There we were in Parami Pizza, a popular pizza joint in Yangon. Nay Aung, CEO and founder of Oway, Myanmar’s first OTA, had ordered kale juice and I, a coffee. The impression wasn’t lost on me – kale in a country still known for its betel-chewing among the older generation – shows you how much things have changed.
In many ways, Nay Aung, born in Myanmar, educated in the US (studied astrophysics and economics) and then returned to his home country, represents the arc of that change in a country that used to be one of the most prosperous in South-east Asia before political convulsions choked its growth and is once again rearing its ugly head to curb its progress.
On the ground though, you see little evidence of a slowdown. Commerce is alive and well, the streets are packed and for the first time, you see a middle class emerging with aspirations to own smartphones, create art, drink coffee in cool cafes, dine in places like Parami Pizza and travel.
It is on the back of this middle class that Oway, started in 2012, built its success. It’s probably the only online travel company in the country to have successfully raised funds from foreign investors – since startup, it’s raised US$28m from companies such as Belt Road Capital Management (BRCM), Northstar Group, Emerging Markets Investment Advisers (EMIA), IFC and Openspace Ventures. The last round was $15m and he’s in the midst of closing another round.
Beyond travel, Oway’s building a future road to defensibility and sustainability
But then Oway is more than travel. Nay Aung recognised that to build a sustainable, more scalable business, he had to do more than travel and today, transportation accounts for 40% of its business. It runs a car rental business for corporates and operates Oway Ride, a ride hailing service, which it launched about four years ago, followed by Mini Oway, a three-wheeler scooter service.
It first launched Oway Ride in Yangon but then had to pull out. “A lot of competition came in and they worked based on subsidies – sometimes up to 40% subsidies to drivers, and we didn’t want to work on that model. Our thinking was, either you raise tons of money or you change your strategy and we decided to move outside Yangon.”
It operates in cities like Mandalay, Mawlamyine (Moulmein) and Bagan. Oway Ride employs 400 workers and drivers number 1,000. “It’s difficult for me to compete with Grab (which stepped up its services in Myanmar recently), it becomes a fund-raising game and I wanted to build something more sustainable. My philosophy was, solve local problems, build a good business, and it has to be sustainable. This approach is more defensible.”
While Myanmar is still largely a cash society, progress is being made on the payments side and Oway has partnerships with two companies, Wave Money (instant money transfers in mobile) and Ongo (money mobile service). It has its own wallet which accepts payment through all relevant channels.
“In the big cities, payment is being solved and addressed. There’s also a push by payment companies for adoption and it’s incumbent on businesses like us to provide use cases. Telco reform is one of the best things that’s happened in this country in the last five years. It’s completely transformed the country and we are seeing the benefits of it right now. Our telco system is on par with everywhere in the world.”
Now Nay Aung is looking at “ecosystem building” and has signed a joint venture with a Japanese car management group to build a factory/academy to do auto repairs and management as well as build talent.
“In Myanmar, when we have collisions, it’s hard to repair the vehicles back to the original state and outsourcing doesn’t work at scale. Then we realized we don’t have talent – so we will build a vocational institute to train mechanics and drivers. Building ecosystem assets makes us more defensible, I don’t care if Grab comes in, I can defend my position.”
“No, I didn’t see it coming” – building through necessity
Of course, the Oway of today is a far cry from the business he thought he was building. “No way did I see this coming. I built through necessity.”
When Nay Aung started Oway, he was imbued with all the naivety of green horn entrepreneurs dreaming of big exits, changing the world and making a difference in the country of his birth.
The idea of building a tech startup first took root during an internship he did at a startup in the US, as part of his Stanford Masters in Management studies. “This online advertising company Blue Lithium was bought by Yahoo for $300 million and the founder was a 22-year-old emigrant from Belarus and it was his second startup. That inspired me a lot.”
He went on to work with Google for more than four years to get management experience. “I was working with senior executives in business operations. They asked interesting questions such as, if Google were to come to Japan, what would they do?”
When he returned to Myanmar, he looked for something to do. “I didn’t know anything about travel. But I believed in two things – that political reconciliation would happen, as would reform in the telecom sector. If a country like Myanmar opened up, tourism would be the first to open up and when I looked at travel, that industry on average grows five times more than the natural growth of the economy.”
His bet paid off because Oway, which started as an inbound business, had spectacular growth. “At its peak, we were growing 245% a year. We were profitable in year one. We were there just to address inbound issues – tourists who wanted to book domestic flights and hotels couldn’t pay so we assembled the information, and helped them book and pay. But I felt it could not be sustained forever.”
He knew if the major OTAs came in, Oway wouldn’t stand a chance. He pivoted to domestic travel and took on the corporate travel market in 2016. Competing against brick and mortar agents, he invested in back end tech “always a little faster than the next guy”. Today, domestic forms about 80% of his business, the rest coming from leisure.
He then identified needs in the transport market. “There is poor transport availability in the country and we had to solve those problems.”
Does he see more potential in transportation than travel? “I see opportunities on both but on the travel side, we were not able to work with hotels. We are strong in car rental and flights, and moderately strong in hotels and packages. It’s just that we are working more on transportation right now. If you want to grow to a $100m revenue company, you have to be involved in a variety of products or go outside the country.”
One suspects though that it is the transportation part of the business that’s attracted his foreign investors. Myanmar, with a population of 55 million, is a developing country with major infrastructure issues to be solved. “Myanmar is right for the right type of investors, the longterm investors.”
Lessons learnt along the way and what the future holds in the land of pagodas
He is thankful he switched his travel business to domestic and corporate when he did. The political issue over the Rohingya refugees has dampened inbound tourism to Myanmar. “If we hadn’t done it, we would be in trouble.”
Oway’s not been spared though as the bulk of its clients are foreign business travellers and with foreign investments drying up, fewer trips are being made. “The good thing is the Asian and domestic markets are holding steady.”
He still remembers the early days of startup. “When I told my friends I wanted to start an Internet company, I was the laughing stock. I couldn’t even find an office with Internet so I had to start Oway in a coffee shop which had the best WiFi. My meetings were held on the phone and I’d be walking up and down, outside the café.”
So first lesson – you don’t need a big office to make it work. “You need to make use of what you are presented with.”
Second lesson – adapt quickly. “To be honest, when I started, I wanted to tackle the domestic market, created a wallet with a top-up card. The first thing I realized, the server kept crashing and I knew it wasn’t sustainable, so I switched to inbound. If you don’t have that mindset, you are in trouble.”
Nay Aung wants to continue to solve local problems. For now, Myanmar is not on the radar of foreign OTAs, “but it will be”.
“The size of the market is still small but there are opportunities. Buses – we are one of the leaders in bus booking but the ticket size is so small. Domestic growth is there but the affordability is not there yet. The positive thing about inbound is, we were very expensive to visit, not seen as a value destination, but now that’s normalising – there’s oversupply of hotels and we have the resources and talent to offer a good tourism experience.”
He has no regrets about returning. “There’s a lot more I can contribute towards and make a lasting impact. In the US, you have a lot of successful people who contribute and make donations towards education, for example.
“In Myanmar, one reason we have so many pagodas is because some of the richest people in the past chose that as their calling – they built pagodas – and for better or worse, the country became the land of pagodas. Next gen entrepreneurs will find their own way to leave a lasting impact whether it’s in education, transport and travel.”
To build their own “pagodas” as it were.
Note: Nay Aung will be speaking at WiT Innovation Stage on October 14. Sign up here