They are not kidding when they say there is too much careful consideration needed when involved with a start-up company. When you are looking forward to running a start-up business, you are in for a gamble. If you are not smart enough then you will end up with the many failures – failed startups.
The root cause of these failed startups can be from financial fraud to just running out money. There has been much of failure on the brain recently; it is partly because there is a good counterbalance to the typical survivorship bias-laden stories. Also; because understanding failure is critical to the algorithms underlying our product.
But, today we provide with this information, as the last thing we want is our young entrepreneurs to make the same mistake. Presenting you with post mortem reports of 20 failed startups lessons, so that you not make the same mistake.
List of Top Failed Startups
The CueCat was invested by Belo Corp, General Electric, RadioShack, and The Coca-Cola Company, listed in top failed startups. The scanned printed bar codes and directed, the user’s Web browser to a page chosen by whoever published the code.
CueCat was the brainchild of J. Jovan Philyaw, who sold several big-time companies on the prospects for CueCat and its parent company, Digital Convergence Corp. Philyaw, a former infomercial producer, raised a sum total of $185 million from investors including Radio Shack, Coca-Cola, NBC, and Belo.
$6.50 was the cost of the scanners, and they were distributed for free to magazine subscribers and electronics store customers. What happened is there was a poor response from the customers, no one bought it and Digital Convergence fired has to fire most of their staff.
The investors for this company were Qualcomm Ventures, Rho Ventures, Vantage Point Capital Partners, and Bezos Expeditions. Advertising revenue was declined sharply in 2016, for ChaCha, which left the company with no means to serve the debt.
The secured lender emptied ChaCha’s bank accounts. Scott Jones, the companies over has shared the fact that they sold their assets to cover their obligations, but it was not sufficient to cover it all. Which led Jones, debt holders and shareholders of the company to, unfortunately, write off their investment and listed in top failed startups
The company’s core is Construction Company, the company wanted to venture out as a technology company. The company was well trusted by its institutional investors by managing risks. The company now faces lawsuits, for misappropriate use of paying off the loan instead of solar development projects.
Quirky was an invention platform, where people were given a chance to vote on ideas which they liked. The hit ideas were later turned into products. Due to the almost non-existent margins of Quirky did not work in their favor. They were reportedly investing more in a development and selling minimally.
One of the products they invested in were they spent nearly $400,000 on a developing a Bluetooth speaker that only sold 28 units. The start-up ran out of money and filed for bankruptcy, which even affected their Wink unit. The business eventually sold its Wink smart home business for $15 million.
Homejoy, one of the failed startups provided on-demand home cleaning services, it was a low-cost cleaning service. CEO Adora Cheung blamed the worker for misclassification while the company faced lawsuits. As the company failed to raise enough funding to grow the company as big as they wanted. The company faced struggled to keep their customers when they later raised the price to meet their financial goals.
Zirtual were providers of virtual assistants. They have full-time employees. Each assistant would work multiple accounts, depending on the workload, making it cheaper for corporate clients. The company apparently over-staffed without having matched the demands. When the funding failed to come through they laid off their 400 employees in the middle of the night via an e-mail.
The secret was an anonymous app that allowed for anonymous posting of snippets of text. It was often used to address rumors or confessions, which were shared with people. But the Secret app failed to meet the expectation of CEO David Byttow. He stated that the company did not represent his visions and therefore Byttow then noted to return the investors $35 million dollars.
The music streaming service was a platform that let the users upload their music for others to listen to it. The service from immediately ran into legal problems due to the concerns about copyright violations. Despite their best intentions, the company failed to secure licenses from right holders for the vast amount of music on their service.
Rdio was another music streaming site launched in 2010, it was done in competition with the Spotify. It was launched by the founder of Skype and Kazaa. Rdio was based on a subscription streaming model, unlike Grooveshark.
The company had struggled to compete against Spotify as the foreign music service entered when they market and offered a better free version. People, therefore, preferred Spotify where they paid less and then paid up for premium. Which only resulted in a failure of Rdio due to them not gaining any subscriptions.
Leap Transit was supposedly a luxury commuter bus, this came into existence hoping to make streets less crowded due to cars. The start-up [now one of the failed startups] was suspended of its services due to disagreement with regulators. The receipt of a cease-and-desist letter put the services on a temporary hiatus. It became a permanent one and the buses were put up for auction. Leap Transit filed for bankruptcy after generating only $20,748 in gross income for the year.
Powa Technologies was an e-commerce operation whose flagship product, was called PowaTag. It was a mobile payment app that allowed the customers to make purchases directly from their smartphone.
But the downfall of Powa Technologies was swift, as it had been found that Wagner alongside the company made false claims about their relationship with the Chinese company that was driving the value of the company. The many investors, which made the Powa Technologies look like such a promising company and a priced possession, did not invest in reality.
A company founded by Parker Conrad named Zenefits that aimed to provide human resource services to small businesses. The company’s downfall took place as Conrad could not fix the disorganization within the company.
He failed to overlook the positions such as office manager, IT workers, and even a receptionist. The internal problems at Zenefits led to both the illegal selling of insurance by the company and Zenefits falling short of its revenue goals.
At the end of the day, it ends up to get a new client for business. As the increase in the frequency of transactions and transaction sizes is growth in the business. Without those, there is no possibility of a successful start-up.
Mismanagement of finances by Mode Media, had them labeled as the most unprofessional. As for their clients, partners and employee base, it was an unethical experience imaginable. Thus the with the shutdown announcement, the manager receives emails from headquarters requesting immediate transfer of all funds and assets.
Khosla Ventures, Alberta Investment Management Corporation, and Artis Capital Management invested in KiOR. The poor hiring decisions resulted in a predominance of lab researchers with Ph.Ds.’ That brought the downfall of KiOR was the lack of people with real operational experience. As unfortunate events such as scarcity of technical people with enough knowledge of carrying operational experience running energy facilities.
With investors such as Kleiner Perkins, Atlas Venture, and Intel Capital, The Nectar system decided to set its roots at MIT’s Microsystems Technology Lab. The system saw the downfall simply because they left the lab much earlier than they should have.
Lauder Partners and Time Warner Investments invested in OnLive. They started off pretty well no doubt at that because of their ability to deliver a lag-free experience. Though the further studies show that the business indeed had some troubles which dragged them to bankruptcy. Which was later followed by big layoffs and a buyout.
The Coraid operations failed to raise new funding, among other reasons which could have caused the end of the business. The company which was invested by Azure Capital Partners and Menlo Ventures closed up for good and filed for bankruptcy.
Cereva Networks was a victim of swiftly shrinking corporate IT budgets. The company failed to meet the demand for a start-up large-scale, storage systems. Resulted in abruptly shutting down and laid off 140 employees.
Aereo users were assigned with a mini broadcast TV antenna, this infrastructure drove its online service. FirstMark Capital and Highland Capital Partners invested in Aereo. The service was no different than sticking a pair of bunny ears on your television, was said by the providers.
It was a technique by which, Aereo could avoid paying retransmission fees for broadcasters’ content. But unfortunately for Aereo, the broadcasters never bought this argument and neither did the law. Thus listed in top failed startups.
It is highly suggested for our future entrepreneurs to see through the cases of these unfortunate start-ups which met the downfall. Whether it be a case of wrong investment or not the exact visionary idea, you can definitely learn from the mistakes the above start-ups did. An advice to always research the depth of business you are looking to invest in.
Lewis Khan is a freelance content writer, currently associated with the firm Limetree Marketing (http://www.limetreemarketing.com/). He is a writer by passion and a sports person by heart. He enjoys regular swimming and jogging. He even opts to teach swimming to kids. He has a puppy named Max and prefers to spend his weekends at home playing with it and catching up on current affairs in the world. Reading is his passion and he prefers staying updated with current news.
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