A flurry of prominent VC and angel investors have flocked to bet on Indonesia’s latest fintech star BukuWarung. They expect its accounting and payments solution for small businesses to fly as the Covid-19 pandemic accelerates the digitalization of the micro, small and medium-sized enterprises (MSMEs) sector that accounts for over 60% of Indonesia’s economy.
The Finance Ministry has allocated over $2.4bn to help MSMEs survive the crisis and save jobs as part of the National Economic Recovery Program.
“We’ve seen hyper growth despite Covid-19, as more and more microbusinesses are coming online and owners have greater understanding of the importance of managing their cashflow better,” co-founder Abhinay Peddisetty says in an interview over e-mail.
Founded only in 2019, BukuWarung is “on an annual run-rate of recording close to $2bn in volume which is growing quickly month on month,” he adds. The startup currently has 700,000 customers across 700 Indonesian cities and towns, including 200,000 monthly active users.
In early July, BukuWarung raised an undisclosed amount of funding in a pre-Series A round led by Quona Capital, boosting the startup’s coffers with 8-digit total funding to date. Just three months earlier in April, amid the height of the Covid-19 crisis and uncertainties, BukuWarung won an undisclosed amount of seed funding led by East Ventures, with participation from Golden Gate Ventures, Tanglin Venture Partners and AC Ventures, the newly merged Agaeti Ventures and Convergence Ventures.
Indonesian billionaire Michael Sampoerna, scion of Indonesia’s largest tobacco family-owned conglomerate, also joined BukuWarung’s seed round, together with angel investors from Grab, Gojek, Flipkart, PayPal, Xendit, Rapyd, Alterra and Zen Rooms.
BukuWarung was the only Indonesian startup selected to join Y Combinator’s Class S20 accelerator program. The company’s other co-founder, Chinmay Chauha, was a product lead at Grab and director of products at mobile classifieds platform Carousell. Peddisetty also worked at Carousell as head of enterprise business. He’s also formerly a founding team member and head of business at Belong.co, an India-based predictive-hiring platform.
Easy to use for MSMEs
“Our team comes from strong relevant product and tech backgrounds, and has previously built products for millions of small merchants at Grab, Kudo, Carousell. So, we understand how to build and scale products for MSMEs, better than our competitors,” Peddisetty says.
He adds: “Our strong mix of local and global investors gives us strong advantage as we work towards empowering 60m MSMEs in Indonesia. We intend to scale our growth and buildout of our product and monetization roadmap” with the funding received."
BukuWarung’s ease of use, “as intuitive and easy to use as perhaps WhatsApp,” Peddisetty says, makes its digital infrastructure ideal for small businesses to implement in over 50 different business categories.
Both co-founders also grew up surrounded by families running microbusinesses. The company’s name, combining the Indonesian words “Buku” and “Warung,” aptly means “book" and "mom-and-pop stores.” Unlike local competitors like BukuKas and WarungPintar, BukuWarung is designed for MSMEs like the warungs, mobile top-up kiosks, electronics shops, wholesalers, traders and online merchants.
The team surveyed over 400 MSME merchants and identified the need for an app that’s easy to operate by users who are less familiar with complex digital applications. Many owners of the traditional warungs and other MSMEs also tend to use cheaper basic smartphone models that may not support the more advanced app software requirements.
BukuWarung designed its app keeping in mind that its target users, who mostly own and run warungs, tend to use lower-end quality phones with pay-as-you-go data plans. This means that offline usage is a necessity when users run out of data credits and need to keep up with their bookkeeping and other operational tasks.
“Our app size is very small, around 6MB which is less than half the size of our competitors, and works seamlessly on low-end devices and even when the user is offline,” Peddisetty says.
The financial management app also enables merchants to keep track of all cash and credit transactions, such as sales and business expenses. The app can automatically take care of online payments, ranging from utilities like electricity and phone bills to paying for bigger-ticket items like rent and renovations. It also takes away the hassle of time-consuming chores like manual updates of customers’ credit accounts on notebooks.
The startup estimates that merchants who use the app will receive customer payments three times faster, with improved cashflow and credit control due to the automated generation and transmission of payment reminders to customers.
“As founders, we come from humble micro-merchant families ourselves and we understand the challenges that these businesses face in managing cashflow and accessing credit to grow their businesses,” says Peddisetty.