Karhoo rides again: Nissan/Renault buys failed on-demand ride startup

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Image Credits: Bartolomiej Pietrzyk (opens in a new window) / Shutterstock (opens in a new window)

It looks like one of the more notable stalls in the world of on-demand rides is going to get another change to see if it can drive ahead. TechCrunch has learned and confirmed that Karhoo — a failed on-demand offering that aggregated drivers and ride options from hundreds of existing fleets of car services in an Uber-like app — has been brought out of administration.

It will be relaunched by Boris Pilichowski and Nicolas Andine as co-CEOs, with full financial backing from RCI Bank and Services, the financial services division of the car giant Renault. Pilichowski and Andine had been running Karhoo just before it went bankrupt, taking over from founder Daniel Ishag.

The plan will be to open for business globally sometime this year, although no definite launch date has been set.

While the new owners are not publicly revealing financial terms, a source has passed us a report from Karhoo’s administrators with more details. The document alleges that the new Karhoo was acquired by a group called Flit Technologies, led by “two former employees” of Karhoo with full backing from RCI Bank and Services, for around $1 million ($500,000 for Karhoo, $500,000 towards paying creditors), plus a commitment of $15 million in further investment.

The development comes after the administrators originally received bids from between 30 and 40 interested groups, the report said.

There are other interesting details in the administrators’ document. For example, while it had been reported originally that Karhoo had raised $250 million in funding, apparently it had only actually raised around $52 million. In any case, it was all spent, with the monthly burn rate at the startup going as high as $6 million a month at its peak, and then down to $2.5 million when Karhoo went into cost-control mode.

Renault buying into Karhoo is part of a larger trend we’ve been seeing of automotive companies buying into the growing world of on-demand transportation startups, in part to hedge their bets about what the future of automotive ownership and driving will look like. Others have included VW investing $300 million in Gett, Daimler buying a majority of Hailo, and GM putting $500 million in Lyft.

Up to now Renault has largely been absent from those investment and acquisition plays, but it has been eyeing up a moment to make its move.

“In 2016 we formed a range of partnerships to support our development strategy on auto-mobility services and solutions for our customers,” said Gianluca De Ficchy, CEO of RCI Bank and Services, in a statement.

“The acquisition of the start-up Karhoo appeared as a sudden opportunity that we did not want to miss and the acquisition was completed rapidly. We have met the highly-motivated teams, and I have every confidence in Karhoo’s business model; it is innovative and underpinned by a first-class technological platform. We will also be able to capitalize on this platform as part of our activities for the Alliance brands.”

The reasons for Karhoo’s original problems were numerous. As detailed in the administrators’ report, among them, it took two years for the company to get its app off the ground, while the startup continued to consume resources; it had problems with overcharging in some cases and offering too many rides for no charge in other cases; and it had poor fraud protection in place.

So how can suppliers and customers know that Karhoo will work this time around? For one, the app finally did get built, and it won’t launch again until all the kinks have been ironed out. And while Uber has dominated in many markets through sheer will, early mover advantage and finance, many want to see strong competitors to keep the market on an even keel. Having players backed by large automakers gives some insurance to the market that there will be financing there, but also alternatives for how the business model is implemented.

“There is a need in ground transportation for someone to aggregate all the independents and allow them to compete and we are determined to make sure Karhoo fills that need,” the co-CEOs said in a statement. “Karhoo was amazingly successful in ferrying hundreds of thousands of people around the world but lacked a corporate backer, but with RCI Bank and Services, we now have that.”

While Karhoo had about 200 employees, the new operation will be kicking off with only 35 people, with the majority based in the U.K. The company had forged links with hundreds of car service companies to built out its service. Whether these groups will be willing to work with Karhoo again remains to be seen.

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