Startup Carousell Raises Eyebrows As Despite US$7 Million Revenue, It Posted Losses Of US$25 Million
Popular Singapore-based classifieds app, Carousell posted US$7 million in revenue for the financial year of 2018, an increase from 2017, according to its latest financial reports. However the company’s losses for the year were US$24.96 million, down 16.2% from the year before. The reported losses for 2017 was US$29.8 million.
Despite being valued at over US$ 550 million (note that valuations are really arbitrarily),the seven year old startup company has been reporting losses the past few years which it blames due to high staff costs. Carousell has over 400 employees globally.
If the company keeps on occurring losses due to escalating staff costs, Carousell may need fresh funds sooner. The startup used US$22 million of net cash flows for operations in 2018. It had US$55.4 million in cash as at end-2018, suggesting a runway of about two years, if the burn rate is unchanged. When asked if Carousell may seek fresh funding within the next two years,senior team members said that there is a possibility considering so many growth possibilities.
The startup also added over 100 employees in the Philippines in April, when it acquired a loss-making unit of classifieds giant OLX for US$34 million in stock. The startup has operations all over in South East Asia including Thailand, Malaysia and Indonesia.
The company recently made headlines when in April 2019, it raised around $56 million from South Africa-based Napsers through its classifieds arm OLX. That funding round brought the overall valuation for Carousell to over $550 million.
The startup started out in Singapore as a general marketplace, but later, only began its monetization efforts in the last two years, launching online advertisements and features like premium visibility as well as moving into high-value categories like cars and real estate. Its platform boasts over 200 million listings to date. According to Carousell founders, direct media ads and programmatic advertising are definitely going to be a huge scale-up in revenue stream for them. us. Carousell three co-founders are Marcus, Lucas Ngoo, and Quek Siu Rui.
Last month, Carousell hired JJ Eastwood, the former Asia-Pacific managing director of Rakuten Marketing, to lead its advertising sales and operations.
For a company that is claimed to be valued at US$550, its revenue is extremely modest and its losses are relatively high and if previous monetizations have not paid off, it looks a bit worrisome according to sources in the VC trade. Furthermore, many are skeptical as many startups from Singapore has in recent years been making huge losses and some going bust.
According to a source in the financial market,”To a certain level, the startup capitalization game is a bit of scam with overvaluations, business models that really do not have fundamentals or strength...just simply speculations, greedy first stage financiers or investors wanting to gain and cash out later and business enterpreneurs who do not understand business as they are simply creators or innovators plus the whole sector is simply just an overdriven hot trend that is slowly sizzling out in certain markets, we should not be surprised to see a 'startup crisis' soon just like the' dot-com crisis' of the past.”