Uber competitor Karhoo shuts down after blowing through $250M

Uber competitor Karhoo shuts down after blowing through $250M

Posted 5 minutes ago by Ingrid Lunden (@ingridlunden)
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So much for fighting the Uber fight. Today Karhoo — a company that wanted to take on Uber by pulling together various other competing car services under a single app — announced that it is shutting down its service and looking for “the next steps for its business” after running out of money and failing to raise more. The full statement is below.

It’s a pretty large crash and burn for the company. Karhoo, founded by Daniel Ishag, had never publicly disclosed how much it raised but a report in the FT last year noted that it was around $250 million with ambitions to raise $1 billion in total. Investors according to that FT article included David Kowitz, co-founder of Indus Capital Partners, the US hedge fund; Jonathan Feuer, managing partner at CVC Capital Partners, the European private equity group; and Nick Gatfield, former chairman and chief executive of Sony Music Entertainment, the record label. Eric Daniels, the former chief executive of Lloyds Banking Group, was a board director at the company.

Karhoo’s business model was based around the company taking a small commission on rides booked through its platform, but that business is based on very large economies of scale to have any kind of reasonable margin. And building out any transport service before it can get to that scale is extremely capital intensive — as Uber has demonstrated.

Karhoo’s was active only in London and starting trials in New York, with ambitions also to extend to Singapore.

We’d been hearing for about a week now that times were tight at the company, with employees skipping paychecks as times got lean. Then yesterday Sky posted a memo to employees that stated that it had to shut down its R&D operations temporarily in Israel after being unable to pay workers, but that it was close to securing an emergency round of funding from a backer that was willing to support the company to profitability.

It looks like that never came to pass, however.

As Uber, which has raised at least $60 billion, continues to grow globally, many smaller regional competitors have fallen by the wayside, consolidated or been snapped up by strategic backers. In Europe, have included Gett picking up strategic investment from VW; Hailo getting acquired and merged with MyTaxi. We’ve even heard that Lyft in the U.S. has considered acquisitions in recent times.

More to come. Full statement from Karhoo below.

It is with much regret that we have to announce that Karhoo has had to close its service and is now looking at the next steps for the business.
The Karhoo staff around the world in London, New York, Singapore and Tel Aviv have, over the past 18-months, worked tirelessly to make Karhoo a success. Many of them have worked unpaid for the last six weeks in an effort to get the business to a better place.
Unfortunately, by the time the new management team took control last week, it was clear that the financial situation was pretty dire, and Karhoo was not able to find a backer.
We would like to thank our staff, our partners, the fleets around the world that shared our vision, and the hundreds of thousands of people who downloaded the app and supported what we were trying to do.
The world needs a Karhoo.
Featured Image: xijian/Getty Images
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