How Uber Rival a car-hailing startup came to a Screeching Halt

(qlmbusinessnews.com via bloomberg.com – – Mon, 14 Nov, 2016) London, Uk – –

When bills for a corporate credit card used by Karhoo Inc. Chief Executive Officer Daniel Ishag arrived, employees in the London office of the car-hailing startup often spotted unusual purchases. There were designer shoes and clothing, along with veterinarian’s bills for a pet dog. The employees flagged the costs as potentially non-business related, but signs of lavishness continued — first-class flights, a blowout in Las Vegas, Cuban cigars.

Ishag’s spending, described by several employees and those familiar with Karhoo’s finances, came to an abrupt end this week when the company shut down after running out of money. As the extent of the startup’s financial problems became known in recent weeks, Ishag stopped coming to the office and two other executives embarked on a futile attempt to keep the firm afloat, said the people, who asked not to be identified for fear of damaging career prospects. About 200 people lost their jobs.

Ishag did not respond to phone calls, e-mail or LinkedIn messages seeking comment. Some of the money was reimbursed, according to a person familiar with the costs. Employees said they didn’t know where Ishag was currently. In an e-mail to employees this week, he apologized for the company's collapse.

“I deeply regret the impact and inconvenience recent events have caused you all,” Ishag said in the e-mail. “I feel responsible, not only to you but also to your dependents as well, and wanted to extend my apologies to you all. I truly wish things had turned out very differently.”

Even by the standards of tech startups that fail more often than not, Karhoo’s demise is extraordinary. Before the company’s price-comparison app for hailing a taxi was released, Karhoo grabbed headlines last year when it reportedly raised $250 million and said it had plans to bring in more than $1 billion. In fact, it never raised that much. According to internal financial documents, it had raised $39 million as of September and was bleeding money as it attempted to take on Uber Technologies Inc. In its two-year life, Karhoo generated about $1 million in net revenue, according to the records shared with Bloomberg.

No Funds

Karhoo employees said they were largely unaware of its dire position until a recent Friday, when managers told them the company didn’t have enough funds to make payroll. There were no severance packages and people weren’t paid for the previous month’s work. People were furious. As the announcement was made, Ishag had been in Singapore in a last-ditch effort to raise more money, two former employees said.

Many employees were left wondering how the company could have blown through what they thought was $250 million in the bank. Some of them joined Karhoo because they were told in interviews that the company had raised that much money, making it more stable than a typical startup. After the figure appeared in U.K. news reports, company executives also cited it in meetings with potential business partners, according to people who attended.

Some workers had been confident in the company’s trajectory, after its app was downloaded nearly 300,000 times since it was introduced in May.

The company spent heavily to expand globally, several employees said. Long before the app was launched, Ishag opened offices in London, Singapore and Tel Aviv and built a marketing staff of more than two dozen. The company rented apartments in New York, including one at a cost of $12,000 per month, said a person with direct knowledge of the cost. The company also had a 10-year lease on an office in New York.

Ishag touted Karhoo as an upstart competitor to Uber. Its app aggregated cars available from non-Uber taxi and car services, allowing customers to pick from them. But the launch, originally scheduled for January 2016, was pushed back to May.

$400 Million

As Karhoo introduced its service in London and several other U.K. cities, Ishag was attempting to raise more money. One person involved in the process said Ishag was at one point seeking a $400 million valuation. To entice investors, he had to show that customers were using the service in droves to hire taxis, several former employees said.

The company began an aggressive promotional campaign in which it gave away codes for free rides, according to former employees. But the service had a bug that didn’t properly process the codes, meaning customers could use them over and over again. Some people on social media said they had taken more than 100 free rides. The company had to pay drivers or taxi companies even though Karhoo didn’t receive any money from customers. In October, about 70 percent of its bookings were with promo codes, according to sales documents seen by Bloomberg.

The app’s payment processing system also didn’t have many fraud protections, such as verifying a user’s address or requiring an e-mail address to set up an account, several people said. At one point, more than 90 percent of passengers’ credit-card payments were being rejected as a result of the problems, three people said.

Customer service was such an issue that Karhoo hired an outside contractor to handle it. The company, ModSquad Inc., is owed nearly $500,000, according to a breach-of-contract suit filed against Karhoo in New York. One employee said Karhoo canceled the contract after it realized the cost of ModSquad's service equated to about $3 per ride each customer was taking — more than it was taking in total after paying drivers. Several taxi companies that are owed money have been calling former Karhoo employees seeking payment, one person said.

Karhoo and ModSquad are scheduled to appear on Dec. 8 in the U.S. District Court in New York. When contacted, Erik Anderson, the lawyer representing ModSquad, said he couldn't comment about ongoing litigation.

Dog, Drinks

Employees described Ishag as persuasive and said he often talked about “creating a reality” for the company. He also gave himself perks like smoking in the office, flying first class and staying in top hotels, while staff members flew in economy and slept at budget inns.

When his dog, a pug, required a medical procedure, about $6,000 was charged for a veterinarian, two people familiar with his expenses said. In Las Vegas for a technology conference, he threw a party with drinks, exotic dancers and party favors that included Cuban cigars with Karhoo’s logo, two people said.

The company approached one of the Las Vegas party attendees later to see if he wanted to invest. Having seen what was spent at the party, the person demurred, according to a person involved in the fundraising attempt.

Ishag’s career started at age 17 when he left his London school and went to India to start his first business. In 2000, he was one of three founders of an online advertising group called Espotting, which used a network of search engines to deliver targeted traffic to advertisers. Ishag’s next move was to become CEO of waste-management company Bluewater Bio Ltd., which went public in 2007 and then got taken private again. He spent eight years there before departing.

Ishag said in a July interview with the online publication Startup that he got the idea for a comparison app for ground transport while in California and then decided to develop a prototype in India before raising money for Karhoo from investors. A cousin, David Ishag, joined the company’s board as chairman. David Ishag didn’t respond to a LinkedIn message seeking comment.

The company has dozens of backers, including Eric Daniels, the former CEO of Lloyds Banking Group Plc, who said his investment was “modest.” Other reported backers include Nick Gatfield, former chairman and CEO of Sony Music Entertainment; Jonathan Feuer of the private equity firm CVC Capital Partners; and David Kowitz, co-founder of Indus Capital Partners. Feuer declined to comment. Gatfield and Kowitz couldn’t be reached.
Shutting Down

The company closed down owing $30 million to creditors, employees, property managers, advertising agencies and other contractors, according to one person who has seen the figures.

Ishag wasn’t seen around the company’s offices as employees boxed up their belongings and left. In the e-mail, he thanked them for working without pay.

In the interview with Startup, Ishag discussed the challenges of building a tech venture.

“If someone wants to do something special or difficult, that person has really got to focus all their efforts,” he said. “It takes a toll; it takes a toll on the people around you. It takes a toll on your partner if you’ve got one, or on your wife. That’s why I’m saying, as an entrepreneur, it is a way of life because it does affect everything you do.”

By Adam Satariano and David Hellier

Businesses in London proposed granting visas to EU Nationals to Avoid Brexit Skills Shortage

(qlmbusinessnews.com via bloomberg.com – – Fri, 11 Nov, 2016) London, Uk – –

Visa
Chris Fleming/flickr.com

Businesses have proposed granting visas to European Union nationals in the London metropolitan area to prevent any migration curbs after the Brexit vote leading to a shortage of workers.

The London Chamber of Commerce and Industry said Thursday that about 25 percent of London’s workforce is foreign, while EU nationals account for a huge proportion of workers in industries including finance, construction and hospitality. If they suddenly needed work visas under current immigration rules, London would lose 160,000 workers and face a 7 billion-pound ($8.7 billion) negative economic impact, the LCCI said, citing a report by the Centre for Economic and Business Research.

The call follows a PricewaterhouseCoopers study last month that said the U.K. should adopt a regional visa system to allow it to deal with staffing needs once it leaves the EU. That report was commissioned by City of London Corp., which oversees the financial district. London Mayor Sadiq Khan has also called for a visa system for the British capital.

London voted overwhelmingly to stay in the EU, and Khan has said that, as much as he “might like the idea of a London city state,” he was “not planning to blockade” it. He is lobbying Prime Minister Theresa May for increased autonomy and access to talent.

The Brexit vote, and indications the government may prioritize controlling immigration, has exacerbated existing concerns about staff shortages. According to the Recruitment and Employment Confederation, the supply of workers has been declining for more than three years.

“In the approaching post-Brexit scenario, for London to remain competitive, we need to not only recruit the very best but also to be able to identify where we have skills shortages and act,” said LCCI Chief Executive Colin Stanbridge.

The lobby wants a one-off, single-issue London Work Visa granting current EU nationals indefinite leave to remain. It said the government could decide eligibility — such as employment in London on the June referendum day or the triggering of Article 50 — to mitigate against a sudden influx of new arrivals.

By Fergal O'Brien

Greenland Group set to Build London’s Tallest Tower

(qlmbusinessnews.com via bloomberg.com – – Sun, 6 Nov, 2016) London, Uk – –

In 2013, the architecture firm HOK was approached by a representative of the Greenland Group, China’s third-largest developer. “They said they were investing in London and that they’d made an offer on a parcel,” said HOK Senior Vice President Larry Malcic, who sat, on a recent afternoon, holding a cup of tea in his firm’s London office. “They’d done their homework.”

The land in question was a run-down warehouse adjacent to Canary Wharf, an area in the far eastern end of the city that grew popular in recent decades for its proximity to London’s financial center. Nothing in the area, however, would match what the Greenland Group hoped to build: an £800 million ($996.9 million), 67-story tower, which, when completed, would be the tallest residential tower in Western Europe. “From the beginning, they saw it as a fundamentally residential tower,” Malcic said. “And they wanted to get value out of the site, so we’ve gone as tall as you can go.” (That’s a literal statement: Any higher and the tower would violate London City Airport’s flight path.)

The building, which is named the Spire, is designed as a three-petal, undulating tower. Its position on a bend of the Thames provides unparalleled views of London in all directions, and its amenities, including a 35th-story lounge with an infinity pool, an entire floor devoted to recreation rooms, and even an outdoor covered track, would place it at the (literal) top of London’s booming luxury real estate.

And then, just as the building broke ground, the U.K. voted to leave the European Union and London’s real estate market, which had already been showing signs of weakness, began to crumble.

The Greenland Group vowed to forge ahead with the building. “The UK’s vote to exit the European Union (“Brexit”) cannot be said to have had no effect on the property market in London, and we are aware that there could be some turbulence in the future,” wrote Wenhao Qian, managing director of Greenland Investment Ltd., in an e-mail. “Developments of note, as well as iconic buildings, are continuing to do well. We feel that the advantages of London—its global cachet, cosmopolitanism and being a centre of world trade—bode well for a positive future for both the property market and the wider economy.”

The question, in turn, is whether Greenland's commitment represents canny long-term planning or something closer to stoicism in the face of adversity.

Hurdles and Payoffs

First, said Faisal Durrani, head of research at the broker, Cluttons, it’s important to consider the overall London housing market, Brexit or no: “We’re probably building less than half the supply of housing that the city needs on an annual basis,” he said. “We’re constructing about 40,000 to 50,000 new units a year, when we really need about 120,000.” In a vacuum, then, the Spire is adding a much needed supply of apartments (861 in total) in the face of cacophonous demand.

But that demand comes with a caveat. “Most domestic [U.K.] demand tends to seek out what we call ‘period property,’ or anything that isn’t new construction,” Durrani said. “So despite a building being brand-new and modern and packed with all sorts of amenities, it’s not a kind of place domestic buyers will aspire to live in.”

Happily for Greenland though, roughly half of all central London buyers are currently international, and many of those buyers “are coming from new-build cities,” Durrani said. “So new buildings appeal to them— they’re used to it.” More good news for the Greenland Group: A recent Cluttons survey of 127 UAE-based high-net-worth individuals listed Canary Wharf as the top neighborhood for residential investment, which Durrani said could be the result of a massive influx of investment into the neighborhood from sovereign wealth funds. Investors “have seen their government has identified a safe space, and they’re going along with it,” he explained.

Still, the recent volatility in the U.K. housing market has caused some international investors to sell (at least, attempt to sell) their London properties. “What's happened, with values softening over most of the city, is that we've seen some international buyers trying to offload their stock,” Durrani said. “There's very little domestic interest in purchasing it because it's perceived to be overpriced.” And, Durrani added, “it often is overpriced.” If economic volatility—not to mention Britain's exit from the E.U.—continues, that could eventually further dampen international interest.

The final factor that could affect the Spire's success? Time. As the U.K.’s domestic buying base grows (and ages), there’s a good chance that they’ll come around to this new, glassy construction. “The cookie-cutter mentality hasn’t arrived yet for domestic buyers, but over time I think that’s likely to change,” Durrani said. “Purely because there aren’t enough homes to go around. It’s as simple as that.”

Planning For the Future

In the short term, the Spire can hope to attract international buyers confident in London's future as a financial center, or at least in its position as a city more stable than those in their home country. In a mid- to long-range outlook, demographic indicators imply that its buyers could come from within the U.K.

Malcic, the architect at HOK, said the building was designed with just this sort of change in mind. “We’re looking to appeal to a whole range of people,” he said. “I think it will be equally appealing to people in the home counties whose children have grown up, who don’t want to spend time cutting the grass anymore.”

Malcic said that HOK accounted for this uncertain future with malleable tech configurations (“What people need is not built-in tech anymore,” he said, “what they need is the flexibility to put in whatever technology is coming”), extra-high ceilings (“which gives a graciousness, but also a degree of flexibility,”) and such amenities as refrigerated storage lockers to stash grocery deliveries. “In the old days, you measured success by how much square feet you had,” he said. “Now it’s how much convenience you have.”

Construction is set to begin in early 2017, with a completion date of 2020. And while the Brexit uncertainty and U.S. elections roiling world markets make it impossible to make even a reasonably cautious prediction about the future, Durrani, the analyst, said that smart investors shouldn't try. “It’s harder than ever to time a building launch with property market cycles,” he said. “Most investors in this market are in it for the long term, and the long-term picture is a lot rosier than the next three to six months.”

By James Tarmy

People who ditch the office commute for the kitchen table

(qlmbusinessnews.com via uk.finance.yahoo.com – – Sat, 5 Nov, 2016) London, Uk – –

Home office
Nicolas Huk/flickr.com

More than 4.2 million people now regularly work from home – but some are working far harder than others.

Most home-workers start later, finish earlier and admit to becoming easily distracted by their guilty pleasure afternoon TV show or playing with the cat.

Monday, Wednesday and Friday are the favourite days for people to ditch the office commute for the kitchen table.

But, while half say they are confident of getting more done at home, the other half admit that slouching around in tracksuit bottoms and a sweatshirt hits productivity.

Research from TalkTalk shows the average the working-from-home day begins at 9.28am but people clock off shortly after 4pm – a meagre 6hr 14min of work, the equivalent of 80% of the typical work day.

Workers admit that the remaining time is spent doing chores, browsing the internet, sneakily catching up on favourite box set or TV show, or entertaining our four-legged friends.

Some workers have even managed to squeeze in an afternoon nap, workout at the gym and a spray tan while supposedly working from home.
Clare Evans, productivity expert and author of Time Management for Dummies, says: “Although it may seem that some home workers cut corners, the beauty of flexible working is that it allows us to fit work around the things in your life that matter.

“Everyone works in different ways and if you’re more productive doing your spreadsheets between the bed sheets, that’s fine.

“By creating structure and staying focused, you can get more done in six hours working from home than eight hours with colleagues – a theory being explored by Sweden with the new six-hour working day format.”

By Mark Dorman

British housebuilder Cala in talks with China’s Evergrande property developer – source

(qlmbusinessnews.com via uk.reuters.com – – Tue, 1 Nov, 2016) London, UK – –

Chinese Developers
Gareth Williams/www.flickr.com

China Evergrande Group (3333.HK), China's second-largest property developer, is in “early stage” talks to buy Cala Homes, a person familiar with the upmarket British housebuilder told Reuters.

Edinburgh, Scotland-based Cala Homes, which is owned by insurer Legal & General (LGEN.L) and real estate managers Patron Capital, was being advised on the offer by investment bank Lazard, its long-term advisor, the person said.

Sky News, which first reported on the approach, said Evergrande's offer could be worth close to 700 million pounds. (bit.ly/2f8dzLh)

Cala, which builds large, high-end homes across affluent areas of Britain such as around the M25 motorway which circles London, in the Midlands and Scotland, reported revenue of 587.1 million pounds for the year ended June 30, 15 percent higher than a year earlier. Net bank debt stood at 123.9 million pounds at end-June.

In its results statement in October, Cala said it had a contracted land bank with gross development value of 4.7 billion pounds as of end-June and that enquiry levels and reservation rates had risen in the 13 weeks after the EU vote on June 23.

“From time to time we may find ourselves the subject of speculation but from our perspective it is very much business as usual,” a Cala spokesperson said in an emailed statement.

Legal & General, Patron Capital and Evergrande declined to comment.

The approach comes as recent mortgage data and statements from housebuilders have indicated that the UK housing market is recovering somewhat from a sharp downturn in activity that followed Britain's vote to leave the European Union.

The Brexit-induced pound slide GBP= has fuelled foreign demand to invest in the sector, especially from Chinese buyers keen to diversify away from a slowing home market.

China Vanke (2202.HK)(000002.SZ) confirmed in September that it had bought a London office property.

For Guangzhou-based Evergrande, one of the most indebted companies in the industry, the purchase of Cala would mean access to the UK housing market as developers benefit from a chronic supply shortage. Britain launched a 5 billion-pound homebuilding stimulus package last month.

Evergrande has been aggressively investing in other companies as it looks to lift some of the pressure of having amassed some $57 billion in debt, almost six times its market value, on land acquisitions and corporate mergers.

(Reporting by Esha Vaish in Bengaluru, additional reporting by Clare Jim in Hong Kong; Editing by Alexandra Hudson)

 

 

HSBC : Virtual reality worlds the future of holidays

(qlmbusinessnews.com via uk.businessinsider.com – – Thur, 20 Oct, 2016) London, UK – –

The future of transport and tourism may well involve not going anywhere.
Researchers at HSBC have seen the future and it features a lot of virtual reality.

People will be able to use the technology to visit virtual worlds as real as our own, HSBC analysts Davey Jose and Anton Tonev said in a note to clients.

And, while they'll be free to visit, they might be full of ads.
VR could “create a many new avenues for recreation and leisure, and if it follows the ad models of many of the technology giants today, these VR recreation activities could be free,” HSBC said.

“If this is the case, instead of recreation costs going up, costs could decline, even if the number of hours spent in virtual worlds for leisure increases.”

Tech giants such as Google, Facebook, and Sony are pushing virtual reality headsets as the next big thing. In a demo last week Facebook CEO Mark Zuckerberg showed off “Social VR,” using a combination of the Oculus Rift headset and a 360-degree camera to mash together virtual reality and the real world.

The technology has endless applications and the workplace of the future may well only exist in virtual reality, eliminating the need to commute to the office, the HSBC analysts said.

Meanwhile, physical transport will become totally autonomous. With less traffic and more AI-driven vehicles, the era of car collisions and deaths on the road will end sometime around 2040, according to the HSBC report.
Key to this change is the development of “haptics” – technology that engages all the senses in the virtual world, rather than just sight and sound, to make it feel more real.

“With technology rapidly advancing and R&D efforts going into the development of better ‘haptics’, where one will be able to ‘feel’ in the virtual world, we believe that it’s likely that the next generation of ‘VR natives’ may find it preferable to utilise VR to travel virtually rather than physically,” HSBC said.

The investment bank added that this might not be such a big leap as we might think. “The shift from the physical to a digital format, in general, is not a novel concept, it has happened before,” HSBC said, pointing to the communication switch from physical letters to virtual e-mails.
“For example, physical mail in US and China declined from the early 2000s to 2014/15 by about 40%. However, in this time, average emails sent increased fifteen-fold, from 12bn to over 200bn per day,” HSBC said.

Travelling to virtual rather than real places is quicker, cheaper and safer than conventional physical transport, HSBC said.
The rise of the technology could cut commute times and make it more attractive to live out in the countryside rather than the city.
This would solve the problem of rising commuting times and growing work days, freeing up precious time to spend in virtual reality holiday worlds.

While it remains to be seen whether the experience of virtual reality will top the excitement of travelling to new places, it certainly would be more convenient.

By Ben Moshinsky