Insights from 12 Founders of Failed Startups

by . August 9th, 2014

Learning Disability
It’s a given that a huge proportion of new businesses fail. According to, if we were to take startups in general as a whole with data from Jan. 2014, the failure rate is close to 71% of all business  after 10 years, with about a quarter going belly up in the first year.

And this is one of the more optimistic studies. Other studies give estimates exceeding 90% after 20 months. But whatever the real numbers are, it all drives the point home that many are called to be entrepreneurs – but only a few are chosen.

On the other hand, we learn so much more from failure than we do from success. Referralcandy’s Melissa Tsang recently came up with a very thoughtful post on some of the most covered startup failures and what we could learn from the people who ran or founded them.

We cut it down to just what the founders (or journalists) said was the cause of their startup’s demise.

1.) Gowalla – Do your own thing.

“We gave people a way to check-in on both Facebook and Foursquare through Gowalla. It was very well received. But it was a lot like being Tweetdeck instead of Twitter. Tweetdeck might be cool, but let’s be honest, you’d rather be Twitter.

Play by your own rules. Listen to your users more than the press. Don’t get sucked into the gravity hole between you and your competition. Ruthlessly run your own path, not someone else’s.”

  • Josh Williams, CEO

2.) Intellibank – Make things simple, obvious, and set expectations you could exceed.

“Every customer was asking for something different and we gave it to them. By failing to declare our major, we created a world of chaos for our sales, product and marketing teams.

Some of the greatest products today don’t have a million bells and whistles, but they solve one concrete problem brilliantly – like Salesforce. I cannot emphasize how important it is in the long run to over-deliver to your customers.”

  • Founder Gary Swart

3.) Sonar – The devil is in the details + Aspire for greatness, but don’t kid yourself.

“You are probably not the Steve Jobs of ______.

Removing friction from existing user behaviors (e.g. checkins) almost always has a higher ROI than building castles in the sky (e.g. hypothesizing about your API).”

  • Founder Brett Martin

4.) On-Q-ity – Scientific breakthroughs take major effort to bring to market

“[Circulating Tumor Cells are] a research-stage story right now, and in diagnostics (unlike drugs) it’s hard to get paid for research-stage stories. We certainly didn’t have enough capital around the table to fund the story until the market caught up. It will be great in 5-10 years to see CTCs evolve as a routine part of cancer care, though clearly bittersweet for those of us involved with On-Q-ity.”

  • Mara G. Aspinall, CEO

5.) 99Dresses – Seek less crowded markets

“99dresses was squarely focused on trading cheaper fast fashion (fast fashion is really hard to re-sell for cash), but all the competition were mainly focussed on buying & selling designer fashion. Despite our differentiation, the space is crowded and the competitors are well-funded to the tune of tens of millions of dollars each. Some of the other partners in the firm didn’t like how competitive the market was.”

  • Nikki Durkin, Founder

6.) Ecomom – It always comes down to financial sustainability

“Ecomom was known for giving customers great discounts through daily deal sites like Groupon. Customers loved Ecomom for its generosity and customer service. While this benefited Ecomom’s customers, the deals ate away at the company’s bank account.

On top of this, Founder Jody Sherman lived large and he was generous with money. He paid employees unusually high salaries and spent $75,000 on an Airstream travel trailer.”

  • Business Insider Contributor Alyson Shontell on Ecomom Founder Jody Sherman

7.) Formspring – Look at people, not trends

“We literally spent months on a [Formspring button]. We bet huge. On someone else’s (Facebook and Twitter’s) plan. Flop. How about photos? Instagram had just come out and was killing it!

I learned to focus. To put the product vision first. To not try keeping up with what’s trending. To build your product for your users.

  • Founder Cap Watkins

8.) Blurtt – Too many cooks spoil the broth

“Blurtt went through four iterations, each significantly different from the previous one.

I kept on changing the vision to appeal to investors so I could chase the bigger dollars so I could build the startup I really hoped to build. In the end, the passion and magic was lost.

The chances of getting it right the first time are about the equivalent of winning the lotto. [But] remember why you started this in the first place and never lose sight of it, because once it becomes something you are not happy doing — you shouldn’t be doing it.”

  • Founder Jeanette Cajide

9.) Everpix – Distribution is everything.

“They spent too much time on the product and not enough time on growth and distribution. The first pitch deck they put together for investors was mediocre. They began marketing too late. While the product wasn’t particularly difficult to use, it did have a learning curve and required a commitment to entrust an unknown startup with your life’s memories — a hard sell that Everpix never got around to making much easier.”

  • The Verge Contributor Casey Newton on Everpix founders Kevin Quennesson and Pierre-Olivier Latour

10.) Newstilt– You really do have to share a vision.

“When Nathan and I signed up together, we had not spent any time working together, and that was a big mistake. Nathan is certainly a great coder, but when we didn’t share a vision, and we found it so difficult to communicate, there was no way we were going to get this built. You need a co-founder who gets you, and whom you work together well with.”

  • CEO Paul Biggar

11.) – …DECIDE. Sooner is usually better.

“We spent a lot of time debating rather than doing. What technology should we use? When should engineering get involved with the design process? What’s our design methodology? How long should our release cycles be? Should we even have release cycles? I could go on indefinitely.”

  • Hsu Ken Ooi, CEO

12.) Better Place – Don’t drink your own Kool-Aid

“Agassi’s grand vision gave Better Place life, but according to former employees, investors, and board members, that same grand vision also ultimately destroyed it. Entrepreneurs are frequently told not to drink their own Kool-Aid. They are cautioned to focus on the small things; to make more money than they lose; to cut costs when needed; and, when necessary, to pivot to a more promising business. Agassi made great Kool-Aid and then drank it all himself.

We spent $60 million to build something that TomTom sells for $29.95,” says a former board member. “We were building our own charge spots and call centers. We thought we could do everything better.”

Better Place lived fast and died young. It had a massive following in 2008, but by May 2013 it had declared bankruptcy.”

  • – FastCo Contributor Max Chafkin of Better Place Founder Shai Agassi


Source: When Startups Fail: 12 Founders, And Advice Moving Forward

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Arthur Piccio manages YouTheEntrepreneur and has managed content for major players in the online printing industry. He was previously BizSugar's contributor of the week. His work has appeared multiple times on The New York Times' You're the Boss Small Business Blog. He enjoys guitar maintenance and reading up on history and psychology in his spare time.