An unexpected new combatant is set to join the taxi app wars: a 10-month-old start-up has raised $250m, with plans to raise more than $1bn, in an ambitious attempt to take on Uber.
Karhoo, a little-known group founded by a British entrepreneur and based in New York, said it will launch its taxi comparison app in January next year with the support of several high-profile partnerships and backers.
The service will open in London, New York and Singapore after securing a network of 200,000 cars by striking deals with local taxi and minicab fleet owners.
This includes partnerships with Addison Lee, the UK’s largest minicab group; Comcab, the London black cab operator; New York private hire firms Carmel and Dial 7; and 10,000 yellow and green cab drivers in the city. Karhoo is working on further deals to expand into more cities in the coming months.
The newcomer is the latest challenger in a fiercely competitive market, with rival taxi app groups also building formidable war chests to fund their expansion plans.
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”.
Declared financial backers include David Kowitz, co-founder of Indus Capital Partners, the US hedge fund; Jonathan Feuer, managing partner at CVC Capital Partners, the European private equity group; and Nick Gatfield, former chairman and chief executive of Sony Music Entertainment, the record label. Eric Daniels, the former chief executive of Lloyds Banking Group, is a board director at the company.
Despite this backing, Karhoo faces an uphill struggle against the established competition. Uber has raised $10bn, allowing it to expand quickly worldwide, while offering price cuts that have attracted millions of customers.
Uber’s main US competitor, San Francisco-based Lyft, has raised $1bn. Hailo, a UK group that has raised $100m, pulled out of North America last year, saying it could not be profitable due to pricing squeeze created by Uber and Lyft.
In Europe, Israeli group Gett has raised around $220m and has made inroads into key cities including London and Moscow. Earlier this month, Madrid-based Cabify secured $12m in investment from Rakuten, Japan’s largest ecommerce company by sales, to fuel a push into Latin America. The dominant Chinese player, Didi Kuaidi, has raised almost $4.5bn, while India’s Ola has raised close to $1bn.
But Karhoo’s chief executive and founder Daniel Ishag said: “[Uber] can’t subsidise prices forever; they have to be profitable, especially if they want to IPO. We can go in and we can level the playing field.”
Mr Ishag, 41, is a serial entrepreneur. In 2007, the London-born businessman founded Bluewater Bio, a water treatment company. In 2000, aged 26, he co-founded eSpotting, the online advising company which was sold in 2003 for about £100m.
He added that by working with licensed taxi companies, Karhoo will avoid the regulatory troubles that have hampered other groups such as Uber.
“We’re able to work in markets where the peer-to-peer networks aren’t allowed to work, simply because we empowered the incumbents,” he said.
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