Questioning the Outstanding Valuation J&T Express Pursues

Local logistics company J&T Express (J&T) has again shocked the news with a plan to raise more than $1 billion (more than Rp. 14,5 trillion) of funding from Tencent and other investors with valuations pre-money of $20 billion, quote news of The Information.

Previously, in April, CB Insights said that J&T had acquired unicorn status with a valuation of $7,8 billion, through the funding they received worth more than $2 billion from a number of investors. The investors are PE China Hillhouse Capital, Boyu Capital, and Sequoia Capital China.

When asked his response According to local media, J&T CEO Robin Lo did not confirm or deny the unicorn's status.

Referring to CB Insight's valuation figures, this means that within four months, J&T's valuation has more than doubled. DailySocial never wrote that questioning J&T's unicorn status.

Chairman of the Indonesian Logistics Association (ALI) Mahendra Rianto doubts this status, because when compared with its closest peers, JNE is also estimated to have become a unicorn.

“Like-for-like” valuation

Without ignoring the rumors above, the key word is that irrational valuation is again interesting to discuss.

Quote from PracticalEcommerce, they stated that the valuation of private companies was speculative. Even the calculations are not as objective as one might imagine.

Some take into account factors, such as team expertise, products, assets, business model, total addressable market, competitor performance, and others. There are also VCs who have their own formula for finding pre-value money from a business.

So it could be said that calculating the valuation of a startup combines elements of art and science. If you align valuation with NFT, it is not a prohibition because both have similarities. Both are irrational. It will still be validated as long as someone buys it, whatever the number.

Beyond that, it is generally known eight valuation calculation methods, for example The Berkus Method, Comparable Transactions Method, Scorecard Valuation Method, and so on.

It used to be considered commonplace for startups to raise no more than three rounds of equity funding and be acquired or go public within five years of starting the business. But now it's not unusual for a startup to receive six rounds of funding and remain closed for more than 10 years.

As a startup grows into a mature business, both revenues and expenses grow, exposing it to a different economic environment. More challenges emerge — additional competition, saturated markets, acquiring customers. VCs, who profit when their startups exit, have shown extraordinary patience.

As long as it is a private company, this means there is no obligation to provide financial reports to the public.

As startups mature, competitors emerge, and each company has to spend more on marketing and customer acquisition. This greatest need is what makes startups need more money. This metric is rarely highlighted and gives a one-sided picture of the actual state of the company.

"All hyping ended, however, when the company filed to become a public entity,” PracticalEcommerce wrote.

Union Square Ventures Co-Founder Fred Wilson wrote on his blog, “…valuation in the private markets, especially in late stage, can sometimes be irrational. Valuation in public, of course after shares have been traded for quite a long time and period lock-off finished, much more rational.”

This is clearly visible in the performance of Uber and Lyft on the stock market. When Uber go public in May 2019, the stock was priced at $45 per share at a valuation of $75,5 billion. The stock has moved wildly since then, reaching a peak of $46 per share on June 28 2019, then falling to a low of $26 per share in November 2019. Now September 2 2021, $41,09 per share with market cap $76,59 billion.

Meanwhile Lyft go public in March 2019 at $72 per share at a valuation of $24 billion. Lyft's stock price is even wilder. Now on September 2 2021 it is at $48,96 per share with a market cap of $16,41 billion, far from the initial offering price.

A “different” war

In Southeast Asia, J&T was present in seven countries, before finally landing in China in March 2020. Long before that, the background of its founder Robin Lo was very strong with backing from Chinese entrepreneurs.

In China itself, the logistics market is very "bloody". There are five big players there, namely S&F Express, Yunda, ZTO, YTO, STO, and HT Express. To gain traction, the tactics used by J&T are extreme, by providing shipping cost subsidies and low prices which tend to damage the market.

The relationship between Robin and Jet Lee (CEO of J&T China) in building J&T Indonesia is quite strong, considering that Jet Lee is a former top Oppo official. According to report Krasia, J&T's business is quite supported thanks to the help of Oppo's parent, namely BKK Electronics. There it not only houses Oppo, it also houses brands smartphone others, namely Vivo, Realme, and OnePlus.

BKK founder Duan Yongping also played a role in J&T's relationship with Pinduoduo because he also served as a mentor for Pinduoduo founder Colin Huang. Together with Pinduoduo, J&T is able to achieve a daily order volume of more than 20 million packages in China alone. During the 618 Shopping Festival - the second largest annual shopping event, J&T Express' daily package volume at that time exceeded 30 million packages.

However, with backing All of that, has not been able to make J&T's dominance strong because compared to its peers, such as ZTO which has 94 sorting centers and 30 thousand delivery outlets that are able to reach 99% of China's territory. On the other hand, J&T still lacks regional coverage rural and remote.

Just not wanting to focus on China alone, J&T continues to create new sources of growth by shifting its attention to the Middle East and Latin America. They will focus on three densely populated countries – Egypt, Brazil and Mexico – and two countries with higher per capita incomes: the UAE and Saudi Arabia. The populations of these countries are huge, totaling nearly 500 million people.

J&T Development in Indonesia

Just like China, the condition of logistics companies last mile in Indonesia it is already so crowded. Robin Loo claims the company can deliver up to 2,5 million packages per day thanks to its partnerships with various marketplace platforms.

J&T's competitors largely rely on similar strategies. For regular delivery and one day delivery (next day), buyers can choose delivery services from SiCepat, JNE, AnterAja, Ninja Express, to Shopee Express provided by Shopee. This doesn't count Grab Express and GoSend which provide instant delivery.

All of these delivery options are available throughout marketplace. Each seller is given the freedom to choose whichever is within their reach. Conditions are considered normal if not all logistics services are available and can be chosen by the buyer. Moreover, if you shop at Shopee, the majority of deliveries are handled by Shopee Express.

In order not to lose out on competition, J&T has recently developed cargo service For sending packages with a large weight and volume with an estimated delivery SLA of 1-3 days. Service premium delivery its scope is also increasingly expanded. not only in Jabodetabek, but can also be enjoyed in Bandung, Surabaya, Semarang, Yogyakarta and Jambi.