The backbone of Indonesia’s economy are small to medium-sized businesses, which account for 60% of its gross domestic product. Many still rely on manual bookkeeping, but the impact of COVID-19 has driven small businesses to digitize more of their operations. BukuKas, one of several startups helping SMEs go online, announced today it has raised a $10 million Series A led by Sequoia Capital India.
BukuKas launched in December 2019 as a digital bookkeeping app, but is growing its range of services with the goal of creating an "end-to-end software stack" for small businesses. Eventually, it wants to launch an SME-focused digital bank.
The funding, which brings BukuKas’ total raised so far to $22 million, included participation from returning investors Saison Capital, January Capital, Founderbank Capital, Cambium Grove, Endeavor Catalyst and Amrish Rau.
As of November 2020, BukuKas had a registered user base of 3.5 million small merchants and retailers, and had crossed 1.8 million monthly active users. During that month, the platform also recorded $17.4 billion worth of transactions on an annualized basis, a figure corresponding to more than 1.5% of Indonesia’s $1.04 trillion GDP.
BukuKas was founded by chief executive officer Krishnan Menon and chief operating officer Lorenzo Peracchione, who met eight years ago while working at Lazada Indonesia.
Menon’s previous startup was Fabelio, an Indonesian online home furnishings store. Every two months, he would visit small cities in Indonesia, like Jepara and Cirebon, to source furniture.
"One of the things that stood out was how different the Jakarta bubble is from the rest of Indonesia, all the way from the penetration of software to financial services," he told TechCrunch. While talking to merchants and suppliers, Menon realized that "no one is building products with them as the center of the universe," despite the fact that there are 56 million small businesses.
Peracchione said he and Menon had been brainstorming startup ideas for a while. "When he told me about the idea of solving cash flow visibility to SMEs, it immediately struck me," Peracchione said. "My dad used to be a SME owner himself and during my childhood I experienced firsthand the struggles and ups and downs connected to running a small business."
The two decided to start with digital bookkeeping after speaking to 1,052 merchants, because helping them keep track of their business performance would generate data that would in turn enable access to more financial services.
"Our vision expanded into providing an end-to-end software stack to digitize SMEs and help them across a wide range of activities as a prequel to building an SME-focused digital bank down the line," Menon said.
In addition to digital ledger features, BukuKas also sends payment reminders to buyers through WhatsApp and automatically generates invoices, includes an inventory management module and analyzes expenses to help businesses understand what is impacting their profit. The company plans to add digital payments this month. During the rest of 2021, it will also introduce more features to help businesses sell online, including tools for online store fronts, a promotions engine and social sharing.
"With COVID-19, SMEs are rushing to get digitized, but they lack the right mobile-first tools to sell online as well as to manage their business," said Menon.
The app focuses on smaller Indonesian cities and towns, since about 73% of the merchants who use BukuKas are located outside of tier 1 cities like Jakarta. Its users represent a wide range of sectors, including retailers, food vendors, grocery markets, mobile and phone credit providers, social commerce sellers, wholesalers and service providers. BukuKas acquired digital ledger app Catatan Keuangan Harian, which has 300,000 monthly active users, in September 2020 to expand its market share in Indonesia.
With its large number of SMEs, Indonesia is seen as a desirable market for companies helping the drive toward digitization. For example, India’s Khatabook, which was valued between $275 million to $300 million after its last round of funding in May 2020, recently launched BukuUang in Indonesia. Other startups in the same space include Y Combinator-backed BukuWarung, Moka and Jurnal, all of which offer tools to help SMEs bring more of their operations online.
Menon said BukuKas’ advantage is its team’s experience building businesses in Indonesia over the past seven years. For example, it launched a "Know Your Profits" module based on user feedback. It also offers a self-guided onboarding process, a simple user interface and an offline mode for users in areas with poor network connections.
"In general, individual features can be copied but we believe our 'integrated end-to-end software stack approach,' coupled with our obsessive focus on simplicity, deep understanding of our users and a superior level of service will be key in differentiating BukuKas from competing offerings," he added.
BukuKas’ Series A will be used on user acquisition, its engineering and product teams in Jakarta and Bangalore and to introduce new services for merchants. The company may eventually expand into other Southeast Asia markets, but "in the short term consolidating and further expanding our leadership in the SME space in Indonesia is our top priority," said Menon.