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.