South Korean mobile services startup Yello Mobile, one of the country’s first official unicorns, is on the verge of collapse as unpaid loans and lawsuits mount and further wreck its financial health, according to a report by The Investor.
Yello Mobile, which has raised $187.2 million in four funding rounds since November 2014, was worth more than $4 billion at its peak, with revenue soaring to W527 billion ($467 million) in 2017. The company, however, posted operating losses for consecutive years until 2017, when operating profits hit a mere W18.9 billion ($1.7 million).
According to the report, Yello Mobile’s CEO Lee Sang-hyok is facing numerous lawsuits for borrowing excessively from partners and affiliates without settling the obligations. These loans were reportedly used to acquire more startups. The company has said that it is trying to pay back the loans.
Additionally, the startup’s investors DS Asset Management and Alpen Route are demanding to be paid back W10.4 billion ($9.2 million) and W16.9 billion ($15 million), respectively. DS Asset invested W10 billion ($8.9 million) in Yello Mobile in 2013.
Founded in 2012, Yello Mobile operates businesses across shopping, media (content), advertising (marketing), travel and O2O (online to offline platform).
Yello Mobile’s “brink-of-collapse” story is not unique in the startup space. Recently, Chinese media reported that Ai Wu Ji Wu (Iwjw), a Chinese startup that operates an online platform for house rental services, has gone into liquidation after raising a total of $305 million in funding since its inception in 2014.
Iwjw’s big-ticket investors include GGV Capital, Temasek Holdings, Hillhouse Capital, and Morningside Group.
In December, Alibaba-backed Chinese bike-sharing startup Ofo was reported to be considering applying for bankruptcy due to “immense” cash flow problems.