Ride Comparison App Karhoo Closed After Failing to Get Needed Funds
image source: Khier Casino / Techtimes.com
Karhoo announced on its website that it was closing. This was after the news broke that it needed more funding to continue its operation. News came out that there were talks with an anonymous investor for the latter to fund the startup and take over the administration.
This was the last resort to save the company and if the discussion didn’t go well, this means the end of the Karhoo app. Unfortunately, it turned out that the talks were not favorable for the company forcing it to end its operation.
The Beginning of Karhoo
Karhoo was a ride comparison app that was founded on November 19, 2014. Unlike the popular vehicle hire app Uber that works with drivers who have their private vehicles for hire, Karhoo works with taxi and vehicle for hire companies. It was perceived as the app that would save taxi companies, which revenue went down ever since Uber became popular.
Founder and CEO Daniel Ishag raised $250 million from the first round of funding. These investors were former Sony Music Entertainment CEO Nick Gatfield and Indus Capital Partners co-founder David Kowitz. It reportedly received another round of funding from another investor with an undisclosed amount.
The app was launched January of this year in Singapore, London, and New York. In the UK, the app has partnered with Addison Lee, which is a minicab company, while it has partnered with Carmel, Dial 7 and other companies offering vehicles for hire in New York.
The Rapid Fall of Karhoo
image source: Peter Nicholls / cpjobs.com
With the promising future of Karhoo, founder Daniel Ishag firmly believed that it would be the game changer and it would level the game between private drivers and taxi or vehicle for hire companies. However, news came out that it needed more funding or the operation will shut down. The only hope was for the third anonymous investor to fund the company and take over the management.
There were even reports that the founders were willing to add their personal money to that of the funds from the anonymous investor just to continue operating the app. However, this didn’t work and after the critical meeting, it has been decided that the company will close.
There were around 250 people who worked for the company who bid goodbye to their jobs as it closed. However, before this even happened, it was said that the research and development employees in Israel were already given words that they might lose their jobs a couple of days before it happened.
Cause of the Failure
image source: Lewis Page / blog.karhoo.com/
What could be the possible cause of the failure of the once promising startup? The big reason that is being pointed on why this happened is because of the free rides that Karhoo offered people. A company employee in the US who didn’t wish to be identified shared that they lost a lot of money due to the said reason.
It was reported that there were too many promo codes that were used and they also had to take care of preventing fraud that came with it. In the end, these free rides backfired and caused the company to lose money.
The promo codes or free rides were meant to help the app make a name and encourage people to use it in the future. However, one app user shared that after using the free rides from the app, the person never used the service again.
An analyst shared beforehand how he was surprised how much money is funded on startup companies like Karhoo and how investors, especially those who have invested on the last rounds, will lose their money, and he was right; at least with what happened to Karhoo.