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An overview of why five big startups failed to make it to the next level

E-commerce · 5 min read

Five times startups failed horribly

Any business owner will tell you that starting out is tough. And often very, very unfair. So when it comes to launching your new business you’ll need luck, timing, great investors and a clear insight into your chosen marketplace. Oh, and more luck.

Prepare for the worst ... 

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.

... to prepare for success.

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.

1. QUIXEY

Know your investors

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.

Relationship status: 'it's complicated'

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.

The beginning of the end

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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2. JAWBONE

Know your value

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.

A revolving door of cash and people 

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.

And a bitterly ironic end

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.

3. JUICERO

Know what makes you special

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.

How unique are you, really?

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.

Lies, damned lies

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.

4.  SPRIG

Know your market

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.

Operating in fine margins

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 pace in this busy marketplace. But it quickly discovered that it’s an incredibly difficult model to sustain on account of the weighty overheads.

Destined for failure

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.

In 2017, CEO Gagan Biyani announced to the world through a blog post that Sprig had folded. It joined Maple, Spoonrocket and others on the ever-growing scrapheap of gourmet food services.

5. BEEPI

Know where your money's going

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.

Money down the drain

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.

Great idea, terrible execution

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’.

Next Steps

Contact your local DHL Express office to discuss this topic. 

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