The most epic-failed startups ever
Ten stories of startups that failed like none other.
Startups come and go. We all know it’s really hard. But some startups blow up like a firework on 4th of July. When reading their stories, you’re likely to say “what the heck?!”
There is Darwin Award for human beings stupidly killed themselves. So why not to list startups that died like none other. I’ve rated some stories below ranked from 10 to 1, where #1 is the most epic one.
Btw, help my startup succeed today — Standuply, A.I. Scrum Master for Slack, is trending on Product Hunt: check it out and leave us your feedback 🙌
10. Being
Being app launched in 2016. It let you see Instagram feeds of another person. Like Taylor Swift, letting you see what she sees up to on logging in. In a few days, Being had been downloaded thousands of times over.
It was featured on TechCrunch, The Next Web and more. It felt like an immediate success, but it turned out to be a failure.
A week later, Instagram pulled off its API for Being. The app stopped working. The team bumped Instagram with messages, sent an email to Mark Zuckerberg. But no one replied. After two weeks they gave up trying.
9. Beenz
Beenz allowed consumers to earn an online currency for performing activities such as visiting websites, shopping, etc. The beenz coins could then be spent on products of their partners.
One of its partners somehow made the error of offering 100,000 coins instead of 50 on its website. Beenz followers spent thousands of coins on toys, fridge freezers, and other goods. A fraud monitor was triggered after 1.5m coins had been collected and spent.
It led to lawsuits and negative feedback from users. Beenz later deleted those coins. It wasn’t the #1 reason why Beenz failed, but surely it ruined their chances to succeed.
8. Lily Drone
In summer 2015 Lily Camera Drone threw in the market an exciting video of their concept of a self-flying drone. A drone with a camera that follows you. Throw it in the air — was the tagline. Sounds cool, I wanted to purchase one.
Luckily, I didn’t.
The company ran a Kickstarter campaign and gathered $34 million in pre-orders. In addition to that, Lily Camera raised $16 million from Spark Capital.
On 12 January 2017, it was announced that Lily Drone is shutting down. No single drone was shipped. What’s happened with raised money remains unknown.
7. Viddy
In 2012 Viddy app was on top of the world. People called it Instagram for videos. In 2013 Twitter put a $100 million acquisition offer for the company. Viddy turned it off and raised $30 million at $370 million valuation.
Later, Twitter found another app to acquire. It was Vine. Meanwhile, Facebook changed its terms of sharing Viddy videos based on users feedback. They claimed there were too many poor videos in their newsfeeds.
Viddy started falling down. Soon, its CEO Brett O’Brien stepped away, and the company returned its investors only $18 million.
6. Pixelon
Founded in 1998 Pixelon promised better video distribution over the Internet. It gained fame for its extravagant Las Vegas launch party that cost $16 million with bands KISS, Tony Bennett, The Who performing.
A year later the company had its sudden decline. It became evident it was using technologies that were, in fact, fake. Its founder, “Michael Fenne”, was David Kim Stanley, a convicted felon involved in stock scams.
In the year 2000 Pixelon began to fire employees and reduce its operations until its bankruptcy.
5. Pay by touch
Pay By Touch app was launched in 2002. It allowed users to pay for goods and services with a swipe of their finger. The total funding was $340 million. After five years nothing was left in the bank and the company was unable to make payroll.
Pay by touch was shut down in 2008. It wasn’t a single failure that ruined the company. People say that its CEO John P. Rogers wasn’t the right person to rule a company.
He was accused of domestic abuse, drug possession, and spending company money extravagantly. San Francisco investor Phillip Bright said that Rogers was “worse than a drunken sailor.”
4. Webvan
Webvan was founded just before the dot-com bubble to become Amazon of supermarket industry. VC invested $396 million and pressured the company to grow very fast to obtain first-mover advantage. This rapid growth was one of the reasons for the downfall of the company.
Webvan placed a $1 billion order to build its warehouses and bought a fleet of delivery trucks. Then it bought HomeGrocer, a competitor that was also losing money, for $1.2 billion in stock.
None of Webvan’s senior executives or major investors had any management experience in the supermarket industry. Its CEO George Shaheen resigned as head of a management consulting firm, to join Webvan.
The company lost over $800 million and shut down in June 2001 laying off its 2,000 employees. As part of its shutdown process, all non-perishable food was donated to local food banks, at least something good came from it.
3. Color
In 2011, serial entrepreneur Bill Nguyen shocked the startup world. He announced his company called Color, had raised $41 million to build yet-another iPhone photography app.
The app went nowhere. Early adopters were put off by both the confusing interface and the lack of privacy controls. All photos taken with Color were public — anyone in the proximity of the original image poster could see them.
Soon after the app’s debut, co-founder Peter Pham resigned. Color pivoted to allow users to broadcast live from their phones to Facebook. Later Apple “acqhired” Color’s team of engineers. In 2012 Color app was shut down.
2. Clinkle
Clinkle started high by raising $30 million dollars in 2013. It aimed to change the way we pay for goods. Top VC including Peter Thiel, Marc Benioff, Accel Partners, Andreessen Horowitz and others backed the company. A year later press put a tag Silicon Valley Disaster on it.
In 2014 Clinkle started with layoffs and the departures of several high-profile executives. By the beginning of 2015, Clinkle had about 30 employees left — down from 70. By May the majority of that remaining group chose to depart.
Clinkle app has been in “stealth” mode for three years. Its unique selling proposition a closely-held secret. Few people had a chance to use it. In 2016, investors requested their money back, and Clinkle was shut down.
… and here’s the #1 and the most epic story how a company with nearly $400 million in assets went bankrupt in 45-minutes because of a failed deployment.
1. Knight Capital Group
In 2012 Knight was the largest trader in US equities. In July its developers manually deployed the new software to their 7 servers. However, they missed one more — 8th server. No one was accountable to back it up.
At 9:30 AM on August 1, the markets opened, and Knight began processing orders from brokers. The seven servers that had the new code began processing these orders correctly. But the 8th server had a fatal glitch.
It missed functionality to count the shares bought/sold. It was meant to instruct the system to stop routing an order once it is fulfilled. Imagine if you had a system capable of sending high-speed orders into the market without any tracking to see if enough orders had been executed. Ouch!
When the market opened at 9:31 AM people quickly knew something was wrong. The market was being flooded with orders out of the ordinary for regular trading volumes on certain stocks. Knight was only able to stop the system only after 45 minutes of trading.
During the first minutes, 8th server sent millions of orders into the market. Knight Capital Group saw a loss of $460 million, more than all its assets of $365 million.
In 45-minutes Knight went from being the largest trader in the US to bankrupt. Read the full story here.
Epilogue
Each failure in the stories above is unique. Some are due to personal traits of founders. Another — lack of thoughtfulness and attention to details. Or just bad luck, like with Being.
But it’s clear based on stories of Color and Clinkle, that money is not the #1 success factor. It’s like a multiplier. No matter how many millions are poured into if nothing stays behind a company. The overall sum will remain zero.
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In case you missed: here are my latest posts with lessons we learned.
