November 26, 2019

Episode 14: Raising Billions: Gift Or Curse? (Recorded in August 2019)

Episode 14: Raising Billions: Gift Or Curse? (Recorded in August 2019)

Intro: Welcome to Go Figure. My name is Nadiem Makarim, CEO and founder of Gojek Southeast Asia's First Super app. Gojek does ride hailing, food delivery, payments even on demand massages, you name it. We do it. Go Figure is a podcast dedicated to expose the inner workings of ambitious tech companies in the emerging world. We like to talk about things we like and talk about things we don't like. There are a lot of myths out there that we want to dispel, so keeping it real is kind of our mantra. Hope you enjoy.

Nadiem Makarim: Hey guys, welcome to Go Figure. How are you?

Thomas Husted: Great to be here. Thanks Nadiem.

Nadiem Makarim: Thanks for being here. We got Andre here back for his, second or third?

Andre Soelistyo: Second.

Nadiem Makarim: Second episode. Andre; our president of Gojek and we got Thomas Husted; this is your first time.

Thomas Husted: First time, happy to be here.

Nadiem Makarim: Alright? You're a Go Figure first timer.

Thomas Husted: Yes. Thank you.

Nadiem Makarim: Well done. Well done. Thank you for being here. Thomas Husted is our CFO. And runs all things related to money in the organization. So together Tom and Andre, uh, run the entire fundraise and spending strategy and spending control of the company. And today the topic is something that is very, very, uh, interesting. It is about raising billions of dollars, raising billions.

Andre Soelistyo: US dollar.

Nadiem Makarim: Yes. Let's just make sure we're talking about US dollars; raising billions of US dollars in a company. What are, how do you do it? What are the pitfalls and what are the advantages?

Thomas Husted: I'm looking forward to a lot of good analogies from Andre during this session.

Nadiem Makarim: Let's talk about how you do it too. How do we end up being able to be put in the position to be able to raise billions of dollars? How do you even get there?

Andre Soelistyo: I can start, well, I think, yeah, there's a lot of, probably ways to answer it, but it all starts with the simplest stuff. Whether you have a product that really sells, right? So it's all about the essence of the why people wants to invest, right? And that's actually, people always generally forget that when you know a country or region becomes over capitalised, it's so easy to just say, "I can raise more money, I can grow a concept and then just raise $10 million." That might be true in a very bullish environment, but that people always forget that in essence you are here because of the why which is the product that really sells, right. Start with that. Right? I mean, and that's also why I think in essence the CEO or founder or co founding team needs to be the one who really drives the, um, the storytelling, right? Because those are the people who really built the original idea and have the mission and the purpose of the 'why'. And sometimes when you send, you know, apologies, you know, bankers to sell that story to you, everything is diluted. So, and fundraising is about building relationship. It's a relationship management.

Nadiem Makarim: I like that word you use about storytelling.

Andre Soelistyo: Yep. Storytelling.

Nadiem Makarim: A lot of people assume that whenever I tell them that fundraising is about the story, you know, they often get confused because it's as if like we're creating a fictional imagination, like a fairy tale with which to raise money. But in reality, you know, a pitch, like any other pitch, it is about the conviction of the future and the promise that you are making, which is a story. And that story has to make sense from a performance perspective, but it also has to be inspiring and confidence building.

Thomas Husted: Yeah, I think that's right. And also, you know, there's an evolution to that process, right? So I mean, you know, we've known each other for quite some time. Andre and I have worked together for the better part of 10 years. We've known each other for a long time as well. And I remember, um, you know, when I was first hearing about the Gojek story and just in context, you know, I had joined the company 18 months ago. So before that, you know, looking from the outside, it was all kind of a bit of a mystery. How it was done right and the various evolutions of the product. And I remember speaking, I think it was with both of you very early in the process where you were kind of constantly joking that the idea was let's start this ride hailing app and then you know sell it to Uber. Five, 10 months later for, you know, some very nice sum of money. And then from, you know, again, from an external observer looking in, what I saw was that you eventually saw multiple avenues to grow the business.

Nadiem Makarim: Yeah.

Thomas Husted: And then ultimately that story corresponded with what Andre just mentioned, which was kind of the belief of the founders and thinking about how you could grow the business. And then that immediately morphed into, I think Andre joining the company. And then all, you know, the, the fundraising then started thereafter in earnest.

Nadiem Makarim: There is no way we're gonna be any close to raising billions. If the story was about, "Oh, I'm going to make a ride hailing app." Very quickly, it transformed the story transformed into how do we fundamentally transform how mobility works for humans? For stuff and for value or money. Right? And now the story of Gojek and we've proven that through our products and our execution is that we are a full stack mobility platform. We move humans, we move things and we move money around. And that story was what made the addressable market and our numbers obviously have to back it up by our numbers, which was made the addressable market's so big, you know, like the product vision of Gojek is, you know, all transactions, you know, like one single app. Uh, it's such a powerful and compelling story that is achievable in a region as big as Southeast Asia. Uh, that, that I think that and the confidence of our team, um, compelled a lot of people to think this is the one of the best destinations for capital.

Andre Soelistyo: If you remember, um, for our series A; the model says that we need 50 million to be breakeven. So if that was true, that this podcast is never going to happen. So, so just, you know.

Nadiem Makarim: We keep saying that.

Thomas Husted: Yeah. And the products have an evolutionary life cycle, right? Where it actually requires incremental capital to continue to grow and add on. And that, you know, frankly, from my perspective, having just joined the company 18 months ago, that's what makes life really interesting here, right? You wake up, you come into the job every day and it's new and fresh and uh, you know, how do you deal with that? How do you do the fundraising, which Andre is principally leading and then how do you control, you know, the messaging?

Nadiem Makarim: Well, that's the thing, right? We always like, we always think, okay, can it really get that much bigger? Right? Every year we have that same self doubt in the management team like it's already really big. Like how can it get? It keeps going. It keeps going. And I think that's when, you know, back to Andre's point, that's when you know, when you've solved a massive problem and people don't go back to the old way of doing things, uh, that you know, you're attacking fundamental efficiencies in the market that are being created. Um, we're no longer in market disruption mode. We are in market creation mode. We have been for the past two and a half years. So if you like, I can think of very, very few companies in the world that have raised billions that are not market creation companies. Right?

Andre Soelistyo: Like it's almost disruption.

Nadiem Makarim: Yeah. And not even just because disruption implies that you, you, uh, you took over an old way of doing things, but literally all of our markets did not exist at this scale, even in any substitute, there was simply not enough food. There's a fraction of what food delivery transactions are done now, there's a fraction of what vehicle based transportation, not even ride hailing, right? Like the amount of things that you could take a vehicle for transport, like taxi for example, before now the market's like whatever, 20, 30, 40 x of it.

Thomas Husted: Oh, and just to put that in context. So when I joined the company, this was, yeah, January last year we were doing about 250,000 orders on food per day and around like three to four months later in, the numbers had doubled already three to four months later. And, and we had, there was around the time that the Meituan IPO happened and we sat down and talked to a bunch of bankers and looked at the numbers and it was like kind of like all of a sudden that's when like the light bulb went on. We're creating something totally new. And as a result of that we did a, we looked at the capital allocation in the company and we had a relatively quick decision that we actually need to pour a lot more money into that. And I looked at the numbers this weekend, it was probably more like 1.8 million right now, which is remarkable. And it goes to this, this theme of kind of creating a whole new business model.

Nadiem Makarim: The ceiling keeps going higher and higher.

Andre Soelistyo: And to be fair, um, we joke a lot in this, that there is multiple evolution of the idea and we weren't expecting well at least you know, going back to my, my first comment about the why and the purpose, I think we've maintained consistency because they were two purpose that you have created, uh, at the beginning. One is to remove transport friction at the beginning, but now we're actually moving into, we'd remove life daily friction, which is similar. It's a, it's a problem statement that exists in this part of the world. And the second part is to help the little guys, right? And we continuously adhere to that principal and the little guys are the one who's actually also, you know, exponentially, you know, kind of, you know, um, proven to the, to the whole world that we can do it as well. And our business really grows because of that principle as well, which is relating to a second point. You know, once you start with a purpose and why then the second most important one as well is that is your, uh, first is your, um, the regional coverage of your business or your product really is going to grow in an exponential way. And then whether your product from a market positioning perspective is going to solve that problem and unlock the hundred X scaling from where it is today. Right. Because you know, a great product, a great vision, sub par country or opportunity. Unfortunately, doesn't also relates to, you know, probability to be able to kind of raise multiple vaults of money and stuff.

Nadiem Makarim: And I just wanna you know, I want to remind, I think listeners that are in the process of fundraising that there's only so much that you know, your confidence and authenticity as a founding team when you pitch for money can only take you so far if you haven't shown traction, right? Traction is still one of the most important things to show that you are actually able to execute and consistently execute on what you have. So I don't want people to be thinking that, "Oh, if I just craft this beautiful imaginary story without backing it up by numbers"

Thomas Husted: That's right.

Nadiem Makarim: In our industry, um, it's much easier to do that. We're not like a, you know, free first and then monetize later, uh, industry, every person who uses, because we're a transactional platform, every person that uses us spends money. Right?

Thomas Husted: That's right.

Nadiem Makarim: Yeah. So for us, uh, monetization is just a function of, you know, charging higher commission rate or reducing our promotional budget, right. The benefit of a company that requires their usage to spend money on our platform is that, uh, profitability is a choice depending on how much you want to sacrifice. Say market share or growth, right? So that's a very important thing. There isn't ever a situation that we can never pull that trigger where, okay, we need to make money now. Um, so, so it actually gives a lot of confidence to investors. If your business model, you have full power over your monetization capabilities so that even if you run out of money, all of a sudden you can, you can still generate profit. Even at a smaller scale. Yeah.

Thomas Husted: Having those levers internally is something that's really critical and being able to actually demonstrate that you can do that. I mean, back back to the GoFood example, when we looked at that business just prior to them that Meituan IPO, we actually started to essentially optimize toward profitability.

Nadiem Makarim: That's right.

Thomas Husted: And it was way too early and what we kind of, what we, what we realized was that we were building something where we were creating a market.

Nadiem Makarim: Yeah.

Thomas Husted: And that actually took much more time and effort. And I think, you know, with, with all the parallels that we operate in, all the verticals that we operate in, one of the other issues is actually scaling the talent as well. And this is something I've seen both of you do remarkably well over the last, really. I'd say last year we've kind of put it into a different gear.

Andre Soelistyo: Well, we got you.

Thomas Husted: No.

Nadiem Makarim: I don't think we would've gotten him if we didn't raise billions.

Thomas Husted: I would have been, I, you know, I, I miss my window of opportunity here. Trust me. I wish I had joined three years ago, but I was really more referring to like Cath and Hans, who I know had been on the podcast before, right. Who are like really deep in the trenches and actually executing extremely well. And that's that. Uh, again, it makes it, it just makes the, it makes me really interested in coming to work every day.

Nadiem Makarim: Okay. So let's go into the advantages wait, park that thought actually, because the biggest advantage is you're right, the biggest advantage of raising big sums of money is talent.

Thomas Husted: It's people.

Nadiem Makarim: Okay. I want to go into that in a second. I first just want to finish up about the art of the pitch slightly. About getting the money itself? Right? So we talked about numbers, we've talked about this. Now, once you have product market fit, once you have a compelling vision and compelling numbers to back up what you want, usually you start raising the billion number. What are we talking about?

Andre Soelistyo: Series D.

Nadiem Makarim: Series D. So it's gotta be your fifth or sixth round.

Andre Soelistyo: Yup.

Nadiem Makarim: Right. At least, right? Before you start. Um, thinking about numbers in this, in this magnitude. At that point, I believe that the, the, if I look at all of our pitches that we've done and all of our sessions that we've done, the bigger your company gets, the more important and the more sophisticated investors get. The more important is your organisational vision and your culture, vision for the organization. This is something that starts to shift. Before, it's all about just like, okay, did you gain traction? Are you going to have, are you hitting your numbers? Oh, is the business model sound et cetera. As you get bigger and bigger, you start attracting more and more sophisticated investors and you start getting challenged on what are your organizational chops? What is the quality of your team? How do you think about target setting in your organizations? What are the cultural traits? Now at our fundraise level, uh, you know, investors are coming in talking to our leaders all the time. They're like opening up the, the kitchen, if you will. And talking directly to our leaders, asking about, are you happy living here? Oh, sorry. Are you happy working here? Are you, are you enjoying your leadership? Uh, are you learning? And all these kinds of things. So there's this shift towards organizational competence that I think becomes increasingly important for your next successful fundraise. I think, and again, back to Tom's point, the other thing is showing that even if you are burning a lot of money to show experiments whereby you can achieve break even if not profitable operations and simple experiments that you can do to show, look, I know you want to know the big question mark is under breakeven or positive unit economics. Can we still maintain volumes? Here's the proof, right? That's a brilliant way of actually saying we can't not grow because we need to grow because there's so much bigger potential. Otherwise we're missing out on all this growth. But check this out. We did this experiment here and we reached profitability without sacrificing too much volume.

Thomas Husted: That's a great question. So let me ask both of you a question, which is, you know, series kind of A, B, C, how much of those fundraise, you know, were fundraisers were really led by you in your soul capacity relative to kind of where we are now; E, F?

Andre Soelistyo: I think, uh, well to be fair, it's not just us, but it's a small group of people, right? Um, I think it was, I would say usually series A to D it's very, uh, centralize if you may and then as we move on, and then obviously there's more and more kind of a deeper analysis on trends and you know, business performance and stuff, then a lot of more people needs to chime in.

Thomas Husted: Right. And, and that to Nadiem's point, then that's when the investors actually are required to come into the company and essentially meet the next layer down and gain confidence in all of those people.

Nadiem Makarim: Yeah. Because at this scale of a company, the amount, the executive impact of the founding team starts to shrink. Right. The ability for, for me to, just to trust the founders in a company of this size is no longer, it's, you know, there are many more people that are and are accountable for the outcome of the company at this level. It's almost more like a, at this stage of our company, it's almost like we're raising like a public round, you know, like it's almost like we're a public company.

Thomas Husted: It feels like that.

Nadiem Makarim: Yeah. But it's just not listed.

Andre Soelistyo: And that's actually, let me, let me throw a, a bit of a controversial mix to it, right? Because that in itself is the myth that every, a lot of people externally think that, "hey, you know, if you're a good company, good brand, you know, you go to A, B, C, D, E, F, G is just a simple and, um, you know, really straight forward process." You know, if you get like a very big strategic shareholder and you'll get there anyway. But people always forget and that's why always people always think about it as, "hey, you know, the, the Co founder or the CEO is enough." Those types of persona can actually do the job, you know, and then there's no strat, you know, there's not much strategy behind it because if there's money, there's always going to be a fundraising probability. But in reality, it's the furthest from the truth. Right. I think the complexity on thinking about the strategy in each level and really thinking about longterm, okay, what's next? Cause it's in, in this company, whenever we fundraise, we already fundraising for the next one. Always. We're talking about this right now, but if you be able to raise X, they will give you into a, let's say two, three years runway, two, three years runway, you know, valuations now X, you want to be raising at the devaluation Y, in the next two to three years. What is the story next? And then whenever you do fundraise for now, you always built for what's next. Right. So that's why I like to kind of, you know, kind of be, you know, give a framework of how to fundraise. I always kind of symbolize this with one of my favorite sport. If you may.

Thomas Husted: Here it comes.

Nadiem Makarim: Is that the premier league reference coming?

Andre Soelistyo: No, it's called the world series of poker. So, um, you know, for a lot of people, you know, it's, it seems like it's a gambling, you know, game.

Nadiem Makarim: It's not. At all.

Andre Soelistyo: It's really not. Because once you, once you're in and once you know how the game of poker is being run. Yeah. It is the, probably the one of the most complex strategy, if, you know, even if you play it, it's like one table like this, it's already complex. Imagine in the world series of poker, you have to go table by table in three or four days until you get to the final table. So that's the analogy. So you, you know, in a poker game, you, you have the, the shark or the one who always get aggressive and built their chip stack. And then there's also people who plays very disciplined, very by the book. If you get, you know, pocket aces, you go all in, but if you get ace and ten you fold, right? I mean, there's always that by the book probability and you count, right? Uh, in terms of the, uh, probabilistic number, the sharks who always, you know, stacking the chip in this context is people over-grazing overcapitalizing right, has the right to bully others. So when they fight with, you know, a moderate player, the moderate player will always get fear. They might have a good hand, but given that it's always over raised, over raised, over raised, you have this risk or a fear and also your number of numbers wise, you're over wellmed by the probability that you will fold a good card and your opportunity to kind of win becomes less and less because of a probabilistic number. So that's one mindset. There's also the disciplined player, right? Maintain consistency in this context. People who really built the product to be long, long, longterm sustainable, right? The product is really good. You know, you don't want it to spend too much money. But again, you know, you probably ended up with lower chip stack but you maintain discipline. You might be able to get the final table and kid you not. I mean the the guy who has the biggest chip stack, when you go to the final table against the, you know, smaller chip stack, there's always opportunity for the lower chip stack to win. So there's two, right? But then, then there's the third one, which is what I call the guy who always inconsistently consistent, which is you be able to be a shark or a discipline at the right moment in the game. So no one can really predict what you think.

Nadiem Makarim: So you deploy both strategies depending on where you are in the game.

Andre Soelistyo: Exactly. When there's a moment when you've, when you, uh, when you actually, um, read some weaknesses, when you see some patterns and you become a shark, when you see some patterns, the other ways you become disciplined and you always play with your numbers, right? And that's actually where the great, you know, separates from the good, right? And that's actually where consistency on opportunity and rewards and probabilistic number will always geared towards this guys, right? And to get here, it's very difficult, right? In the context of fundraising, then there's always that opportunity, okay. Because in reality, fundraising is not always about skills. It's also about the moment in time where you are right? If the market is really bad today we hear a lot of very bad news, uh, globally. Uh, what's happening in the world, you know, capital will dry up. But the third guy that inconsistently consistent in moments of victory, in moments of defeat, they're always consistent because they know how to play the game in both of the equation and the consistency is really important. And its the same thing if today capital market is dried up, you know, all public market, Uber, you know, stock price went down, everything is just went down. Your comparables is terrible from a valuation multiple perspective, but you, you know, you still need to raise, how do you do it? Right? And that's actually where, you know, people needs to realize that the art of fundraising is super complex and no one can be really good at it unless you already experienced it. Right? So, and your adaptability and being able to see the pattern recognition here, a lot of advices, you know, speak to a lot of people and understand those patterns to be able to then really build that kind of longterm plan. And how do you react with all the, uh, curve balls? That's thrown into you. It's the most important part of the success of this, right? I mean that's actually, um, how I'm seeing it.

Nadiem Makarim: I mean, you, you know, one of the things things I admire about you, the most Dre is your contingency planning skills, right? You are by default that hybrid player, uh, in the fundraising space, you are, you are, and I learn a lot from you about this. But you've noticed that in all of our fundraisers, we built mechanics into our business that always assumed that this will be the last fundraise. It never is. It never is. But we built it in, we build the fail safes that for, okay, if we can't ever raise money again, this is the plan, this is the thing and we can do it and we picture it out and we let all manager know this is all the plans that we are. I mean, we had this discussion just a couple of months ago about like, okay, where are our fail-safes in the system? Right?

Thomas Husted: That's right.

Nadiem Makarim: And, and always having that assumption in fundraising, the worst thing you can do is build a business predicated upon the next fundraise. The worst thing you can do is you just didn't plan for if it doesn't happen, right.

Thomas Husted: Correct. And can I just add, cause I think this analogy is very good and let me just add to that that specific point because I think while Andre is focused on optimization, right? Which is a critical skill, I think there's another cultural trade on the company and frankly I think it's also an a somewhat of an Indonesian trade, which is part of the reason why I frankly really enjoy, enjoy working here. And that is when you step back and you think about the non fundraising deal making that we do, which is also equally frenetic, um, you know, all the time.

Nadiem Makarim: That's an understatement.

Thomas Husted: Yeah. And if you think about kind of traditional corporates globally, right? They tend to have high walls and deep moats, right? They want to protect the capital structure. They want to protect their own upside. And one of the things that's so nice about working here is while we're optimizing on the fundraise and optionality, which is, you know, frankly what shareholders want to see us doing, the approach is somewhat different when it comes to partnerships, particularly in Indonesia, when we're thinking about adding to the overall platform, and I would use the analogy of it's kind of like a big tent. So the more people we have in the tent and then in the more partnerships we have, the higher the likelihood for success and it almost creates a virtual circle back to this optimization analogy that Andre just talked about, which is you have more people pulling for you, you have more people pushing the agenda, and then when new investors come to look and say, "Hey, who are you and how do you work?" You automatically have a massive bench of people basically seeing this is the right strategy, this is the right team and this is the right campaign going forward.

Nadiem Makarim: It's like having secret partners in the poker table.

Thomas Husted: Yeah, yeah, exactly.

Nadiem Makarim: Which is illegal in poker, but in business it's absolutely a requirement. It's a complete requirement. You need to have allies. Um and in some cases you're slightly competing with those allies, but in many cases you're partnering with them as well. And Gojek simply can't survive without those partnerships. So that's our DNA.

Thomas Husted: And then kind of where you overlay the poker strategy of actually raising lots of money and then thinking about building a big tent. So everybody that wants to come into the big tent and be part of this story knows you have all that money. That creates kind of a moral hazard in regards to how you negotiate a partnership transaction. And then the third component, which actually makes it also extremely difficult is the fact that everybody knows that we are in a, you know, a pretty existential battle with one large competitor that is equally well, well capitalized. So that the dynamic of like, okay, well we want to do this with you, but we have another option on the table as well that creates,

Nadiem Makarim: Because they want to keep their options open as well right?

Thomas Husted: Correct. If you're somebody in Indonesia that has something that's of tremendous value to this platform, you are also gonna optimize. So then that also kind of goes back to the poker analogy and that creates a very interesting dynamic and frankly, we spend a tremendous amount of time in this building constantly talking about that.

Nadiem Makarim: And, and correct me if I'm wrong, but I think the biggest, you know, reason why we ended up winning those partnerships over ultimately don't come down to money. I think the biggest reason of that is usually trust and relationships. That's the referee in the middle, right? Usually when there's like, oh my God, like I'm closing one opportunity if I work with one partner, et Cetera, at the end of the day, they're going to make a gut decision based on trust and relationship. Right?

Andre Soelistyo: Yeah.

Nadiem Makarim: And that's usually where we tend to win that partnership, uh in many, in many circumstances. But having a big pool of capital provides the leverage to make yourself very quickly, very relevant to everybody.

Thomas Husted: Correct. And the one other thing I would point out on this though, it also requires a massive teamwork, uh, effort. Uh, and secondly, none of these things happen quickly, right? I mean these, these partnerships in some cases, I mean we've been working on a couple that have been going on for two years.

Nadiem Makarim: Yeah.

Thomas Husted: Right. In terms constantly change and eventually you'll get to a point where, you know, there's either a fork in the road and you don't do it or you do it, but how you engage and how you treat those people really matters. It really matters.

Nadiem Makarim: It's everything. Even if you never reach an agreement.

Thomas Husted: Correct.

Nadiem Makarim: That's what a lot of people don't...They don't teach you that in business school at all.

Thomas Husted: And this, this is, I mean, look as, as the foreigner sitting at the table, right. I mean, you know, you guys know, have spent a long time in Indonesia. I've lived and worked here for about 15 years in this country.

Nadiem Makarim: You're an honorary in Indonesia.

Thomas Husted: I'm the hybrid.

Andre Soelistyo: You're more Indonesian than we are.

Thomas Husted: Yeah I don't know about that.

Nadiem Makarim: Your children are half Indonesian as well.

Thomas Husted: Yes. Yes. Um, but, uh, I think, you know, that engagement and the engagement and the local context of being humble despite the idea, you know, despite the reality that everybody knows you've got the big stack of chips. Is actually a really important, right, the big stack of chips. That analogy is important mostly in the fundraising context, particularly in optimization and figuring out how you get the best possible terms, which is what our existing shareholders want us to do all day long.

Nadiem Makarim: Yeah. But that's how you build trust. How else do you build trust? Unless you have demonstrated that you are not abusing your position of power and your chip stack. Right? That's how you build trust. Um, but I, you know, I think that what you mentioned before was really interesting. Like it builds advantage in having partnerships want to come to you, but it builds moral hazard inside your organization with which to make clumsy, stupid mistakes, knowing that there's so much money. So we hear a lot, um, of, of this talk in India now, in Southeast Asia, definitely in China as well, about how raising billions as a curse as much as it is a gift. So let's go a little bit about the curse. What are these pitfalls and risks?

Thomas Husted: Sure.

Nadiem Makarim: I mean, we've gone through them. Let's be honest.

Thomas Husted: Yeah. We have and to be frank, I mean I think, look, my DNA is kind of a command and control CFO. I mean my last two CFO roles,

Nadiem Makarim: No really. I had not noticed.

Thomas Husted: No. I've had to retrain myself, but that comes out of...

Nadiem Makarim: Tom is always the adult in the room. "Alright children, let's make sure we don't spend all this money." But I think it is necessary.

Thomas Husted: Right. So look at me. The story. You know, my personal background, right. I grew up in Maine. Right. Um, my, I came home one day, I was 16 years old. My parents, um, I came home, my parents said, hey, we're gonna move to the Philippines. Cause my dad had decided to take a job there. So I went to high school in Manila and um, complete eyeopening, like amazing experience, loved every second of it. And I came out of that and I thought, wow, I really like this is it, I want to work internationally for my career. So then I went back to the US. College, graduate school and was fortunate enough to get a job at Citibank. So where do they send me? They sent me to Indonesia in year 2000 immediately after the crisis. So, the Asian financial crisis. So coming out of that, and I was in the debt restructuring team at Citibank.

Nadiem Makarim: So you were born in the fire of rescue mission.

Thomas Husted: So it was, it was a, you know, there was a, there were a lot of lessons to observe during that time period, both in terms of how you actually ...

Nadiem Makarim: Just for the listeners that don't know. This is the period when we had a massive financial crisis in Indonesia and a huge swath of businesses had to shut down.

Thomas Husted: That's right.

Nadiem Makarim: Because of credit issues, et cetera. It's our currency went crashing down et cetera. So just for listeners that don't know.

Thomas Husted: Yeah. So it was a very formative time for me personally, but also looking back on it, the most interesting thing is that actually the investors that looked at that as an opportunity, um, did extremely well. And I'm, and I think we collectively are very fortunate that a lot of those investors that invested in Indonesia from, you know, kind of circle let's say 2002 to 2006, our existing investors now.

Nadiem Makarim: In Gojek?

Thomas Husted: In Gojek and they are influential. They are thoughtful, uh, and, and totally engaged. So that was the, that was my personal background. And then eventually I left banking and took an, I've been a CFO on two other companies in Indonesia, both which required some restructuring work. One; it was a balance sheet restructuring pretty, pretty large. And the second was an operational restructuring. So when I showed up at Gojek, um, I, you know, it was a kind of knew what to expect and, uh, I loved the challenge. And the one thing I noticed immediately, which I think is probably the case for every fast growing tech company, is that, you know, you do rounds A, B, C, all the money is focused on tech, product and growth. And what, what is lacking is essentially everything that's going to require a company to eventually go to an IPO. So, you know, systems, control, policies, procedures,

Nadiem Makarim: Compliance.

Thomas Husted: All the, all the boring stuff that that people don't want to talk about.

Andre Soelistyo: What is that?

Nadiem Makarim: Why are you such a downer Tom?

Thomas Husted: No, no. It's good. I'm so what we did was, you know, Andre and I spoke a lot about this. We went out and, and hired a bunch of really good people. We've got a fantastic team and they're working you know, in close tandem with the rest of the other groups. It feels like we're kind of hitting our stride now.

Nadiem Makarim: But how hard is that? Like preparing a company, a very young company of millennials, um, to go IPO and to institute processes. It's like you know, it's like telling people at a party, you know, "all right guys, you know, like from now on, you know..."

Thomas Husted: I'm taking the beer keg away.

Nadiem Makarim: It's that guy in the party that goes; "alright, party's over guys." So, but it must be a huge challenge to instil this kind of, it's almost like instilling the value of money again in the organization that every dollar counts. And you need to be aware of that. And just because we have it doesn't mean we can put it to poor use. It must be so hard for you.

Thomas Husted: Correct. It is and again this goes back to the pitfalls of actually having billions, right? And like what is that internal messaging? And the reality is you can't take away the punchbowl, right? This company is founded on high growth, you know, like very thoughtful innovation and you can't, you can't come in and squash that. I mean it's just not, that doesn't make a sense. So it doesn't make sense. So one of the things that we talk a lot about within the finance team is that actually we are a service provider internally and the systems that we're, that we're building, which has, you know, mostly kind of like SAP; profitability by product, profitability by function group. These are really going to be designed as tools to allow the business leaders to sit in a room and have an articulate discussion with one another about which product makes sense. Because you know, ultimately they should be deciding, you know, about what should be prioritized and what should be deprioritize. And they can only do that with information. So you know, frankly, that's really the goal. The goal is not to stand in the way of anything.

Nadiem Makarim: I love that analogy information. So if we go back to Andre's poker analogy, okay. The benefit of having a big stack is you can play a lot of hands.

Andre Soelistyo: That's right.

Nadiem Makarim: Which means that you can take a lot more risks. You can keep playing to see what your, what the next card will be. Right? But your job in the organization is not to prevent that risk taking, but you see your job as the one who reminds the player, what are the probability odds every time before calling.

Thomas Husted: Correct. We have the capital comes in. And then essentially with this crew, principally in consultation with Andre and the rest of the team, right? We essentially analyze that amount of capital and then we allocate and we measure and we monitor and then we adjust. It's a constantly dynamic, changing environment. And frankly that's what makes us so interesting. Yeah.

Andre Soelistyo: And then, you know, if you take a step back, you know, um, everyone also needs to remind themselves that raising money, it's, it feels like, you know, if the analogy is it's good for short term, it's bad for your health long term. If a company is founded on the belief that it will always continue to be dependent on external, you know, capital and you know, obviously there's something wrong in that business, right? So, and people tend to forget the essence of that, you know, that saying, right? Because you know, and this is where, you know, raising billion, it's definitely a curse because you're in that virtuous cycle where money is so easy to be raised. I can raise like a billion or two tomorrow and there's ample demand. People loves us and stuff. And that continuation of not being disciplined, not being very, you know, hungry on, you know, trusting your product and really building those metrics that released the product is actually the pitfall. Right. Because guess what, next year when capital, you know, if you're a subpar product executer but you have a lot of capital, the next year the capital runs out, the better product team wins, hands down. There's no, there's no, um, kind of history in the world where the, you know, the worst product wins against the better product in the longer run,

Nadiem Makarim: in a profitable environment?

Andre Soelistyo: In a profitable environment. And that's why, and you know, companies in the US are trained this way because a lot of the competitive landscape is saturated. The only thing that determine whether they can win or not is whether their product is good, whether the customer loves the product and stuff. And that's why it's, it's, you know, the, the ecosystem has developed in a, in a much different way against, you know, the regions that are facing hyper-competitive, uh, competitiveness, right in like India, Southeast Asia and stuff. And that's actually how we actually need to grow up and mature.

Thomas Husted: We'll that's right and I think in the end, you know, having some sort of frugality in the process actually drives a much better outcome because it makes people think about efficiency and impact. And you know, if you're just writing internal blank checks to everybody, then there's no ability to weigh results.

Andre Soelistyo: Yep. And then it also comes with a lot of maturity, right? Because to be fair, not a lot of people understand that concept, right? Because a lot of people who joins in this hyper growth type of technology company born and grow up in that environment. So you haven't seen what you haven't seen, right. So that in some sense, you know, they don't understand sometimes the longterm analogy, how to sustain, how to build a sustainable business and stuff. So that process of education is also very important. In some sense. I like in a way we had a chat, um, two days ago. Financial prudency is very important in some sense that if our mission at Gojek today is to help the little guys, like it's our job to make sure that the business is self sustaining so that our mission to help the little guys continues to be sustainable, right? Because otherwise if the business relies on external capital, we are putting the risks not to this company, but for the people who dependent on this platform to really get an income and that mission purpose and that responsibility needs to resonate in the organization to start and ensuring people thinks that way. Right. So start with that and obviously then we have to educate. We have to build a better control system, processes, ROI Analysis. I like your analogy and then optimizing every corner to be able to achieve those, um, you know, pipe dreams, dreams.

Nadiem Makarim: Yeah. I really love that. Like, I don't know about other companies but in Gojek you know, the majority of people here, at least the majority of good people in Gojek are actually here for the purpose, the mission. They're not here to create, you know, you know, uh, many multibillion dollar companies. For them, most people here, especially in the leadership of Gojek I think are most obsessed about the impact that we can create. But you lose the right to fulfil your mission if you get addicted to outside money and you can't stand on your own two feet. Profitability is what earns you the right to continue your social mission. And this is, this is, uh, like exactly what you said. I love the way you positioned that.

Thomas Husted: Correct. And to that point, I mean, if he goes, if you think about prior to to, you know, my entry, right? We had basically James running the finance accounting team. Amazing guy, right. And we've single-handedly single handedly, and we've essentially now augmented that with, you know, additional senior leadership, principally Benny who's doing all the financial control work. He's brought in like a cadre of ex Citibank folks, he's the ex financial controller of Citi group for Indonesia. Putting in place all the new systems that are gonna essentially going to deliver that. And you know, the measurement of the ROI product by product. And then we have David, right? So David is, he is an ex PWC tax partner worked at Uber for a long time. He's now the CFO for interational and collectively as our job to politely bring that tension and, and not to ostracise or be too obnoxious and uh,

Nadiem Makarim: But at times you have to be. You have to show...

Thomas Husted: You do if it's egregious. Yeah, of course you've got to like step up. And you can't, you know, and you can't do, and I mean, and particularly in my case, it's impossible to do this job without some emotion. Right. It's just that just kind of, I mean, and particularly given the number of eyeballs on us and the amounts of money and frankly the expectation and the other, you know, and we can't forget the impact to kind of the base part of Indonesian economy, right. There's a big obligation or responsibility that comes with running this company, not only in a sustainable but longterm profitable manner.

Nadiem Makarim: Yeah. We are, we are systemically integrated into the Indonesian economy in the most, you know, integral way. And it's just like, it like for us it is a national mandate to succeed. It's like just the amount of jobs, like anywhere from 2 million drivers, 2 million people in the merchant sector that we support their primary income. It's crazy. Just thinking about that level of pressure is why people want to work here, but it also adds a huge amount of pressure to ensure that we succeed.

Thomas Husted: Right. And if we do our job right, those numbers should be substantially larger you know in the next two to three years.

Nadiem Makarim: Yes. I liked, I want to go back into what, Andre was saying about being coddled with lots of money. You know, what's really interesting is that I talked to a lot of people who have left Gojek, um, and, uh, are doing, uh, startups and starting business elsewhere and, or joining organizations that are of smaller scale, et cetera. And, you know, they were some of the most successful people, uh, internally inside Gojek. But what they told me was that they became, they hit this realization once they left Gojek that, oh wait, so you know, they, I guess they took for granted the amount that capital can push you towards your business objectives in a rapidly fast way or the quality of team members you can get to make something a reality. So a lot of what I want to warn people who have been working in high growth, high capitalized companies or very big companies, tech companies, when you do go out, you need to go out with open eyes and never ever overvalue your own contribution versus you in the ecosystem that you grew up with. So for a lot of people, it's their first time, right? And these big companies, they grew up in it, they grew up in it and pretty much in their whole professional career. So it means that that's all they know. And this is a very dangerous thing when you go out on your own and you have these massively high expectations of your own performance when it's not actually backed up by the, the stack. And the stack is not as your technology stack is the teen stack and it's the money stack that will push markets towards where you want to go. And so I just wanted to kind of, it was an interesting part. A lot of people feel disillusioned coming out and then they're kind of struggling because you know, they don't have that stack. Um, but you know, don't fear struggle on because it just takes a lot more time. Gojek didn't happen over night. This was a 10 year company in the making. Nothing great can be achieved in under 10 years, nothing. That hasn't changed from back in the day to today.

Thomas Husted: Yeah.

Nadiem Makarim: Is this mythology of like, oh yeah, become a millionaire in like six months, one year. And I'm like, no. No great thing can be achieved in under 10 years. We're now approaching our 10 year mark.

Andre Soelistyo: And that's, I mean, great company that has built this strategy, if you may, or framework, whatever. Again, whatever the environment is, you can always fundraise. So that's, that probably will be the one of the differentiator, right? Because yes, money will be, you know, sometimes, you know, because of macro money will be limited, but the great company will always be able to continue to tap into that opportunity. Right? And that's actually how everyone needs to think about it again, in downturn and up, you know, um, upmarket, like you have to kind of maintain that discipline and really built that strategy to be able to withstand all the curve balls.

Thomas Husted: Yeah, I agree. And then cascading that down to the team. To your point Nadiem, I think we need to reinstate the mentality that this is going to be a marathon, right? This is not like with the next fundraise and we was joking you were saying about like; "oh the next fundraise and we are done." Um, not that it's another fundraise, but there can be multiple hurdles going forward. Uh, and you know, the team really needs to be purpose-built mostly from a mentality perspective to actually be able to carry the burden and do it every day and make sure that, you know, there's not immediate burnout. Um, and what I've seen in my short time here is actually there has been a kind of a natural evolution because as you go from series D, to series E, to series F, you know, we've had some changes in the leadership team and those changes are normal because you know, somebody who comes in and series A, by the time we had serious D, R, F it's like they've kind of done their marathon and it's time to hand off the baton to the next person that we need to work closely with those team members to make sure the new ones coming in to make sure that they're prepared for the journey because it's not easy.

Nadiem Makarim: It's not easy and you're exactly right. The kind of people who burn out really fast are the ones that are not running a marathon. Um, they are thinking from milestone to milestone only and thinking like are like; "once I hit this" this is the most dangerous phrase; "once I get that I'll be happy or once I get that I'll be relaxed. Or once I get that, then I don't have to worry about that anymore." And that's really not the right mindset. Once you've gone through enough peaks and troughs, you start building the pattern recognition that on the way up you always have to plan for it to come down. People who just assume on the way up is another up, that's trouble. Right? So on the way up, never assume that it's going to continue to go up, but on the way down, never assume it's just going to continue going down as well. This is where people give up. This is where people make stupid mistakes on the way up. And then people give up too early on the way down. And you can take this not just on a company flow, but on a personal career flow of an individual, right. Within your job in these highly volatile high growth companies, you need to accept and embrace that volatility as just part of the journey. Otherwise you shouldn't really, you won't survive.

Andre Soelistyo: Yeah. Cause you know, it's, it's, it's great to actually bring it, bring those up because I mean, we say this, um, but in reality people struggle, right? Because the amount of burden, the amount of expectation, the amount of like, you know, bad news happening, it just weighs on you. And then, you know, obviously that's, so that's why I went, whenever we talk about this marathon in reality, we're sprinting in a marathon.

Thomas Husted: That's right.

Andre Soelistyo: It's consistent sprinting in a marathon, right? Because yes, of course, you know, you can strategize, you know, you can, you know, take a little bit of a breather and then you run again and stuff. But in reality, this a sprint in a marathon as well. And that's actually not easy. And we are all, we all have to realize that as well and help each other. And you know, people outside people who are building great companies and stuff too, to help, you know, you know, those mental health.

Thomas Husted: Yeah. And that, and that pressure on me that particularly for the more senior folks in the organization, you end up carrying a lot more of the burden. And you can't share with a lot of people. It's a lonely existence a lot of times. And you know, either you're used to it and you like it and you can deal with it or you can't. And you know, fortunately what I see in our organization is that we have a lot of purpose built people who are actually up for the task. And that actually creates a tremendous sense of comradery. And look, the one thing I'll notice is the...

Nadiem Makarim: Purpose as opposed to achievement based people, right?

Thomas Husted: Correct. Purpose as in as I'm here for essentially the greater good, right? I'm doing something that's really important and one of the most interesting observations for me. So just for those that may be listening, um, I actually joined through a sale of one of the payment companies, um, along with Ryu and Aldi, who I think have already been on the podcast. And what I find so remarkable about that time period was, you know, it took us probably nine months to negotiate and close all those deals could have been a lot faster, Andre. And, but what's remarkable is if you look at Kartuku now spots Midtrans and Mapan, nobody has left. Every single senior leader is still in place, actually has completely bought into the vision that has been explained and articulated quite well by the leadership team.

Nadiem Makarim: And despite how turbulent that integration process was.

Thomas Husted: Those things are terribly difficult for everyone. Terribly difficult. And uh, yeah, so I think that's really credit. I mean, that's, so for me, that says as much about an organization as you can. I mean, so often those type of M&A (Mergers & Acquisition) deals go off the rails and like nine months later people have taken whatever money they gonna, they're gonna get paid out and they leave and they're bitter. If you look around here, like everyone is actually super excited about where GoPay is cause all of those deals were essentially central to executing the GoPay strategy.

Speaker 5: Yeah.

Thomas Husted: And I mean, we are on the verge of doing something truly remarkable, GoPay. And I think it's credit to, I mean I stepped out of the leadership position of, of my, uh, of the company that I sold really quickly and essentially handed it off to Ryu; he's done an amazing job. So really that's, that's one of those things where I'm, I'm looking forward to see where we land in another six to nine months. There it's going to be good.

Nadiem Makarim: That's awesome guys, we're out of time. Thank you so much for talking about raising billions. Um, I would like to have you back here on the show if you're willing to discuss other interesting topics that we'll see where we are then. Thank you so much. It's been awesome.

Thomas Husted: Thank you guys.

Andre Soelistyo: Thank you guys.

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