S$20m funding sought for honestbee; no update on strategy tweak

Singapore

INVESTORS were approached about raising at least S$20 million for struggling grocery delivery startup honestbee earlier this month following its leadership shuffle, The Business Times understands from market sources.

Before the leadership change, the startup had also been in talks to roll out its brick-and-mortar supermarket concept, habitat, in Japan and Thailand, documents seen by BT revealed.

honestbee did not respond to queries from BT on whether the funding target and details in pitch documents were still relevant.

It is unclear how much honestbee has raised so far. Its last announced funding round was a US$15 million Series A raise in 2015; this was led by Silicon Valley-based investment firm Formation 8.

Brian Koo, a founding member of Formation 8, replaced honestbee co-founder Joel Sng as the startup's chief executive on May 2.

In late April, honestbee announced a 10 per cent layoff of its global headcount, and suspensions and halts in operations in its various markets amid media reports of a cash crunch.

Pitch documents shown to investors showed that, as of April this year, honestbee had 3.1 million customers. Its gross merchandise value (GMV) - which measures the value of goods sold before revenue splits and costs - was US$132 million, although the time frame for calculating GMV is unclear. Beyond its existing verticals, honestbee was also exploring other avenues of growth, said the documents.

One area was partnerships with financial institutions to provide financing to honestbee's freelance delivery people.

Another was micro-financing for honestbee consumers, as well as working capital loans for restaurants. honestbee also eyed potential partnerships with insurance companies.

Those plans may no longer apply. The startup is now reviewing its strategy as part of its leadership change.

While honestbee may still be realigning its strategy with an ongoing review, it needs to be more public about how Mr Koo will steer the company to win back investor confidence, said a seasoned local investor who declined to be named.

"The good thing is that Brian is there, but he cannot be executing the old plan. People would probably want to know what his plans are, going forward, and if there are any underlying issues with operations ...

"Previously, (honestbee) didn't give people regular updates. We need to hear from Brian more," the investor said.

There is also limited visibility on the company's finances. The latest financials filed by Honestbee Pte Ltd - which may not reflect every aspect of its business - are for the year ended December 2015, which implies a three-year backlog.

For 2015, Honestbee Pte Ltd posted loss after tax of S$6.67 million on revenue of S$1.46 million.

While it is not surprising that rapidly expanding startups may struggle to report their financials on time, a spokesman for Singapore's Accounting and Corporate Regulatory Authority (Acra) confirmed to BT that Honestbee Pte Ltd will face penalties for missing the deadline for its 2016 numbers.

BT understands that honestbee received help from Enterprise Singapore (ESG) to reach some potential investors during the recent pitch, tapping the government agency's mandate to support and develop local businesses.

A spokesman for ESG did not respond to specific queries from BT, but described the agency's function in general as helping enterprises to "build capabilities, innovate or internationalise, depending on their needs and stage of growth".

"This includes connecting them to partners such as government authorities, private companies or investors, pointing them to project leads, providing grants or financing schemes, and more," she said.