Failed Startups: 7 Startup Founders Reveal What Went Wrong with Their Startups


Every startup is striving to achieve its goals, vision and ultimate purpose. The unfortunate news is that 90% of most startups shut down before they even start. Some of them shutdown even though they have millions of users. Others shutdown because they don’t have enough funds to take off. Management has often been an issue too.

Formspring (question-and-answer-based social networking service) launched in November 2009 as a unique way for people to have engaging conversations about anything. Eventually reaching over 30 million registered users and 4 billion posts and then it shut down. Yes, 30 million users but the company had to shut down.

Formspring became an important part of how people interact online. The founder said, they had to shut down because was challenging to sustain the resources needed to keep the lights on. The company shutdown in March 31st 2013.

Some entrepreneurs wish they had done something before they got to that point of no return. Check out what  40 Successful entrepreneurs wish they Knew before starting their businesses for more lessons and advice on starting and running a successful business.

These are 7 other startups that shutdown for different reasons and lessons learned after the unfortunate shutdown.

1. Failed startup: Intellibank (sort of like Dropb0x)

Shared by Gary Swar

My former company, Intellibank, was sort of like Dropbox done wrong. You’ve probably never heard of Intellibank, because it came and went like so many startups do, but it was a promising company with smart people. We raised money and could have been the next big thing, but it never happened. Why?

What went wrong:

At Intellibank, we did not achieve product-market fit. Every customer was asking for something different and we gave it to them. We had six markets with 40 different types of customers, and in hindsight, we should have developed just one product. We couldn’t be all things to all people — and by failing to declare our major, we created a world of chaos for our sales, product and marketing teams.

Lesson learned:

1./ Your goal should not be meeting your customers’ expectations; it should be exceeding them.

2./  In order to succeed, a startup needs to do one or two things exceptionally well;

3./ Validate with your customers, not your investors.

4./ Take a step back and ask yourself the most important question of all—when your customers are using the product how do they feel, and will that feeling keep them coming back?

Original post-mortem

2. Startup: Standout Jobs (recruitment communication platform)

Shared by Ben Yoskovitz

What went wrong: 

I raised too much money, too early for Standout Jobs (~$1.8M). We didn’t have the validation needed to justify raising the money we did. Part of the reason for this is that the founding team couldn’t build an MVP on its own. That was a mistake.

If the founding team can’t put out product on its own (or with a small amount of external help from freelancers) they shouldn’t be founding a startup. We could have brought on additional co-founders, who would have been compensated primarily with equity versus cash, but we didn’t.

Our timing was terrible. We launched the paying version of our application in the fall of 2008 about 5 minutes before the economy collapsed. We knew the economy was heading south, but we had no idea how bad it would be and how long it would last. And we failed to react quickly and aggressively enough.

Lesson learned:

1./ Success is never as easy as it seems when someone else talks about it, and failure is rarely as dismal as it seems either.

2./ “Overnight successes” are generally bullshit. No road to startup success is without big, massive road bumps. It’s called a rollercoaster for a reason.

3./ In the future I’ll focus a lot more on a Minimum Viable Product (MVP) and getting it into the hands of customers as early as possible. And even more importantly, I’ll solicit real, hard feedback from them.

Original post-mortem

3. Startup: Cusoy ( restaurant meal planner based on your dietary needs)

Shared by Melissa Tsang

What went wrong:

I didn’t want a startup, but an actual business that generates revenue, and Cusoy would not fulfill that personal goal for me without a full-time team, 1-2+ years of funding, multiple years of hard work (3-5+ years at the very least?) trying to answer the if/when questions of whether or not Cusoy could make money (very expensive questions too, might I add — not only in money but time, my most valuable asset). 

While I know there might be a possibility I could hustle incredibly hard and try to set up partnerships, the time investment required far outweighed the already incredibly slim chances of generating revenue.

Lesson Learned:

1./ I felt that Cusoy did succeed in solving the initial problem I set out to solve, but ultimately it was difficult for me to generate money from it (or at least see a clear, predictable way to sustainability).

2. Monetizing user-generated content is really, really hard. Especially for Cusoy, where it heavily relies on users to crowdsource information and generate new restaurant additions, it doesn’t encourage or incentivize users to do so if they have to pay to use Cusoy.

Original post-mortem

4.   Startup: Teamometer (online team diagnostic tool)

Shared by Sergio Schuler

Here are the startup lessons learned from Teamometer, a startup with 2 years and about 300 users.

What went wrong:

I had all those people who were interested in the product. I judged the product “validated” (WRONG! WRONG! WRONG!) and went on to build it. Looking back, I cannot believe how stupid I was. I had all those people who said they were interested and the obvious next step was NOT building the product, but TALKING to the people who were interested.

Lesson learned:

1./ Just speak to prospects and extract their pain, then sell the painkiller (before building the product).

2./  (Don’t) multiply big numbers. Until you have your first 10 clients, you have proved nothing, only that you can multiply numbers.

3./ Never underestimate expectations.

4./ Validating the product is more important than vanity metrics like how many likes you got on Facebook.

Original post-mortem

5.  Startup: Everpix ( photo hosting service)

Shared on The Verge

What went wrong:

Everpix attracted 55,000 users and earned enough each month to cover the cost of the service, if not employees’ salaries. But while its talented team obsessed over the look and features of its product, user growth failed to keep pace. 

They failed to effectively position themselves against giants like Apple and Google, who offer fairly robust — and mostly free — Everpix alternatives. And while the product wasn’t particularly difficult to use, it did have a learning curve and required a commitment to entrust an unknown startup with your life’s memories — a hard sell that Everpix never got around to making much easier. Everpix is in the process of selling off its technology in order to cover the costs of ending the service.  

Lessons learned:

1./ The founders acknowledge they made mistakes along the way. They spent too much time on the product and not enough time on growth and distribution. The first pitch deck they put together for investors was mediocre. They began marketing too late.

2./ They hoped that at the very least, they would be able to refund their customers’ money and allow them to download their data. “We’ve made a commitment to people,” said Sameer Sundresh, the company’s back-end engineer, wearing a pained expression on his face.

Original post-mortem

6.  Startup: Gowalla ( location-based social network)

Shared by Josh Williams 

What went wrong:

While Gowalla continued to grow, the trajectory was not what it needed to be. At least not in terms of winning the game we had chosen to play. We were the younger, prettier, but less popular sister of Foursquare. And even that had changed. In time, Foursquare had dramatically improved the design and experience of its service. This was no longer a defensible platform for us as a company.

 We felt that in order to survive we had to get our numbers up. We tried just about everything to juice growth, some ideas being more successful than others.

Lessons learned: 

1./ Play by your own rules. Listen to your users more than the press. Don’t get sucked into the gravity hole between you and your competition. Ruthlessly run your own path, not someone else’s.

Original post-mortem

7. Startup: Sonar (social discovery app)

Shared by Brett Martin

What went wrong:

We received conflicting advice from lots of smart people about which is more important. We focused on engagement, which we improved by orders of magnitude. No one cared.

People didn’t like the bland “@Sonar” text string so they stopped sharing updates from Sonar. Their friends never engaged with our updates in the first place. Facebook noticed this and started hiding our posts. Instead of optimizing for actual user behavior, we spent countless whiteboarding sessions trying in vain to design an alternative.

Lesson learned: 

1./ Growth is the only thing that matters if you are building a social network. Period. Engagement is great but you aren’t even going to get the meeting unless your top-line numbers reach a certain threshold (which is different for seed vs. series A vs. selling advertising).

2./ Be polite, but postpone brand and agency “intros” until you’ve built your own audience. If you build it, they will come (and pay).

3./ You do not have 20% time. Identify your top three priorities. Throw away numbers two and three.

4./ Be steady at the wheel. The only way one startup can kill another startup is by getting into the other’s head and leading them off a cliff.


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