Ridesharing

Ridesharing Startup Karhoo Shuts Down

Karhoo, the startup that was aiming to take on Uber in the ridesharing app market, has shut down after burning through its capital.

On the company’s website, Karhoo said it had to close the service and is looking at the next steps for its business.

“Unfortunately, it became clear two weeks ago that the financial situation was getting pretty dire with Karhoo in urgent need of funding. Discussion with a potential new backer ended last night forcing the company to stop trading,” the company said. “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.”

According to TechCrunch, Karhoo, which saw Founder Daniel Ishag step down as CEO a few days ago, hadn’t said how much money it raised, but Financial Times pegged it at around $250 million last year. It had plans to raise $1 billion in total. Karhoo, which was live in London, was beginning trials in New York and was eyeing Singapore. In London, TechCrunch noted the company claimed to have a 200,000 car strong network, and in the New York trial, it had around 10,000 cars.

The business model — getting a 10 percent commission on rides — put it ahead of Uber, which charges 20–25 percent, but the startup’s structure was based on having a ton of customers to have reasonable margins, which didn’t happen, TechCrunch reported.

Karhoo isn’t the only one that is burning through money. In Q1 2016, Uber lost approximately $520 million, according to Bloomberg, but losses in Q2 were over $750 million, with total losses for the first six months of 2016 at $1.27 billion. The losses, however, can be confusing. According to Bloomberg, bookings were soaring in Q1 and Q2, increasing from over $3.8 billion to over $5 billion, with 18 percent growth in net revenue

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