Conventional wisdom says that half of all businesses fail in the first year and more than 90% fail in the first five years. The Small Business Administration issued a study in 2016 that says 75% survive the first year and a half survive five years.
However, many startups do fail, and some do so miserably, spectacularly or both. Let’s look at seven startups who failed miserably. A good internet marketing company could have strategically taken them on a different path. But of course, it takes more than just a great marketing to win in business. These startups hold a lesson for the rest on how not to run a new business.
Silicon Valley, in particular, has been home to multiple billion-dollar startup companies that failed. CueCat by Digital Convergence Corporation set the stage for this by raising almost $200 million dollars in funding and then falling apart.
CueCat was a device that let you scan barcodes and go to the website of the barcode’s creator; this was a precursor to the technology that lets you scan or take a picture of a QR code and go to a website. It was arguably a failure because it required the separate, proprietary CueCat device and wasn’t as universal as smartphones today.
The solar startup Solyndra was touted by President Obama as the future of American energy. Solyndra received almost a billion dollars in loans from the Energy Department in addition to many tax breaks and nearly guaranteed high market prices for power it produced per renewable energy mandates.
When your business fails despite government financial backing and nearly guaranteed pay rates for what you produce, there must be something wrong with it.
Pay by touch
Pay By Touch was intended to let you pay for items with your fingerprint, tying the security of biometrics with the convenience of immediate payment. The startup received a whopping $340 million dollars between 2002 and 2008. The company’s biggest problem was wasting much of the money that it received.
Quirky was New York’s innovation factory. It was intended to crowdfund inventions by the everyman. It was churning out products that ended up in stores like Home Depot, instead of apps and websites.
The startup managed to receive $170 million dollars in funding but failed in 2015. Its biggest mistake was trying to handle everything from engineering to manufacturing to retailing. It didn’t fail as spectacularly as Fab.com, though, which managed to squander $300 million dollars.
Boo.com opened its doors in 1998. Like pets.com and other 2000 tech bubble companies, it benefited from being the first on the block and securing an easy to remember web domain.
Unlike other early internet companies, it had a solid business plan. The company sold branded fashion online. It managed to receive $135 million dollars and burn through it in less than two years.
Its biggest failures were trying to go live to too many markets at once without adequate support, not setting up a solid “back end” for order processing and tax calculations, and trying to rely on too many suppliers when they were still getting the kinks out of their system. This business fail shows why an order management system is imperative.
Wesabe was an early personal money management tool competing with Mint. Wesabe received five million in funding and lasted through 2010. Wesabe’s failure was based on a poorly designed user interface. Mint, in contrast, was bought by Intuit for $170 million.
Friendster gets points for being the early social network that could have become Facebook. Unlike a number of other Facebook-wannabees, it is still online.
The site received almost fifty million in funding and has remained running, but its failure was not to capitalize on being so early in the market.It even failed to sell itself to Google when it had the chance. Friendster evolved into a gaming site, but the team had to shut it down because of poor engagement.
The biggest startups that failed typically did so because they wasted money like a drunken sailor, though trying to do too much in house was often to blame as well.
Several companies combined wasteful spending with a poor user interface or proprietary technology that prevented them from taking off. And many of them compounded their failures by refusing to be bought out by bigger companies.