delivery verticals in 2021. To meet its ambitious goals, Zou taps on his decade of experience in the financial sector.
While the company’s bootstrapping days are over, the former fund manager and chief investment officer still runs a tight ship with Ryde. “As an entrepreneur, you start out with very little intellectual capital and financial resources… We didn’t raise that much money as compared to others but it has forced us to be lean and run our operations innovatively and creatively,” he says.
Zou believes his tight cost control makes Ryde a more sustainable business to run, versus other start-ups that go about raising copious amounts of new capital from investors in order to offer generous subsidies and buy market share.
“When the tide goes down, you know who is swimming naked,” says Zou, quoting a famous quip by Warren Buffet. He believes this idea holds even more true in times of market turbulence, such as the pandemic the world is grappling with now.
The market, the way he sees it, has woken up to the reality that businesses need to run with care for both the top line, and the bottom line. “Fiscal prudence and sustainable growth have suddenly become more fashionable as compared to three years ago, when we were fighting hard against a flush of capital coming into our industry. There will always be investors with an appetite for risk, but their patience might run out,” he says.
