Singapore-headquartered grocery and food delivery startup Honestbee is seeking to raise S$20 million ($14.5 million) in bridge financing, and is open to raising this capital via convertible loans/warrants at double-digit interest rates, for a term of 6-12 months, DEALSTREETASIA has learnt.
Singapore’s Business Times first reported last week that Honestbee had approached investors seeking to raise at least S$20 million.
In a document seen by DEALSTREETASIA detailing the terms of the convertible debt it seeks to raise, the startup claims to be out of money and “solely surviving on drips” from its investor and interim CEO Brian Koo, who will also be personally backing the bridge loan.
The company is seeking a pre-money valuation of S$680 million ($493 million), but has told potential investors that the funding amount, as well as its valuation, were both negotiable.
In an undated pitch deck, the struggling startup said that immediately after the bridge round, it was targetting to raise S$200 million ($145 million) Series B/C round that it seeks to close in the next six to 12 months, if all goes well. Honestbee reportedly raised $49 million last year from Yesco, a subsidiary of South Korean conglomerate LS Group.
In an email response to us, the startup said: “The Honestbee executive team is going through a strategic review of the business, and is outlining a path to overall profitability for the company. Unfortunately, we are not able to comment further.”
The troubled startup had recently halted its food delivery service in Singapore and temporarily suspended its laundry service, as part of an in-depth strategic review of the business. It continues to operate its grocery delivery service as well as its physical store, Habitat by Honestbee.
Besides Singapore, Honestbee had also suspended its operations in Hong Kong, Indonesia, Japan and the Philippines. In the document, the startup said the ongoing restructuring is expected to complete next month.
In a recent report by Malay Mail, HonestBee said its Malaysian operations are still “going strong”, particularly in the urban areas of Klang Valley, Johor Bahru and Penang with its recently launched deals for the fasting month of Ramadan.
In the same document, the startup also expects to slash 20 per cent of its 1,000 workforce to lower its burn rate. Honestbee has previously said it will reduce its headcount by 10 per cent. It further adds that the ongoing restructuring will see its monthly burn rate come down to $3million from $5 million at present.
Going back to grocery delivery
“The Bee is going back to the basics of grocery delivery and working upstream to supply chain/farm-to-table in order to capture higher margins. It is also convinced with an online-offline strategy in its new retail experience Habitat and is in talks with various local partners including Robinsons (Philippines) to expand this vertical regionally,” states the document.
Apparently, its physical store Habitat is expected to break even, and even turn profitable, after the restructuring and has currently reached cash flow balance.
One person close to the development told us that Grab was approached by the grocery delivery startup but declined to engage in further discussions. The ride-hailing giant already has a stake in Honestbee’s competitor HappyFresh. A TechCrunch report said Honestbee has been actively seeking a buyer for its business.
Founded in 2015, Honestbee provides on-demand delivery services for grocery and food orders placed on its mobile app. Its co-founder and former CEO Joel Sng was replaced by Koo earlier this month. Koo is also the general partner and founder of Silicon Valley-based investment firm Formation 8, which led the $15-million Series A round raised by Honestbee in 2015.
The food delivery business in Singapore has proven to be tough, with London-headquartered Deliveroo said to be exploring a potential sale of its Singapore operations. The stiff competition in the city-state had also caused Hong Kong-based Plum to shutter its operations this January, while hawker food delivery service startup Fastbee had closed down last year after failing to secure fresh funding.
One of the pioneers of food delivery, foodpanda, which is now backed by German company Delivery Hero, was forced to close down its Indonesia business while its Vietnamese business was gobbled up by Takeaway-backed local rival Vietnammm, which itself was said to be acquired by South Korea’s Woowa Brothers.
It doesn’t help that ride-hailing unicorns like GOJEK and Grab are doubling down on food delivery, especially the latter who has a strong presence in six Southeast Asian markets. GOJEK’s food delivery arm, Go-Food, is in the midst of rolling out its services in Singapore, Thailand and Vietnam.