Startups That Failed In 2015
90% of all startups fail. In 2015, we’ve seen the end of seemingly very promising online businesses. Let’s take another look at them and try to understand why they failed.
Quirky platform was designed to connect companies with inventors. Ben Kaufman founded it in 2009 to see the raise of $185.33 million in eight rounds of funding, from eleven investors. But on September 22, 2015 the company filed for bankruptcy. Quirky’s business model was inappropriate for the proclaimed mission. In a year, the company wanted to make dozens of products rather than concentrate on one or two viable products at a time.
- Weigh your resources and capabilities carefully
- Don’t focus on too many goals at a time
Homejoy was initially a very successful cleaning services marketplace, a Silicon Valley darling even. But on July 17, 2015б it said it was shutting down. Former employees said that it was killed by bad customer retention. According to them, Homejoy cofounder and CEO Adora Cheung and the startup “pushed relentlessly for high growth numbers instead of fixing its poor retention rates, which persisted both because Homejoy relied too heavily on deal sites like Groupon for new customers and failed to improve its core service because it couldn’t train its independent contractor cleaners”.
Homejoy expanded too quickly into new and international markets including the US, UK, and Canada. But most of the clients roped in by deal sites like Groupon and LivingSocial or by offering discounts on Homejoy’s own site could not or did not want to pay the full price, which ranged from $25 to $35 an hour. Homejoy changed its pricing last year to make recurring cleanings cheaper and encourage repeat business. In response, some customers simply booked at the cheaper price and cancelled future appointments.
It's important to be able to recognize you're moving nowhere early enough to make a pivot or even pull the plug on it.
Another reason was poor cleaning quality which made customers never come again. Homejoy suffered a high turnover rate, due to which it failed to train independent contract cleaners. And because Homejoy’s cleaners were independent contractors, the company was barred from giving them even basic training on how to clean a house, even if the workers had never cleaned professionally before. Also, the company had to face several lawsuits on whether its cleaners were contractors or employees of Homejoy.
- Don’t sacrifice customer retention for growth, or, in other words,
- Focus on quality rather than quantity
Zirtual’s mission was to simplify stuff like scheduling meetings, paying bills, managing emails, carrying out online research, booking flights, and so on. They provided personal Zirtual Assistants (ZA) - US-based point people who worked remotely as your right hand and left brain. Users delegated tasks to them and they were on it. It started to grow too rapidly which escalated their costs. One day they shifted from independent contractors to employees, and it was the last drop: their costs skyrocketed and, soon, they ran out of cash. Fundable acquired the company on October 5, 2015. Another unpleasant thing about Zirtual is that its CEO Donovan gave no indication to his 400 odd workforce early who found out on a Monday morning via an email that they have no job anymore.
- Don’t disregard processes and systems completely
- Scale your product, revenue, people and infrastructure to growth to make sure that your revenue matches incoming funding
- Develop a solid pricing and profitability strategy
- Treat your employees well
Most tech startups fail too soon after they've launched. Check out how you can avoid early disaster and secure successful launch.
Grooveshark provided free music to its users. They didn’t have to pay a cent to upload music, create their own playlists and stream their favorite songs. It all ended on May 1, 2015 when the company shut down after having got into trouble with copyright holders. According to Grooveshark, they “failed to secure licenses from rights holders for the vast amount of music on the service”.
- Know your industry well
- Know the law
Once again: 90% of startups fail. The good news about it is that you have lots of examples from which you can learn and try to avoid the mistakes when, for example, building your own mobile app or website.
P.S.: Meanwhile, we at Devvela built a new promising startup for Tyrre Burks, our client, in 2015. Check out Player's Health, an ultimate sports injury management platform.