Karhoo, the provider of an app for comparing cab options, has announced it will cease operations, citing a dire financial situation. The company was in talks with a new potential investor but that deal fell through early this week, forcing it to shut down. Karhoo raised $250 million in funding last October and had aspirations of securing north of $1 billion within the following 18 months, according to the Financial Times; those plans never came to fruition.
Having been founded in 2014, it’s fair to say that Karhoo was a bit late to the ridesharing market. Industry leaders Uber and Lyft were founded in 2009 and 2012, respectively, giving them quite the headstart. Both companies also have a sizeable funding advantage on Karhoo, with Uber having raised over $10 billion and Lyft about $2 billion.
Karhoo's business was predicated on charging a 10% commission on rides booked through its platform, as opposed to the 20-25% that Uber and Lyft charge. While taking a lower percentage of fares could incentivize drivers to join the service, it also necessarily meant less money returning to Karhoo for each ride.
Although there are a million reasons to not join the ridesharing fray, Karhoo's attempt to slice off its own section of the industry could be seen as noble. What are startups if not for risk-takers? That said, battling it out against Uber and Lyft is not for the faint of heart and has an increasingly low probability of success, as Karhoo found out.