In memoriam: 7 once-hot startups that shut their doors in 2015
As legend has it, 90% of startups fail.
While the seven on this list collectively raised nearly $400 million in venture capital, these startups are only a few of the high-profile ones that ended up shuttering their doors in 2015. CB Insights has a full list of 146 startup failure post-mortemsfrom the past few years.
Here's how they tried to change the world, and what other startup founders can learn from their demise:
Quirky
What was it: Launched in 2009, Quirky was an invention platform where people could vote on product ideas they loved, and the company would turn them into products, like the much-loved Pivot Power strip. It also created a subsidiary Internet of Things business called Wink, which made hubs for the smart home.
Why it closed: Many of Quirky's products had thin to non-existent margins, Business Insider's Jillian D'Onfro reported. For example, the company spent nearly $400,000 on developing a Bluetooth speaker that only sold 28 units.
Its Wink unit also faced distress, and a botched security update meant the company had to do a nationwide recall this spring of all of its smart home hubs.
The startup ran out of money and filed for bankruptcy in September. It had struggled to change its business model after several rounds of layoffs, and eventually sold its Wink smart-home business for $15 million. Its CEO had stepped down in August.
Money raised: $185 million from Andreessen Horowitz, GE, RRE Ventures, Norwest Venture Partners, and Kleiner, Perkins.
Homejoy
What was it: Homejoy offered on-demand home-cleaning services. One of the first companies into the so-called gig economy, Homejoy was a favorite of the press because it offered low-cost cleaning and was using software to automate the process of booking so it would be more efficient.
Why it closed: In an interview with Re/code, Homejoy CEO Adora Cheung blamed the worker-misclassification lawsuits the company faced. It had failed to raise enough funding to grow the company as big as they wanted, she said, so it decided to shutter its doors in July.
But Christina Farr on Backchannel pointed to poor customer retention, poor worker retention, and mounting losses as its downfall. Like Groupon, the company had struggled to entice repeat customers when it offered a cheap initial cleaning and then later raised the price.
Money raised: $40 million from Y Combinator, PayPal founder Max Levchin, First Round Capital, Redpoint Ventures, and Google Ventures.
Zirtual
What was it: Zirtual provided on-demand virtual assistants. Instead of taking the gig economy model and using only contract workers, Zirtual differentiated itself by having full-time employees. Each assistant would work multiple accounts, depending on the workload, making it cheaper for corporate clients.
Why it closed: In August, Zirtual laid off its 400 employees in the middle of the night via an e-mail, after a last-minute Hail Mary round of funding failed to come through. CEO Maren Kate Donovan later said the "numbers were f-----" and the company had over-staffed without having matching demand.
Looking back, she told Fortune that she should have hired a full-time CFO and had a proper board for the company. Zirtual's assets were acquired in October by Fundable.
Money raised: $5.5 million, including from Jason Calacanis, Mayfield Fund, Tony Hsieh, and the VegasTechFund.
Secret
What was it: Secret was an app that allowed for anonymous posting of snippets of text, often rumors or confessions, that were shared with people. It was huge at SXSW and rose along with other anonymous apps like Whisper and Yik Yak. But like many anonymous apps, Secret had problems with cyberbullying and eventually redesigned itself to look like competitor Yik Yak.
Why it closed: In his farewell blog post, CEO David Byttow wrote that Secret "does not represent the vision I had when starting the company." He continued: "I believe in honest, open communication and creative expression, and anonymity is a great device to achieve it. But it's also the ultimate double-edged sword, which must be wielded with great respect and care."
Money raised: $35 million. Byttow noted that most of the money would be returned to investors.
Grooveshark
What was it: The music-streaming service launched in 2006 as a site where users could upload their music for others to listen to it. It immediately ran into legal problems over concerns about copyright violations, and over the years tried to sign contracts with one of the largest royalty companies. That company said it never really received information from Grooveshark on what was being streamed, so it — and pretty much every other major music company — started suing them.
Why it closed: In its goodbye note, published as part of its settlement conference, the streaming site acknowledged that "despite the best of intentions," it made mistakes by failing to secure licenses from rights holders for the vast amount of music on the service.
Money raised: $6 million.
Rdio
What was it: Launched by the guys who founded Skype and Kazaa, Rdio was another music-streaming site launched in 2010 to compete with Spotify, and now Apple Music. Unlike Grooveshark, Rdio was based on a subscription-streaming model, but it puttered along in second place behind Spotify for much of its existence.
Why it closed: In November, Variety's Janko Roettgers reported that Pandora was acquiring the "technology and intellectual property" from Rdio for $75 million, contingent upon its bankruptcy proceedings. The company had struggled to compete against Spotify since 2011, when the foreign-music service entered the US market and offered a better free version. People got hooked to Spotify and then paid up for premium, but Rdio failed to gain the subscriptions or reinvent itself.
Money raised: $125.7 million.
Leap Transit
What was it: Leap Transit was supposed to offer a luxury commuter bus on bus routes that benefited the commuter and weren't serviced by the city. The critics in San Francisco claimed it was just another way for rich techies to get to work — the city already has an extensive network of commuter shuttles. A city supervisor reportedly called it a "crock of s---" and criticized it for creating a two-tier transit system in the city when it first launched in 2013.
Leap's proponents, though, saw it as a problem-solver and a way to get more cars off the street. The high-end line of buses was equipped with Wi-Fi, coffee, snacks, power outlets, and leather seats. It unabashedly catered to those who could afford its $6 ticket each way.
Why it closed: The startup suspended its service in May after a disagreement with regulators and the receipt of a cease-and-desist letter. The temporary hiatus became a permanent one months later after its buses were put up for auction. In July, the company filed for bankruptcy after generating only $20,748 in gross income for the year.
Money raised: $2.5 million from Andreessen Horowitz, Index Ventures, Slow Ventures, and Salesforce CEO Marc Benioff.
Comments
Post a Comment