Startups can make or break entrepreneurs. The reality is not all of them can be successful and sustain it in the long run. One major hurdle is financial backing. However, if a startup is well funded, nothing can go wrong, right? Well, these five well-funded startups got a reality check: it takes more than money to be successful in the industry.
The question now is, why do these startups with huge fundings suddenly became irrelevant? In an article published by Entrepreneur, it gave nine reasons why startups fail at the company level. Ultimately, lack of leadership is a major reason. However, there are other areas that need to be considered such as cost issue, poor product and got outperformed by other products in the market.
TechCrunch lists down five well-funded startups the faded into obscurity in 2017. Though these companies will be known as biggest what-could-have-been, they will serve as a lesson for future startups on what to do to avoid failing.
Juicero had good intentions but ultimately doomed by the exorbitant price tag. The company managed to raise more than $118 million from Google Ventures and Campbell Soup among others but it shut down after just 16 months in operation. An article from Bloomberg opened a can of worms which eventually led to the juicers’ demise. Investors started pulling out after learning that Juicero’s juice packs can be squeezed by hands. This rendered the $400 machine impractical to buy. The public lost interest as a consequence.
Auctionata wanted everyone to take part in online auctions whenever and wherever they are in the world. It offered live streaming to make it possible. It was able to raise $95.65 million since 2012 due to its appeal to fine art collectors and the affluent. However, the transition to online was not as easy as it seemed. Slow broadband speeds and shipping proved too much of a challenge to overcome.
3. Yik Yak
Yik Yak is a social app that had its peak moments in 2015. If lets users chat with each other anonymously. It was fun while it lasted. Soon, cyber bullying plagued its forums, forcing a decline in downloads by as much as 76% in just a year. Schools have even banned the app. Yik Yak was able to raise 73.4 million in venture funding and was once valued at $400 million during its heydays.
Pearl folded June this year after raising $50 million from four investors since its inception in 2016. It offered a backup camera inscribed in a license plate cover. Pearl’s developers claimed it was the best backup camera in the market. However, it came with a steep price tag of $500. It did not take long for buyers to realize its impracticality since backup cameras nowadays are just as good but a lot cheaper than Pearl.
Beepi promised to make car ownership a lot easier and cheaper by eliminating the commission and overhead of traditional car dealerships. It was once valued at $560 million and was able to raise $148.95 million from investors. However, while their idea is good, they failed at execution. An ex-employee claimed Beepi was mismanaged and at one point was burning $7 million per month due to an unusually high number of employees.
Beepi’s failure was a case of mismanagement. Pearl and Juicero could be categorized under cost issue while Auctionata and Yik Yak were poor products. These well-funded startups failed due to a lot of circumstances, but, in the end, the lack of proper planning and backup plan did them in.
Startups exist because they offer a unique solution to a problem. The developers and entrepreneurs must have a vision which sees possible effects, consequences or implications of their product. The ability to adapt to a changing industry is a key for a startup’s survival.
In the end, running a startup is no different from running a business. Entrepreneurs still need to get their hands dirty in the ins and outs of their business. They are selling people their idea, so unique that no one else has thought of it yet but at the end of the day when there is money from investors, they have to execute the game plan. Investopedia suggests that only 50% of startups can make it through the first five years. When the honeymoon period has ended and passion has subsided, knowledge and expertise will come in handy.
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