Where Did It All Go Wrong? 5 Startups That Failed
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A question on Quora sparked my interest this week – What is the most BS startup that you have seen?
There are many reasons a startup might fail. It may not have the right people, there may be a lack of product-market fit, it might be bad at acquiring and retaining users, or the most common; it simply runs out of money.
Today we take a look at some of the more high profile failures, to see where these startups went wrong after an initial burst of funding.
Confido
Towards the end of 2017 Confido was becoming one of the most hyped blockchain projects to hit the market. It billed itself as a ‘smart contract’ startup and raised $375,000 through an initial coin offering.
But just two weeks after the raise the founders had vanished. Any trace of the company’s social media presence disappeared with them, before a cached version of a Medium post by the company was discovered (it has since been removed). It said Confido was in a ‘tight spot’ due to legal trouble with a contract.
In a matter of hours Confido was, for the most part, gone. So too was the value of the CFD token. At one point these tokens traded for as much as $1.20. They currently trade at around $0.03.
An important lesson for anyone looking to participate in an ICO; it was relatively easy for the team to put together a website, set up some fake profiles and sound compelling enough to get some viral coverage. But without some actual substance to the startup, it’s dead in the water.
Juicero
When it launched in 2016 Juicero was hailed as the new king of juices. Despite its main product being a juice squeezer with a hefty price tag of US$699 (swiftly dropped to US$400), the company raised an impressive $100 million from Silicon Valley venture capitalists.
The idea behind the product was to create a juicer for the home that could transform a produce pack (a sealed pouch of hand cut raw fruit and vegetables) into a tasty, healthy juice, and all at the press of a button.
Juicero had tapped into two particularly juicy trends – subscription services and health foods.
But within a few short months Bloomberg discovered – rather hilariously – that the package the produce came in actually allowed you to squeeze the fruit by hand, eliminating the need for the pricey juicer altogether.
A swirl of not-so-positive coverage emerged, and 18 months after its launch Juicerco had suspended operations. The lesson? In such technologically advanced times, there’s a real and present danger of over-engineering.
E Umbrella
Umbrella-sharing startup E Umbrella launched in 2017, tapping into the trendy sharing platform market following the huge success of several bike sharing platforms in China.
The theory behind the app was that it allowed people to rent umbrellas — which are picked up from stands located at subways and bus stations — for a deposit of 19 yuan ($3.70), with a fee of 0.50 yuan (10c) charged for every 30 minutes of use. Launching with an investment of 10 million yuan ($1.9 million), the startup was tipped for success.
The reality was quite the opposite. It took only a few weeks for the startup to lose nearly nearly all 300,000 of its umbrellas.
Lacking the in-built GPS of bike-share services, the company had no way to track their umbrellas. And the incredibly low deposit was hardly a big enough motivator for users to return their hired umbrellas to a designated spot.
“The startup is closed now,” E Umbrella founder Lei Houyi told Shanghaiist. Thankfully he was very philosophical about the whole experience – “I’ll think of it as a charity project.”
Beepi
Beepi was a startup launched in Mountain View, California in April 2014 which offered an online peer-to-peer marketplace for buying, selling and leasing used cars. Transactions could be carried out entirely with a smartphone or a PC.
After going through nearly $150 million in funding and growing to an impressive 300 employees, the company shut down operations in late 2016.
Beepi is a textbook case of a startup with a good idea at its core, but which was run into the ground through bad management.
It had been valued as high as $560 million in previous rounds of funding after raising money from 35 different investors, but according to TechCrunch sources the priorities of Beepi management were all out of whack. One ex-employee said Beepi was burning through around $7 million a month while at its peak of 300 employees.
Primary Data
One story emerging this year is that of four-year-old California-based data virtualisation startup Primary Data. The company is said to be is in the process of shutting down after raising a whopping $100 million in equity and debt and attracting the likes of Apple co-founder Steve Wozniak to its management team.
The reported Primary Data shutdown comes barely five months after the startup picked up $20 million in funding and a $20 million line of credit. Its CEO is yet to confirm the shut down, but reviews on Glassdoor by former employees certainly seem to point that way. “Running out of money means that they suddenly had to shut down. All the other [cons] pale in comparison,” one ex-employee states.
Company CEO Lance Smith has so far only been able to offer the most non-existent of commentary. “There’s nothing I can comment on at this time,” he says. Insightful. Indeed only time, it seems, will tell us where Primary Data is at.
Lessons Learnt
These examples can teach us a few important lessons, to sum up:
- Be vigilant with crypto, as a new hot industry – plenty of scams will emerge.
- Don’t create technology just for the sake of it, check there’s a problem that actually needs solving.
- The sharing economy doesn’t work for everything.
- When in startup mode, watch every single dollar.
- Never lend your mate your brolly.
