4 of the Worst Startup Failures of All Time; Are You Following in Their Footsteps?


startup failureIt’s a simple fact in the world of startups: Failure is all too common. Most startup fails in one way or another but it’s also the key to learning quickly and making a successful business.

The level of failure is the element that often differs and can mean the difference between a learning lesson and seeing it crumble to the ground.

Over the past 15 years there have been many significant failures in the startup world, especially those that were in the .com industry in the late ’90s and earlier 2000′s. While these companies fail in an epic fashion they offer startups and small business owners a valuable lesson.

Related: 69% of Small Businesses Only Last 2 Years: Are Your Startup Estimates Realistic?

Fail #4: Wesabe

Wesabe was a web-based personal money management tool founded in 2005 and launched publicly in November 2006. The tool was fairly intuitive and took a web 2.0 approach to personal finance, relying on community and tags much like Flickr and del.iciou.us.

Though Wesabe arrived on the scene first, they were blown out of the water when Mint launched and won the first TechCrunch 40 conference in 2007. Mint was later acquired by Intuit for $170 Million in 2009 and within a year Wesabe shut down.

Although Wesabe had the advantage of being first, they made 2 key errors:

  • They decided not to work with Yodlee, an automatic financial data aggregation service (Mint did end up using Yodlee)
  • They had an inability to streamline the data entry process. Mint focused on the user experience much more than Wesabe.

Startup Tip: Fully understand exactly what end users want, need and are looking for – then be great at it.

Fail #3: Pay By Touch

Pay By Touch seemed to have a great future when it launched in 2002 but the ending was far from it. The company, which enabled payments for goods and services with a swipe of a finger on a biomoetric sensor, quickly acquired a large amount of funding, approaching close to $350 Million.

CEO, John P. Rogers ultimately lead to the company’s downfall; he was accused of drug possession, spending company funds on personal items and even domestic abuse. The company quickly ran through its investment fund and within 5 years was having trouble making payroll.

Startup Tip: Personal accountability is paramount, without which, the chances for failure dramatically increase. This does not apply only to executives or management but every position in your company. Every employee needs to understand that there is a level of personal accountability, especially as a startup.

Fail #2: Boo.com

Boo.com was an online retailer based in England which sold branded fashion merchandise. The company was the epitome of the .com crash; they went bankrupt in 18 months after getting $135 Million in funding. The company simply tried to do too much at one time sending them in too many directions. They launched in multiple currencies, languages and utilized too many fulfillment partners.

Startup Tip: Be precise with strategic decisions and be sure you can fulfill on the decision you make. While it would be nice to offer more than anyone else, if you can’t fulfill properly, you can easily become over extended. Try to make decision based on ROI as often as possible.

Fail #1: Friendster

Friendster was one of the first social networks. Launched in 2002, it is arguably the start of the modern social networking era. Founded by computer programmer Jonathon Abrams, Friendster went after and obtained some of the best and brightest in Silicon Valley yet ended up being the butt of many jokes.  While Friendster looked to have everything in place, it was quickly surpassed by MySpace, and eventually Facebook.

Friendster’s key flaw was that it truly lacked in its ability to provide a substantial user experience – after filling out your profile and sprucing it up, there wasn’t much else to do in terms of actual interaction with others, which is the key to all social media platforms.

Startup Tip: While having a beautiful design is important, the experience is critical. Start up and small business owners alike should always consider user experience as a key to their business success.

Bio: Gerad Hoyt is an entrepreneur and online marketing specialist working with Safe Choice Security in Jacksonville on various aspects of their online presence. 


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4 Responses to 4 of the Worst Startup Failures of All Time; Are You Following in Their Footsteps?

  1. These are always interesting reads. I remember using Friendster, and also remember quickly leaving it for MySpace (which I then left for Facebook.)

  2. Sam says:

    wow, friendster, i rememeber them, they were almost facebook. very true about the user experience being critical. as well as keeping personal accountability.

  3. user experience =

    personal accountability
    exclusivity
    coolness
    introduction of new technologies using social [eg. Farmville]

    + perception of usage = IPO + ad revenue
    + perception of agility [eg. mobile]= current 2nd chance

  4. Oh, I thought WebRamp was the biggest failure. There was a book written that discussed it.

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