In 2017 there were 5.7 million businesses in the UK. In the United States there were nearly 30 million. In both countries over 99% of those businesses were SMEs. Just 50% of those businesses will survive their first five years. And a further third will disappear after ten. There’s no doubting it: it’s a cold, hard world for new business owners.
So for your guidance (and possibly pleasure) here are some fateful examples of recent, doomed enterprises, the people behind them and the reasons they failed. Get your pen and paper out. You’ll want to take notes.
Quixey began life in 2009 as a rather clever 'deep search' app that was able to mine information from other apps, to satisfy your query. For example, from a 'Hotels in New York' query, it could source hotels, transport, local entertainment information and weather from all your other downloaded apps. Pretty soon the fledgling company had raised an initial US$80m investment from Chinese search giant Alibaba. So far, so good.
But it was when Quixey signed a separate commercial contract with Alibaba that things started to go downhill. Alibaba were now both customer and investor to Quixey. A tricky relationship that led to numerous quarrels over who owed who how much.
What followed was the long slow death of Quixey as it failed to settle its differences with Alibaba. When Google and Apple replicated the technology in Quixey for themselves, the app lost its relevance, appeal and value. It disappeared forever in 2017.
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Every new company needs investment. And for many new businesses, finding that investment is the hardest part of getting started. But it’s worth remembering that sometimes an inflated sense of worth can bring with it unreasonable levels of expectation. That was the case for the once-fêted billion-dollar unicorn and creators of wearable fitness trackers, Jawbone.
In 2014, against a valuation of US$3.2bn, Jawbone easily raised US$147m in investment. By 2015, the same year it was laying off 15% of its workforce, it raised a further US$400m. Then in 2016, after another final injection of US$165m and the loss of its president, Jawbone was forced to face up to the looming, inevitable specter of failure.
Yet what really killed Jawbone in the end wasn’t the failure of its product to launch in a crowded marketplace, it was its inability to find to a buyer when it was failing. No-one was willing to match the grotesquely unrealistic valuation of Jawbone after its IPO. So when it could quite easily have been salvaged, it was ultimately sabotaged by its price tag. In the end, what really killed Jawbone was over-investment.
Hubris is a common pitfall in the business community. But rarely has there been such an incredible example of inflated self-worth, than in that of the cautionary tale of cold-press juicer manufacturers Juicero.
As anyone with a business head on will tell you, one of the key rules to success is identifying your Unique Selling Proposition (USP). The more unique your product, the higher its value to the consumer. In the case of Juicero, who raised over US$120m to manufacture a juicer that retailed for an astonishing US$400, this was not a principle well adhered to.
CEO Doug Evans assured the world Juicero had a great USP, claiming it administered over 4 tons of pressure to cold-press the contents of its fruit pouches. He also fitted it with an internet connection, purely to claim that the product never juiced a pouch past its use-by-date. However, he was ultimately proven wrong when customers hand-juiced the sachets quicker than the Juicero. And noticed that the sachets came with clearly-visible expiry dates.
Juicero lasted just 16 months and is regarded by most as a triumph of arrogance over sale-ability.
The food market is notoriously difficult to crack. And while the last couple of years have seen the incredible domestic and international success of companies like Uber Eats, Deliveroo, Blue Apron and Seamless, the margins will always be perilously fine in such a demanding industry.
San Francisco based Sprig launched in 2013 in an attempt to match the public hunger for healthy food, delivered. Having raised US$56.7m to cook and deliver its own meals, the company thought it had found its place in this busy marketplace. But it quickly discovered that it’s an incredibly difficult model to sustain on account of the weighty overheads.
Burdened by fine margins that cheaper delivery services didn’t have to worry about (Domino's) and an already cluttered marketplace, Sprig was always destined for failure.
Launched in 2014, Beepi was a peer-to-peer app designed for buying and selling cars without the middleman. In its first year, Beepi raised an impressive US$72m and projected that it would turn over US$15m a year, seeing it valued at over £2bn at one point.
But things soon started to go wrong when talk of Beepi's financial indiscipline began to surface. 'Grossly high salaries' and too much overtime were matched by stories of stunting micromanagement by the owners, and even casual overspending on frivolous items.
It wasn’t long before Beepi and its ‘mercurial owners’ were forced to face up to the harsh reality of liquidating in 2017. A modern-day, cautionary tale of ‘great idea, terrible execution’.
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