Tech Startup Failures and Flops to Avoid

Everybody loves a good blooper reel. Fascination with seeing others fail at life’s simplest moments is the source of America’s Funniest Home Videos’ successful 30-year run. However, when more important or ambitious endeavors fail, it’s less of a joke and more of a cautionary tale. Let the following tech startup failures serve as lessons to inform your founder journey.

Quibi Quibbles Over What Led to Failure

Quibi, a mobile streaming service, barely made it out of infancy before crumbling six months after launching. Impressively, founder Jeffrey Katzenberg and Chief Executive Meg Whitman cut the cord before running through the $1.75b in disclosed funding in an effort to return as much investor’s capital as possible.

The concept behind Quibi was to give viewers on-the-go mobile entertainment viewing. Unfortunately, due to the COVID pandemic’s stay home movement, people were far less on the go than usual. Furthermore, Quibi was up against the recent launch of more established subscriptions including Apple TV+ and Disney+ as well as existing free options for short video streaming. The startup bet that people would forsake free options in favor of a Quibi subscription to higher quality content, which Quibi heavily invested in.

Whether the fault lies with the pandemic, seemingly poor market research, or a combination of the two we may never know. The message here is that a balanced attention must be paid to internal product features as well as factors in the outside world.

Periscope Pares Down to Nothing

Unlike Quibi, Periscope did not die young in tech years. It is less the story of failure – as the company was successfully acquired by Twitter in 2015 for $100m – but a tale of phasing out. It was an app originally designed to live-stream important events. After purchasing Periscope, Twitter initially attempted to run it as an independent app. 

Citing “unsustainable maintenance-mode state,” declining usage and increasing costs, Twitter closed Periscope in early 2021. The social platform giant chose to integrate the app’s core capabilities into Twitter.

While Periscope founders were probably sad to see their baby go, this is one potential outcome of selling. While on its own, Periscope was a product, paired with Twitter it became apparent that Periscope was merely a feature. It’s critical you determine early on whether your idea is a feature or a product. We’ll discuss how to do this in a future blog.

Hubba: A Hub of Internal Strife?

Hubba, a Canadian e-commerce startup, closed its doors in February 2021. The reason for closing down was not publicized, though “…one source BetaKit spoke with claimed a months-long battle between Zifkin and Hubba’s board of directors regarding the ongoing viability of the company.”

Keep your house clean, so to speak. Internal conflict can tear apart the best idea or strongest business. Part of avoiding major conflicts is being deliberate and thorough in the planning process. If the path forward is clear and everyone is bought into it, then small bumps in the road are surmountable. It’s also important to define and agree upon business values, as these will serve as guideposts even when external factors change (cough, pandemic, cough). 

Don’t Be Beam 

Beam failed so spectacularly that we almost didn’t include them on the list. The ENO8 team is positive none of our readers would ever deceive their customers. And perhaps Beam started out on the up-and-up too. We’re not sure what led them to lie to their users, but the mobile savings app was shut down by the Federal Trade Commission after dozens of customers were not able to get their money out of their accounts, according to CNBC. Just…don’t lie. As we have seen with countless companies experiencing data security breaches, the best path through a tech mistake is to own it and do your best to make it right.

HubHaus Moves Out

Co-living startup HubHaus was founded by former medical student Shruti Merchant with the worthy ambition of helping young professionals find shared housing in luxurious homes and giving them the chance to build new living communities. Launched first in major cities San Francisco, Los Angeles and Washington, D.C., HubHaus went down in an ugly fashion, leaving landlords with unpaid rent and utilities and tenants in insecure living situations. Furthermore, the concept led to as many as 10 unrelated people sharing a house, which violates some city’s zoning rules leading to evictions. Though the COVID pandemic likely dealt the killing blow, HubHaus was in trouble in 2019 with founder Merchant saying, “We made a series of bad bets.”

Stranding tenants and landlords alike was an unbecoming exit for the company. Sometimes the larger failure is not going out of business but not knowing when to call it quits. For a company that relies on strangers being willing to live together to be struggling pre-pandemic and then to continue for another six months was irresponsible and likely exacerbated the damage of HubHaus’s demise. This is a clear contradiction to the way Quibi exited. 

Let this be a lesson. It’s not just the success or failure but the way both are handled that matters, especially if you plan to found more companies in the future. The investment community has a longer memory than the general public.

Some of the Best Free Advice Out There

Market research involves scanning the existing startup landscape for models and products that are similar to yours, but we suggest you take it a step farther. Look into the failed companies and ideas that are similar to yours to learn from their mistakes. More and more founders are putting out postmortems. These are ripe sources for the most valuable lessons you’ll find for free.

As you can see from most of these examples, failures are rarely just a story of the money running out. Many failures and missteps can be avoided by taking the time to create a thorough and comprehensive plan up front. This helps alleviate future issues like inadequate market research, creating a feature that you think is a product, failing to deliver on your main offering, harming your users, not being able to pivot when the market changes, and relying on hope, versus research, to predict consumer habits.

We created our Innovation Lab for this exact purpose. We were tired of watching tech startups and major companies alike jump into partnership with a development firm before investing in a solid plan. The reworks and missteps later are time draining and financially costly and sometimes they are the death knoll of what should have been a successful software project. If you have a great idea, give it the space it deserves to flourish. Bring it to the Innovation Lab.