Did failed taxi-app Karhoo actually raise $250 million? Statistically, it looks unlikely

Yesterday, taxi startup Karhoo announced they were shutting down:

“It is with much regret that we have to announce that Karhoo has had to close its service and is now looking at the next steps for the business.

“The Karhoo staff around the world in London, New York, Singapore and Tel Aviv have, over the past 18-months, worked tirelessly to make Karhoo a success. Many of them have worked unpaid for the last six weeks in an effort to get the business to a better place.

“Unfortunately, by the time the new management team took control last week, it was clear that the financial situation was pretty dire, and Karhoo was not able to find a backer.

“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.

“The world needs a Karhoo.”

Following the announcement, attention in the media first questioned how a company that had raised $250 million just over a year before could blow through the money so quickly, before an even more surprising story emerged, doubts whether they had even raised that amount in the first place.

At the time, the $250 million investment was reported in the Financial Times:

“Sources familiar with the matter said Karhoo has raised about $250m so far. The company said it is in talks with “several parties to raise in excess of $300m and we expect this to rise to more than $1bn in around 18 months time”

This was subsequently accepted as gospel by the tech media and loyally entered into CrunchBase.

However, following the announcement yesterday, sources familiar with the matter told Business Insider that the figure was “more like $10–20 million”.

It’s probable that the actual number will never be revealed, but by looking at Karhoo’s competitors it is possible to get an understanding of whether it was statistically likely that they did indeed raise and subsequently piss $250 million up the wall.

Clearly, this is a market that is extremely competitive and does require significant investment to become a major player, Uber and Didi Chuxing are prime examples of that.

In fact, looking at all the major players in this space, $250 million seems a perfectly fair amount to be raising compared to their competitors, especially as a later entrant to the market.

However, when you start looking at how long it took each of them to raise $250 million, Karhoo begins to stand out as an anomaly.

However, as I mentioned above, Karhoo is (was)a latecomer, so naturally there is a requirement to raise money faster, also, capital is increasingly more available than ever before so it is not out of the realms of possibility that they were able to raise this amount in record time.

Disregarding Uber, there is also a correlation between the later the company was founded and the shorter the time they took to raise $250 million adding further credence to this line of thought.

However, where this argument begins to fall down is in the acceleration of the correlation between when the company was founded and how long it took them to raise $250 million.

Ola and Didi Chuxing were both founded three years after Uber and were subsequently able to raise $250 million 15.22% and 96.3% faster than Uber respectively.

It’s worth pointing out that both of these companies are now the market leader in large, growing markets (India and China respectively).

Karhoo was founded just two years after Ola and Didi Chuxing and was able to reportedly reach $250 million in investment 360% and 170% faster than these two companies perfectly positioned to benefit from largely untapped markets full of potential.

Even with investment more readily available, this simply does not add up for me. (For what it’s worth they also “raised” $250 million 430% faster than Uber).

This is where alarm bells start ringing as to the possibility of Karhoo having raised $250 million in such a short time, especially when you consider they have now shut down.

Finally, to really place the speed of this into context, and to almost put the argument to bed, here’s how much Karhoo’s competitors had raised in total ten months after being founded.

The purpose of me writing this post is not to definitely prove or disprove that Karhoo did or did not raise $250 million, I am not able to do that. In fact, my point is less about whether they did or did not and more about why we all simply accepted this as fact in the first place.

This analysis is by no means comprehensive and has plenty of holes in its reasoning, but by running a few simple calculations that took about 15 minutes, it’s easy to at least uncover enough question marks in order to doubt the validity of the amount originally quoted.

Nor it seems do you raise $250 million just because you said you did.