The 10K a Day Startup: Product Delivery & Drone Logistics with Benevolent Tech

Two former employees we interviewed complained about poor management, with the startup having no CFO, and Sng making all high-level decisions, particularly around budgets and spending.

One of them revealed that teams were often pushed to aggressively grow the business, but they had little visibility on cash flow. So they even ended up spending money allocated to be paid to suppliers.

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A Business Times report said Honestbee was burning through $6.3 million on average per month—chiefly on discounts to lure customers—in the first half of 2019. That’s a lot of cash, especially when the company’s total reported funding from investors came in at a little over $60 million. The ex-employees who spoke to us suspected the company had raised additional capital which it did not announce.

This year it became clear from Honestbee’s court filings that it was being sustained by debt from financial creditors, mainly entities linked to Brian Koo of the LG Group. Sng was once listed as a partner in Formation 8, a Silicon Valley fund co-led by Koo that invested in Honestbee.

Then there were the reported questionable transactions, as well as self-dealing by Sng as outlined by Tech In Asia, all while Honestbee was bleeding money.

Dishonestbee

Dishonestbee

Honestbee supposedly spent $1 million to spruce up its Singapore office and purchased a five-bedroom chalet in the small ski town of Niseko in Japan – the exact purpose of which was unclear, according to a Tech In Asia report. The property did serve as backdrop for one of Honestbee’s flashy marketing campaigns – a contest in which two people could win a stay at the house in exchange for performing tasks such as delivering groceries. Honestbee’s e-wallet BeePay, whose only shareholder was Sng, was also said to have been gradually offloaded to Honestbee, while another entity controlled by Sng reportedly rented an entire floor above the supermarket Habitat only to leave it unused. [Image via Oliver Dickerson/Unsplash]

The company’s journey so far shares striking parallels with the headline-grabbing collapse of what was once a high-flying startup, WeWork. The SoftBank-backed co-working firm scrapped its public listing, ousted its self-dealing CEO, accepted a bailout offer that dramatically cut its valuation, and let go of 2,400 employees globally—all in the space of year.

Honestbee’s business comes nowhere close to WeWork’s sprawling operations, of course. But it managed to establish a regional presence in just a few years from its 2015 launch, making a splash with Formation 8 and Koo joining its $15 million series A and later rounds.

Honestbee also appeared to be bucking rivals. Like Singapore-based online grocer RedMart, which was sold to Alibaba-owned e-commerce marketplace Lazada in a cut-price deal estimated at $30 million to $40 million. And grocery delivery service HappyFresh, which downsized its operations in 2016 before taking a strategic investment from Grab. Grab now operates as a key strategic partner, providing business for HappyFresh. (We’ve written about how Grab and rival Gojek are increasingly closing such investments.)

Under the surface, however, the waters at Honestbee were not so calm. Obvious symptoms of its dire situation began to emerge in January, when it stopped deliveries from Singapore’s top retailer FairPrice, with its store pickers saying they barely received any notice.