Last year, taxi price comparison app Karhoo’s CEO Daniel Ishag was trying to convince investors in Silicon Valley and London to back his taxi app idea with their millions.
The startup, which shut down this week, managed to close a funding round in October 2015. It never confirmed how much it raised but The Financial Times reported that it was $250 million (£197 million), and Karhoo founder and CEO Daniel Ishag happily went along with this figure.
The fact that Karhoo never denied that amount caused many of its 200 employees to believe the company had a cash surplus in the bank.
The reality is, however, that Karhoo never raised anywhere near that much, and it never set out to either.
A venture capitalist told Business Insider on Friday that Karhoo chairman David Ishag (Daniel’s cousin) emailed him in January 2015 asking for $10 million (£7.9 million) at a $50 million (£39.5 million) valuation. In the email, Ishag wrote: “Our goal is that there won’t be a city, town or village anywhere in the world that Karhoo won’t be able to help you in.”
The investor said there’s a chance that Karhoo went on to raise more than $10 million but they refused to accept the company raised anything like the $250 million.
“I’m shocked anyone would give them ten not to say more than that with such a rubbish product,” said the investor. “But it’s plausible. I guess they found bigger suckers. They’re well connected in the finance world so high net worth bankers are a possibility if you’re posh and went to school with them. Those guys often are the dumbest money in London venture capital.”
Ishag admitted to the FT this week: “We did not raise $250 million, that was a misconception.” Albeit a misconception that he didn’t seek to address.
So how much did Karhoo really burn through in less than a year? “Since inception, $52 million (£41 million) has gone into the business,” said Ishag. “If you look at the Lyfts and Ubers of this world, they had spent in the region of half a billion dollars to get 200,000 drivers, so it just goes to show our efficiencies.”
Karhoo was giving individuals in London, New York, and Singapore hundreds of pounds worth of free rides as it looked to tempt them away from platforms like Uber. A Karhoo employee, who found out he no longer had a job at Karhoo via Slack, told Business Insider: “There were many promo codes out, and we ended up having to deal with a lot of fraud prevention in our app. They were usually $40 promo codes per ride, so people would take a $39 dollar ride over a $28, for example.”
Bloomberg reports that Ishag put things like designer shoes and clothing, along with veterinarian’s bills for a pet dog, on a corporate credit card. The company also forked out for offices in London, Singapore, and New York. It reportedly rented a £12,000-a-month apartment in the latter.
Karhoo’s debts stand at $30 million (£23 million), according to a Silicon Valley investor with knowledge of the company. They added that the company’s employees have not received any redundancy pay and that they are owed at least a months wages.
Daniel Ishag could not be reached for comment.
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