Sequoia India helps fund Indonesia's BukuKas but are there too many digital bookkeeping apps?

By Lee Kah Whye
Singapore, January 18 : Last week, BukuKas, an Indonesian-based digital bookkeeping start-up, announced it had raised USD 10 million in Series A funding which was led by venture capital firm Sequoia Capital India, a subsidiary of famed global tech investment company Sequoia Capital.
The latest capital injection brings Buku Kastotal funding to date to USD22 million. Investors involved in Series A include Saison Capital, January Capital, Founder bank Capital, Cambium Grove, Endeavor Catalyst and Amrish Rau
BukuKas is a mobile credit tracking and accounting application designed to help Micro, Small, and medium-sized enterprises (MSMEs) manage their cash. It digitises physical financial record-keeping by assisting businesses to record their financial statements, monitors their sales, profit and credit automatically. As a result, it enables MSMEs to better monitor and manage cash flows and ultimately makes it easier for them to track overall business processes and performance.
The vast majority of MSMEs in Indonesia still rely on manual bookkeeping but the digitalisation trend which has been accelerated by COVID-19 has in the same way driven many small business owners to migrate their accounting records online.
BukuKaswas 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. It has a goal of starting an SME-focused digital bank sometime in the future.
In November 2020, BukuKas had a registered user base of 3.5 million small merchants and retailers, of which 1.8 million are active monthly users. During that month, the platform made USD 17.4 billion worth of transactions on an annualised basis.
As about 73 percent of the merchants who use BukuKas are located outside of tier-one cities like Jakarta, the app focuses on smaller Indonesian cities and towns. 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.
It claims that merchants who use the app can achieve 20 percent cost reduction as well as save up to four hours per day through the automatic bookkeeping process.
Ex-Lazada Indonesia colleagues, Krishnan Menon and Lorenzo Peracchione, who met eight years ago, are the founders of this bookkeeping app. Krishnan hails from Kerala and has a Masters of Science from Birla Institute of Technology and Science. Lazada is a Singapore-based ecommerce marketplace with a presence in many Southeast Asian cities and was bought by Alibaba in 2016.
Peracchione was quoted by tech publication TechCrunch as saying that his father used to be an SME owner and he had firsthand experience during his childhood understanding the struggles and the ups and downs of running a small business. When brainstorming ideas for a startup, Krishnan's suggestion of solving the cash flow visibility of SMEs struck a chord with him.
Krishnan added, "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."
In addition to digital ledger features, BukuKas also sends payment reminders to customers of MSMEs through WhatsApp and automatically generates invoices, includes an inventory management module and analyses 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 storefronts, a promotions engine and social sharing.
"With COVID-19, SMEs are rushing to get digitised, but they lack the right mobile-first tools to sell online as well as to manage their business," Krishnan continued.
BukuKasis in a crowded marketplace of similar types of financial bookkeeping apps.
One of its competitors BukuUangis owned by India's Khatabook which itself is a bookkeeping startup but of significantly larger size having been valued between USD275 to USD300 million based on a May 2020 funding round.
Other local rivals attempting to bring Indonesia's MSMEs bookkeeping onlineincludeMoka, Jurnal, and BukuWarung.
BukuWarung which also started in 2019 was founded by two Indians, Chinmay Chauhan and AbhinayPeddisetty with a similar aim to help small businesses digitise their financial recording and collection processes. The inspiration behind BukuWarungistheir families, both of whom operate small neighbourhood stores back in India. As of the end of 2020, BukuWarung claims to have over 2.5 million merchants signed up to its app.
BukuWarung is backed by Y Combinator which an American seed money startup accelerator launched in2005 and headquartered in Mountain View, California. It has launched over 2,000 companies including now household names like Stripe, Airbnb, DoorDash, Dropbox, Twitch, and Reddit.
SMEs including MSMEs account for some 60 percent of Indonesia's GDP of about USD1.12 trillion based on 2019 World Bank data. It is estimated that there are between 55-60 million businesses that can be targeted by these bookkeeping apps. The penetration is small at the moment but has the possibility to grow exponentially in the years to come.
Furthermore, with the potential to expand these services to include digital wallets, micro-financing and digital banking, there are plenty of opportunities for these apps to thrive. However, some form of consolidation can be expected in the future.