Outrage Over Announcement That Path Accepted Investment from Bakrie Group
I’ve only been up for about an hour this Saturday morning and a huge news dropped courtesy of Kara Swisher on Re/Code. Something that I suspected back in November came to reality. Indonesia’s Bakrie Group, run by conglomerate Anindya Bakrie, led a USD 25 million investment in Path. Path CEO Dave Morin had made two trips to Indonesia in the past three months (most recently last week) and it quickly bore fruit.
Morin told Swisher that the $25 million round was an up round from the $30 million round it closed in 2012 for $250 million valuation but the company had been looking for a $50 million round in mid 2013 at a $500 million valuation. Morin was reluctant to share the details for this latest investment.
While Bakrie Global Group led the round, other, existing investors also joined in, which included Greylock Partners, Kleiner Perkins, Index Ventures, Insight Venture Partners, Redpoint Venture Partners, and First Round Capital, according to Swisher.
When Morin was in Jakarta last November, he shared some numbers regarding Path’s usage and Indonesia was, and most likely still is, the network’s most active country with the highest number and proportion of active users. Path’s significant use in Indonesia clearly was the reason why both Path and Bakrie saw an opportunity to work together.
For a quick list of the facts in this deal, I’ve outlined many of them on my personal blog.
The investment news from Bakrie sent a shock across Indonesia. Across Twitter and Path, people are talking as if the group had acquired Path and many have decided to remove Path from their devices although it remains to be seen whether this knee jerk reaction will last.
Sentimen negatif pada Bakrie sangat besar ya, sampai investasinya ke Path pun bikin orang jadi menimbang buat uninstall.
— Ndoro Kakung (@ndorokakung) January 11, 2014
“The negative sentiment towards Bakrie is so large, its investment in Path even causes people to consider uninstalling [the app].
I hate you @path for accepting money from Bakrie
— Alderina (@alderina) January 11, 2014
— Rene Suhardono (@ReneCC) January 11, 2014
Not everyone thinks this will be negative to the Path though.
Data path itu menyeramkan. Dan siapapun yang invest di sana, harus diakui worth every penny.
— Hamid Muhammad (@duajanuari) January 11, 2014
“Path’s data is frightening. Any investment there must worth every penny”.
pretty sure this whole Bakrie investing on Path won't affect anything. even Indonesians would buy an iPhone just so they can use path.
— ｎａｎｉｎｇ。 (@naningutoyo) January 11, 2014
this might be a different context, but lion air with such an infamous reputation can still be one of the fastest growing airline.
— ｎａｎｉｎｇ。 (@naningutoyo) January 11, 2014
The Bakrie Group and family has a terrible reputation in the country. As per the Jakarta Post report in February 2013, Bakrie Life has been in a deadlock with its clients regarding a failed investment scheme. A number of Bakrie companies were fined (albeit a tiny amount) for failure to explain financial discrepancies. Bumi Resources Minerals, a subsidiary of Bumi Resources, a Bakrie-owned company, allegedly misused funds amounting USD $110 million.
The group’s largest indiscretion in the country, and one that’s causing much of people’s anger towards the family, is the seven year mudflow in Porong, Sidoarjo, East Java. The ecological disaster has been attributed to Lapindo Brantas, a Bakrie-owned company, which conducted a drilling expedition in the area in 2006.
The government and the public had decided that despite the “sale” of Lapindo Brantas, the Bakrie Group and family remain responsible for the disaster and must compensate the affected residents, something for which the Bakrie Group has been very reluctant to comply.
Bakrie Telecom announced that it is falling further in debt, with signs of defaulting, to the tune of over USD 760 million at the end of 2013. Real estate development company Bakrieland Development, is locked up in court over failure to pay bond obligations.
In short, the Bakrie Group evidently has not been a good corporate citizen and it’s all been laid out in public. It may well be among the most prominent Indonesian companies and Path CEO Dave Morin has said in the past that he has been looking for a Southeast Asian investment, so ignoring the corporate trail, linking up with a major Indonesian corporation would be a great strategy
On paper, this deal may have been a great match with Indonesians dominating the use of Path, but has Morin struck a deal with the wrong Indonesian group? Will the backlash to the deal rob Path of its user base or will it be water under the bridge? The cynics out there would ask, will Path even see the money?
It’s rumored that Saratoga Capital, led by another prominent Indonesian businessman, Sandiaga Uno, was involved in early talks to invest in this latest round but apparently pulled out.
[header image from Shutterstock]
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