Karhoo was supposed to be another Uber competitor: a taxi app that allowed users to “compare all available cab options at a single glance.” The idea was that the company could surpass Uber by using an open format app that included all sorts of cabs rather than simply those driven by Karhoo contractors. And there would be no surge pricing. Ever.
The company collapsed last week after what various reports describe as a lavish spending spree in which its founder Daniel Ishag allegedly “blew thousands” on “first-class flights, designer shoes and personal grooming.”
This failed startup was closer to the ad industry than you might think. VCCP of London helped launch the app in May with the campaign “here comes choice.”
At the time, VCCP positioned the launch as part of a full partnership. VCCP worked on creative and media while SomeOne handled brand identity.
Last week, Bloomberg reported that 200 people lose their jobs when the company failed after approximately 6 months; Karhoo also closed owing approximately $30 million to its “creditors, employees, property managers, advertising agencies and other contractors” including VCCP.
A VCCP spokesperson provided the following statement:
“We do a lot of work with early-stage companies. Usually it works out just fine. In this case, unfortunately, Karhoo was unable to secure funding while they were working with us. So we’ve ceased work. And yes, they did owe us some of the fee.”
San Francisco/New York agency MUH-TAY-ZIK|HOF-FER, which was recently acquired by VCCP, also worked on the account.
Why did the business fail so quickly and spectacularly? Bloomberg calls its fall “extraordinary” even compared to those of most short-lived startups. According to Business Insider, a reported $250 million fundraising total was more marketing spin than anything approaching reality. The company only raised around $10 million, and Ishag later admitted as much to the Financial Times.
It was all a mirage. Here’s a particularly harsh passage from the Bloomberg story:
“Karhoo employees said they were largely unaware of its dire position until a recent Friday, when managers told them the company didn’t have enough funds to make payroll. There were no severance packages and people weren’t paid for the previous month’s work. People were furious.”
Given how many agencies are now investing with or promoting such early-stage companies, Karhoo may continue to serve as a cautionary tale.
One more helpful reminder: Uber lost more than a billion dollars in the first half of this year.