Indonesian fashion startup Sorabel to close down as Covid-19 wipes out cash

Sorabel, an Indonesian fashion ecommerce startup, is set to close down as the Covid-19 pandemic wiped out its cash.

“Our business was hit very significantly, and we just didn’t have cash reserves to survive this major crisis,” Jeffrey Yuwono, co-founder and former CEO of Sorabel, told Tech in Asia.

Photo credit: Sorabel

The company is now under “administration,” which means it has appointed a third-party administrator to look after the interests of its shareholders and creditors.

According to Sorabel chief financial officer Kevin Widlansky, it’s possible that the company might liquidate parts of Sale Stock – the company behind Sorabel – while another company may acquire the rest, including the Sorabel brand. If that happens, the Sorabel brand may continue to exist and some employees may also stay with the company, with the acquiring company leading the business.

Local media DailySocial earlier reported that Sorabel is undergoing a “liquidation process.”

“Due to this liquidation process, we have to terminate employment contracts with no exception, effective July 30. I am certain that no one would ever expect this to happen,” the company said in an internal letter to employees, a copy of which was obtained by DailySocial.

However, Sorabel told Tech in Asia that the letter intended to inform employees that the company would not be able to pay salaries beyond this month and wouldn’t enter into liquidation or bankruptcy right away.

“Since 2016, we’ve never had more than six months of runway, and the downside of that is that it’s difficult to survive a big crisis,” Yuwono said.

Widlansky also said that the company had over six months of runway heading into Covid-19, but “it hit especially hard during Lebaran/Hari Raya because it hit demand all around but also constrained our ability to restock new goods.”

Founded in 2014 as Sale Stock, the company was on its way to profitability as of July 2019, following a rebrand in January of that year. It was also working to close a series C funding round. The startup raised a total of US$27 million from investors such as Gobi Partners, Kejora-InterVest Star Growth Fund, SMDV, and Alpha JWC Ventures, among others.

“It really felt like the rebrand had worked and we were on our way. We grew really quickly over the year from beginning to end year, grew revenue by 2.4x, and awareness for the Sorabel brand started to accelerate in Q4 of 2019,” Yuwono shared.

The company was also testing a store in the Philippines, with planned experiments in Vietnam and Cambodia. Its Philippine store, however, closed down in February this year.

Yuwono has resigned as Sorabel’s CEO since June, but he will still be involved with the company’s transition. Its co-founders Lingga Madu and Ariza Novianti, meanwhile, had left the company since late last year.