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Update: Uber rival Karhoo closes down after reportedly burning through $250m in a year

One of Uber’s main rivals in the UK has announced it is to close down its service after failing to raise new investment.

Staff at taxi booking app Karhoo, which reportedly raised $250m just over a year ago, were informed on Monday that the search was underway for new investment at the tech firm from an unnamed investor.

However, it said that due to a lack of funding, its entire R&D team in Israel had been placed on a notice of termination, which it described as a ‘deal breaker’ for the new investor.

According to Sky News, the internal memo claimed that if Karhoo was unable to reassemble its R&D department and meet a term-sheet outlined by the investor, the startup was likely to run out of money and go into administration.

The memo said: “The key discussion points have been around providing him with reassurances about the state of the business, as he is being asked to invest money today with no due diligence done.

“The result of these discussions is a term-sheet received overnight, outlining the terms under which the investor is willing to take over Karhoo and fund it to break even.

“While there are still some items which need to be negotiated, the terms are very close to being acceptable.”

It now seems that those terms were unable to be met and the service is now no longer operating.

In a statement on its website, the cab booking app said that the compnay has now ‘closed its service’ and would be looking at ‘next steps’ for the business, after staff at bases in London, New York, Singapore and Tel Aviv had ‘worked tirelessly’, some unpaid, to try and turn the business around.

The statement added: “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.”

With firms finding it increasingly difficult to compete with Uber’s deep pockets and seemingly endless amounts of investment, which currently stands at $11.4bn, there have been signs of retrenchment in the hotly contested taxi booking app space.

Earlier in the year, the owners of US rival Lyft were reportedly looking to sell after struggling to take a bite out of Uber’s market share in North America, while former European rival Hailo merged with MyTaxi in July.