They raised millions of dollars in financing. They sought to be disruptors. But they failed miserably. We tell you what lessons we can draw from these experiences
We often hear about the Facebooks and Amazons of the world. But what about the countless startups that didn’t make it?
I’m sure you know that 9 out of 10 startups fail. This statistic is repeated so often that it has become a mantra in the entrepreneurial world.
If your goal isn’t to run away with venture capitalists’ money, then I’m sure you’ll learn valuable lessons from failed startups.
After all, some great person has said:
“The secret to success is knowing who to blame for your failures”. – Anonymous
Oh, sorry, I think I made the wrong appointment. Here is the correct one:
«Failure is not an option. It comes included with the software ». – Anonymous
Oh, sorry guys, I think something is wrong with my keyboard today. One last try:
«Failure is simply the opportunity to start again, this time more intelligently. —Henry Ford
Now we have set the right tone for the rest of the article. Whether you’re a bright-eyed newbie or a battle-hardened entrepreneur, pay attention. The ghosts of failed startups have a lot to teach us. Their stories could be the key to your success.
But what was Quibi?
Quibi, short for “Quick Bites,” was a streaming platform that sought to revolutionize the way people consumed content on their mobile phones. It was launched in April 2020.
Quibi’s unique proposition was short-form, “high-quality” content, designed specifically for viewing on mobile. You could watch it for $5 with ads and $8 without ads.
What was your plan?
Quibi’s goal was to capture the attention of millennials and Generation Z, who were increasingly consuming content on their phones during short breaks throughout the day.
Did you raise money?
A lot! It received funding of over a billion dollars, $1.75 billion to be exact, in two funding rounds.
And yet it closed in just six months.
What went wrong?
First, who asked for it? And secondly, who knew of its existence?
Exact! Lack of demand and bad marketing. But that’s too simple to summarize.
There are more reasons: they didn’t recognize TikTok and Netflix as competitors, they could have experimented more with the pricing of their service, they got into a legal dispute early on, and perhaps launching a new streaming service during the pandemic was the last straw.
Lessons learned?
- Overconfidence in the power of brand and leadership can be dangerous. Quibi’s founding team was made up of heavyweights like Jeffrey Katzenberg — former president of Disney, and Meg Whitman — former CEO of eBay and Hewlett-Packard (HP).
- Know your audience and recognize your competitors. Don’t live in an arrogant fantasy where you are always right.
- If content is king, then distribution is queen. Quibi struggled to distribute and promote its shows effectively. A great product needs equally great marketing and distribution strategies.
- Be cautious with spending, especially in the early stages. Make sure your business model is sustainable.
- Finally, listen to user feedback and be prepared to adapt.
What was Theranos?
Theranos was a health technology startup founded in 2003 by Elizabeth Holmes when she was just 19 years old. The company’s main claim was that it could perform hundreds of blood tests using just a few drops from a finger prick, rather than the traditional method of drawing blood from a vein.
Did you raise money?
Yes, it had more than $400 million in financing between 2004 and 2014. And at its peak in 2015, it was valued at $10 billion.
What went wrong?
Nothing, and practically everything.
They never revealed or patented their technology. Guess why? Because they didn’t have any in the first place!
The company’s president, Balwani, was sentenced to prison for 12 years and 11 months, while the CEO, Elizabeth Holmes was sentenced to 11 years and 3 months.
What do we learn from this?
- If someone says they can turn water into wine, make sure it’s not just grape juice in a fancy bottle. Verify statements whenever possible.
- If a company is more secret than your teenager’s diary, something is probably wrong. Similarly, if you’re starting a company, be as transparent as possible.
- They say “fake it until you make it.” But don’t take it too far, or you’ll end up in prison.
What was Juicero?
Juicero was a startup founded in 2013 by Doug Evans. The company’s main product was a Wi-Fi connected juice machine, designed to make fresh juice from pre-packaged packets of fruits and vegetables.
The device cost $399 and only worked with bags of fruits and vegetables that the company sold for $5 to $8.
Did you raise money?
Yes, about $120 million in funding from investors in Silicon Valley.
What went wrong?
People were smart enough to discover that there was a cheaper alternative to the Juicero device: their own hands. You could just buy the fruit packets and squeeze them yourself to get the juice. So what was the need for a $399 machine?
In its defense, the company said the juicer was connected to Wi-Fi and could read expiration dates. Of course, why trust human eyes when machines can read?
What can we learn from this?
- If you have good storytelling skills and can sell your vision, you can raise money for anything.
- Solve a real problem! If the main function of your product is to open a bag, you may want to introduce your team to a pair of scissors.
- Keep it simple. Avoid over-engineering and set reasonable prices.
What was this startup doing?
Beepi was a startup that sought to revolutionize the process of buying and selling used cars. It was founded in 2013 and was based in Los Altos, California.
They wanted to be a true “disruptor.”
For sellers, the advantage was that, once the car was inspected by Beepi and listed on its platform, if the car did not find a buyer, Beepi would buy it and continue trying to sell it.
For buyers, they could use multiple payment options, including bitcoin, have the car delivered to their home and return it within 10 days if they didn’t like it. All this for a 9% commission.
Did you raise money?
Total funding of $149 million was raised between June 2013 and August 2015. At its peak, the company was valued at $560 million.
This one looks good, what went wrong?
Turns out they spent too much money too quickly. According to some former employees, the money burn rate was about $7 million a month at its peak, when the company had 300 employees. They soon ran out of money and had to look for potential buyers for the company.
What should we learn from this?
- Turns out money doesn’t grow on trees — who knew? Burn rate matters. So spend wisely or risk your own extinction.
- Focus on profitability. It’s good to chase users, but it’s also important to try to be profitable.
What was Jawbone doing?
Jawbone was a consumer technology company founded in 1999 by Hosain Rahman and Alexander Asseily. The company was known for its innovative technology in wearable and audio devices.
Jawbone’s initial focus was on noise-cancelling Bluetooth headphones for mobile phones. They then introduced the Jambox line of portable speakers.
Then came their ambitious, not-so-successful product: the UP3 fitness tracker.
Did you raise money?
They raised nearly $1 billion in funding, according to Crunchbase. At its peak, the company was valued at $3 billion.
What went wrong?
Despite having a head start and good funding in wearable fitness products, they lacked focus and long-term vision. To make matters worse, there were internal clashes between teams, which led to a toxic work culture.
Their fitness bands had some quality control issues, leading to loss of user trust, and Apple and FitBit came along just in time to capitalize on it.
The company was eventually liquidated in July 2017.
It is often better to excel in one area than to be mediocre in many.
Ensuring product quality and reliability is essential to maintaining customer trust.
Jawbone struggled to keep up with competitors like Fitbit and Apple. It is important to constantly innovate and adapt to market changes.
With this we conclude our tour through the cemetery of startups that received a million in financing. I hope you learn from the failures of others and avoid starring in the next cautionary tale.
