Saturday, June 16, 2018

"253 Startup Failure Post-Mortems"

From CB Insights, April 17:

It's hard to say goodbye. A compilation of startup failure post-mortems by founders and investors.
Of his many failed experiments, Thomas Edison once said:

I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.”

In the spirit of failure, we dug into the data on startup death and found that 70% of upstart tech companies fail — usually around 20 months after first raising financing (with around $1.3M in total funding closed).

For consumer hardware startups, the stats are especially brutal, with 97% of seed or crowdfunded companies eventually dying or becoming “zombies.”

So why do so many startups flame out? The real reasons can be hard to uncover, but the obituaries written by founders, investors, and journalists offer plenty of clues.

Below is a time-staggered compilation of startup post-mortems for some of the most notable failures in the CB Insights database.

After reading the 253 goodbye letters and investigative takedowns below, check out our rundown for the top 20 reasons that startups shutter.
2018 first update (4/17/2018)
In the last few months, startups have shuttered for reasons ranging from the conventional (Doppler struggled to raise capital to support the production of a complex hardware product), to the regulatory (Coinprism’s CEO cited concerns about the regulatory future of the cryptocurrency space), to the unexpected (connected wine bottle startup Kuvée ran into trouble following fires in Napa Valley).

A number of recently shuttered startups cited fierce incumbent competition as the reason for their closures. Philadelphia-based B2B food delivery startup Zoomer floundered in comparison to UberEats and GrubHub, while video platform Videma had difficulty luring consumers away from established platforms like YouTube and Facebook.

Read on for post-mortems of 11 startups that have shuttered since our last update in October 2017.

Title: ‘Colored coins’ startup Coinprism is shutting down
Product: Coinprism web wallet
In an email to CoinDesk, Coinprism founder and CEO Flavien Charlon wrote:
We didn’t see a business model that would have been viable long term. Regulators are starting to pay attention to the [cryptocurrency] space, and activities around blockchain assets (tokens exchanges, ICO tools and services, etc.) are likely to become heavily regulated in the next 5 years. That means some of these services will have to shut down or restrict their activities, some might go to prison, and only a small number of well capitalized companies will successfully adapt to the regulator’s demands.
Title: I can’t wait for you to see what we do next
Product: Shyp
Shyp CEO Kevin Gibbon published a company post-mortem on LinkedIn after the company shuttered in late March.
Consumer growth slowed. People close to me and the business began to warn that chasing consumers was the wrong strategy. After all, how often do consumers ship things? I didn’t listen.
At the time, I approached everything I did as an engineer. Rather than change direction, I tasked the team with expanding geographically and dreaming up innovative features and growth tactics to further penetrate the consumer market… But, growth at all costs is a dangerous trap that many startups fall into, mine included.
… We decided to keep the popular-but-unprofitable parts of our business running, with small teams of their own behind them. This was a mistake — my mistake. While large, established companies have the financial freedom to explore new product categories for the sake of exploring, for startups it can be irresponsible.
Title: A $178 wine bottle that connects to Wi-Fi raised $6 million from investors, and now the startup is shutting down 
Product: Kuvée connected wine bottles
[It] became clear that, to properly educate the market, we would need a much louder voice and considerably more capital. The last year’s Napa fires affected our ability to scale our customer base over the holiday season and hence our ability to raise the funds required to continue building awareness of Kuvée.
Title: An experienced startup founder learns some new lessons 
Product: IntroNet
Mike Krupit, CEO of IntroNet, a service for professionals to make and track introductions, wrote a lengthy post about the factors that contributed to the company’s failure:
On the surface, the business didn’t succeed in the first two iterations of IntroNet for the same reason that 90% of tech startups fail: we did not find a product-market fit before the end of our cash. It’s a math equation that is pretty deterministic. Why didn’t we find product-market fit? Perhaps we were solving for a pain (e.g., LinkedIn sucks) instead of a real problem (e.g., I can’t find expertise)? Did we try to change user behavior in a way that wasn’t tractable? Yes, probably all of that....