The company's financing history is opaque and it is burning millions per month
Honestbee, the online grocery delivery service in Asia, is nearly out of money and trying to offload its business.
The company has held early conversations with a number of suitors in Asia, including ride-hailing giants Grab and Go-Jek, over the potential acquisition of part, or all, of its business, according to two industry sources with knowledge of the talks.
Founded in 2015, Honestbee works with supermarkets and retailers to deliver goods to customers using its store pickers, delivery fleet and mobile apps. The company is based in Singapore and operates in eight markets across Asia: Hong Kong, Singapore, Taiwan, Thailand, Indonesia, Malaysia, Philippines and Japan. In some markets it has expanded to food deliveries and, in Singapore, it operates an Alibaba-style online/offline store called Habitat.
The company makes its money by taking a cut of transactions from consumer transactions, while it also monetizes delivery services separately.
Despite looking impressive from the outside, the company is currently in crisis mode due to a cash crunch — there’s a lot happening right now.
From talking to several former and current staff, TechCrunch has come to learn that Honestbee is laying off employees, it has a range of suppliers who are owed money, it has “paused” its business in the Philippines, it has closed R&D centers in Vietnam and India, it isn’t going to make payroll in some markets and a range of executives have quit the firm in recent months.
Honestbee’s Habitat store includes a cashless and automated checkout experience, among other online-offline services
The issue is that the company is running out of money thanks to a business model with tight margins that’s largely unproven in Asia Pacific.
One source told TechCrunch that the company doesn’t currently have the funds to pay its staff this month. A source inside the company confirmed that Honestbee has told Singapore-based staff that they won’t be paid in time, but it isn’t clear about employees based in other markets. Previously, staff have been paid inconsistently — with late salary payments sent as bank transfers happening twice this year, according to the source.
One reason that the Philippines business has closed temporarily — as Tech In Asia first reported this week — is that it is out money, and waiting on Honestbee HQ in Singapore to provide further capital. Already, the saga has proven to be too much for Honestbee’s head of the Philippines — Crystal Gonzalez — who has quit the company, according to a source within Honestbee Philippines.
Gonzalez helped build Viber’s business in the Philippines, where it is a top messaging player, and she was previously with Yahoo before launching Honestbee. She is said to have grown frustrated at a lack of funds when the Philippines is the company’s best-performing market on paper.
Indeed, the situation is so dire that suppliers and partners have been paid late, or left unpaid entirely, in the Philippines and other markets. Honestbee takes payment for grocery deliveries, after which it is supposed to provide the transaction, minus its cut, to its supermarket partners. But it has been slow to pay vendors, with two in Singapore — FairPrice and U Stars — cutting ties with the startup.
On the subject of financials, Honestbee looks to be toward the end of its runway.
The company has always taken a fairly secretive line on its financing. On launch, it announced a $15 million Series A investment from Formation8, a firm which included Honestbee CEO Joel Sng as a partner, but it has said nothing more since. (It appears that Honestbee stake has transferred to the firm’s successor, Formation Group, according to its website.) Tech In Asia dug up filings last year that show it has raised a further $46 million from more Korean investors, but the startup declined to comment on its financing when contacted by TechCrunch.
It looks like that capital is nearly gone, at least based on what has been declared.
Internal numbers for Honestbee in December 2018, seen by TechCrunch, show that it lost nearly $6.5 million, with around $2.5 million in net revenue for the month. GMV — the total amount of transactions on its platform before deductions to partners — reached nearly $12.5 million in December, but costs — chiefly discounts to lure new customers and online marketing spend — dragged the company down. A former employee said that monthly retention is often single-digit percent in some markets because of the “outrageous” use of coupons to hit short-term revenue goals.
That internal data showed that the Philippines business accounted for around 40 percent of Honestbee’s overall GMV, which backs up Gonzalez’ apparent frustration at a lack of investment. That said, the Philippines unit remains some way from profitability, with a net loss of more than $1 million in December.
High burn rate
Three markets — Singapore, the Philippines and Taiwan — accounted for more than 80 percent of GMV and net income, making it unclear why Honestbee continues to operate in other countries, including the expensive Japanese market, when its funding level is perilously low.
More pertinently, operating at that burn rate would give Honestbee less than 10 months of runway if it used the $61 million capital float that it is known to have raised. That suggests that the company has raised more money; however, none of the sources who spoke to TechCrunch were able to verify whether there has been additional fundraising.
Current and former employees explained that Honestbee doesn’t have a CFO and that all high-level decisions, and particularly those around budgets and spending, are managed by CEO Sng and his right-hand man, Roger Koh, whose LinkedIn lists his current job as a principal with Formation 8.
Filings in Singapore indicate that Honestbee has $55.9 million in assets through two registered companies. A common shareholder across the two is Brian Koo, a member of the LG family who founded the Formation 8 fund, and the Formation Fund which launched after Formation 8 was shuttered.
Full story at https://techcrunch.com/2019/04/25/time-maybee-running-out-for-honestbee/
Honestbee ex-staff, trade creditors won’t get any of the S$320 million owed
There is no money left to pay former staff, vendors and other unsecured creditors of failed grocery delivery startup Honestbee, who are owed S$319.9 million, The Business Times (BT) has learnt.
Honestbee’s sole secured creditor, Formation Group, has realised about S$700,000 from the startup’s assets, BT understands. The sum falls far short of the US$4 million worth of debentures that Formation Group held over Honestbee’s assets.
According to documents seen by BT, Honestbee’s liquidator BDO only managed to recover about S$720 from excess payments for “electrical supplies”.
BT understands several former employees of Honestbee are still owed salaries. One who is owed about S$8,000 told BT: “(I) would have liked the Ministry of Manpower to take harsher action on the company and its directors.”
More at https://www.businesstimes.com.sg/startups-tech/honestbee-ex-staff-trade-creditors-wont-get-any-s320-million-owed