Startups that were massively funded that died in 2017
businessinsider.com
businessinsider.com
It almost seems as if many of these firms are throwing money away without even thinking over the 101 level business requirements: expenses, revenues, growth rate, 2nd derivative growth rate, market size, profit per employee etc.
I'd guess there is more money floating around than there are startups which meet all the metrics. Thus there's investment in riskier ventures (remember it doesn't matter if any startup succeeds as long as the fund comes out on top as a whole). Moreover startups which do have all these metrics may have many competing VCs which in turn lowers the return for the VC.
There's a lot of capital floating around out there. Most of it is actually foreign, either OPEC sovereign wealth funds (like how Saudi Arabia put $3.5B into Uber) or wealthy Chinese businessmen. All that capital is seeking a productive return: it has to go do something, if it sits in a bank account it'll just shrink because of inflation. Right now, tech is basically the only sector of the economy that has noticeable growth. Hence, anything vaguely connected to tech gets plenty of funding, regardless of how ill-considered the idea is.
The fundraising climate has tightened fairly significantly since 2015 - that's why all these companies are going out of business. But around 2012-2013, the way you got funded was you went out, painted a picture of how everyone in the world would be using your technology-enabled product, and asked lots of people for money. There were so many people with money to invest that you'd be bound to find somebody.
So how does one find Saudi or Chinese money that needs to do _something_
time + money == more money
money + money == more money
2 x money == more money
Most people I know use it with an 'unlimited' subscription and feel the money they save, by knowing exactly what they will be spending and by not having impulse buys, plus the time saved makes it worth it.
Ocado might be seen as an exception but even that was started out as a partnership between Waitrose and another company (I forget which). I'm also discounting more niche services, such as Graze, btw.
Delivery is nice too, but the picking is what I really hate. Showing up, picking up a box, and leaving would be fine too. However, if delivery is the main option, I'll take it.
The fact that I strongly dislike Tesco and STILL just set up an account for grocery delivery so I can pay them to pick groceries and bring them to me, because I hate going shopping so much, suggests that this service is needed by at least some people.
I also wanted to use buymie.eu, but I have an aversion to services that would work perfectly well as websites but insist on an app instead.
It's not much different from food delivery (or grocery delivery), but it seems hard to make a profit. Food delivery companies from arbitrary restaurants have been a thing for a long time, it's great that now there's enough floating VC money to support lots of competition, maybe this time one of them will find out how to be profitable. And the VCs of that one will make a handsome return.
EDIT: changed "self-driven" to "self-driving"
Properly hedging requires constant adjustment of the steak to lock in the "winnings" and replacing the losing company with a different one that does similar things but has better management.
Where's the compelling drive to grow an industry? Where's the compelling argument for making money with a real capitalizeable asset? How do these projects fundamentally grow an area of the economy, put people to work, so they will want to buy these things. make life better and make investors more money?
This kid is what we should be investing in: https://qz.com/909614/a-cameroonian-17-year-old-won-the-goog...
Putting this kid to work is what we should be doing, not goofing around with some stupid ass Mindfulness app in SF. This is exactly the plan I'm working on. If somebody doesn't scoop this kid up, I will at some point.
Africa and South America each represent 6% of the world's app revenue. You want to make some money? Help these continents compete. Help the governments involved learn how to manage their information and build out their IT infrastructure. Help bright kids like the one I linked to use their talents to help you make money and grow their local economies at the same time. That's what I'm interested in.
If vc's in the US have been reduced to investing in yet another goddam coffee machine to sell to the US market, then I'd suggest silicon valley has exhausted their strategic thinking, and have been reduced to daddy and friends giving college grad something to do. It's a waste of money that could be so much more strategically spent.
Until they are identified, I don't think VCs will put their money at risk. (They may already exist; I'm pleading ignorance here.)
They're already putting money at risk by investing in startups that are obvious flops. Or even startups that do stuff that won't fly even with western-style legal framework (Theranos).
You might want to take a look at this project: https://www.kountable.com/
I'm quite proud that I once was a part of the team working on it.
What we should try to do is invest in opportunities that get them to the point when they can take a stab at building a startup around whatever they come up with.
The easy money in tech right now is harmful, as it crowds out actual innovation. But I don't see it getting better anytime soon.
Besides, how many "actual" innovations were profitable at an early stage? I take issue with the entire concept of splitting "actual" innovations from attempted innovations, because all successful innovations began as attempts.
There's a couple of reasons people like that don't partner with someone who is able to raise the capital more easily, but the most pronounced i've heard was that they don't want to buy into the dishonest-"fake it till you make it" culture that surrounds VC.
Companies that don’t play the VC game are harder work but totally possible (and potentially more rewarding) but the VC game requires those “hustlers” because that’s the VC’s expectations.
When thousands of startups with terrible ideas get funded, it floods the market with tons of new products that users don't get any value from. Eventually they get category fatigue and just start blocking out trying anything new. Even if you've got something innovative that you can build yourself, people still need to try it for it to catch on. That's easier when there are few other products vying for attention and users are actively looking for something new.
Fortunately, I think the last mania ended around 2015. Trump has sucked all of the oxygen out of the collective zeitgeist since mid-2016, so hopefully by 2018 people will be sick of being angry at their leaders and looking for small, concrete ways to improve their lives.
When you have lots of unprofitable "businesses" chasing after the same limited pool of resources using their big bags of monopoly money, the business environment becomes toxic to fragile, new organisms.
Sometimes I wonder if the VC world is the worst possible combination, rewarding merely the false promise of short term impact, as opposed to genuinely worthwhile but perhaps completely unprofitable RnD.
The risk may actually not be that high due to the liquidation preferences and the inflated prices and hype may actually be promoted by the VCs themselves so they can offload at high prices. The most important factor for this pump and dump is the founders personality.
Crypto ICOs eliminate much of this potential as whilst in the VC model the investor needs to be thinking pump-and-dump. In crypto, every buyer must be thinking this. Ironically due to the hype in cryptocurrencies the hype may be so widespread that this does indeed happen despite it being able to completely upset the funding model. (That large capital requires impressing specific keyholders)
None of them are particularly original, they're all just variations of the same thing. Fundamentally there's little difference between Maple and Dominoes Pizza delivery.
Surely it would be a no-brainer to do delivery only, and optimize for that. Select a few cuisines, get great chefs to develop recipes that anyone can be trained to execute flawlessly, set up locations strategically situated to minimize delivery time/distance. It might not end up being Michelin-star-quality food, but then none of the places I order deliver from are, either.
As a consumer, my biggest problems with delivery are speed and quality. Places I order from routinely take 60+ minutes to deliver, even if they're close by. Quality is the bigger problem, and I suspect a lot of people feel the same.
But heck, I was just a delivery boy, and lots of people really loved the idea. I'm sure we'll see more delivery startups, and maybe they'll be great, having learned from Maple.
A delivery-only restaurant still needs to deal with hiring staff, sourcing product, health inspections, purchase and maintenance of equipment, etc. That's before the whole delivery thing comes into the picture. If you want fast service, you have to scale up the staff and get some decent logistics in place.
I suspect this would only be profitable via automation. But that will probably happen soon.
If you think of it as a trilemma between quality, speed and price, it's unlikely you'll ever find a service that can meet your needs because when a competitor shows up, "worse is better" kicks in.
Want a sandwich at noon? That's $7. Want it at 3pm? That's $4. Want us to drop everything and get it to you in 15 minutes? That's an extra $2.
If a startup wants to leverage technology, its founders should approach Dominoes, not try to become a competitor of Dominoes while trying to do something with delivery. Domonoes will crush them like an annoying bug they are.
What would you say might put us on the path to getting better in the long term, and what does better mean exactly? The system we have right now is designed to waste large amounts of money, it will never get better by itself. Won't VCs always seek lower risk, and go for the best ideas they can find that have some chance of working? It seems we could always look at the biggest failures and call it easy money, rip the ideas apart as stupid, regardless of how much actual innovation is there.
Is it fair to characterize the business plan of Maple or Sprig to deliver food at a loss? I assume the idea was to make a profit eventually, but being able to deliver quality on 15 minutes notice can only work on a huge scale.
There’s a lot of venture money out there, and like some other comments mentioned it needs to _do_ something - and that’s good. We as founders and consumers want to see that money do something. But...
It needs to do something meaningful. I believe that responsibility lies in the hands of those that give it. Bad ideas are merely potential opportunities, but bad business plans, founders with short term vision, and lack of discipline make this into a real problem.
So many companies can prove their model without big money. Yet, because investors are hoping for a home run those founders jump right into the deep end.
I don’t want to say getting money needs to be harder, because ultimately that could slow down innovation. I do however believe investors need to raise the bar for founders.
There was another thread today about an interview with some rockstar VC and his wisdom was: invest in ideas that sound stupid, but turn out not to be. I mean, here I've been trying to not sound stupid in front of investors and it's been holding me back.
I think requiring a more thought out business plan (ie. one that includes steps to turn profit within some timeframe).
Some investors I’ve met do this and do it well, while still investing in ideas that may not seem all there upfront.
You can't help but feel bad for these guys. You know they must have poured their heart and soul into these companies. I guess that's corporate Darwinism for you though.
ETA: well, here's a post-mortem (about halfway down): https://techcrunch.com/2017/05/25/anatomy-of-a-managed-marke...
Just take a look at Carvana's most recent earnings, they lost something like 40M in the first quarter on revenue of $160M. They're still spending a ton of money to compete.
Beepi had a flawed model, and ran out of money.
I find it hard to be sad for them as this is what is supposed to happen when you don't have a sustainable business model.
They learned a super valuable lesson about market for, and it will help them all in the future having this experience.
YikYak was very popular at my univeristy back in 2014. What replaced it? Or has anonymous social media fallen out of favor all together?
I think the main reason anonymous social media is out of favor is that it's hard to monetize. It's hard to gather information (and thus serve valuable ads) about your users when they are explicitly using your app to not share that information. When yikyak introduced profiles, I think that was when everybody stopped using it.
Is it more EU-targetted or seeded initially?
Whisper still exists
Another geolocated thing that briefly existed was Google+ - at one point and only on mobile if you stopped the screen to the right there was a "Nearby" listing that showed public posts within some geographic radius that was never quite clear.
> When the service was accessed with a supported mobile device, Buzz tagged posts with the user's current location.
I'll use as the example Pokémon Go, which within the last month revised a major part of the game to introduce a feature that requires teams of people to defeat (gym raids). This has ended up with an assortment of tools being used in attempts to organize those teams, as well as some folks simply showing up and hoping others do the same. These include multiple fan/independent Discords, Facebook, and at least one browser map-based "I'm going to X" solution. Yik-Yak's geolocated chat (minus the anonymity that caused them so much trouble) seems like it would have been an excellent framework for for local team chats.
Why isn't a niche product making people wealthy seen as good enough anymore?
The 11 or so odd years before that were their Bluetooth headsets only. I think Jawbone could fit into this list. It's sort of like a spinoff company using initial foundations around 2011. That's not a good sentence or way of wording it but I can't think of something better right now. Still, the expectation from 2011 onward was huge growth with all that funding. Unlike their first 11 years.
But Jawbone could've become a completely new company in late 2010 when they unveiled their speaker. And being close to unveiling their wristbands. All the money and funding (like 90% of their funding) were done since then. The last 6 years. Jawbone was already flaming out in 2015 and 2016. That's only a few years after 2011.
I'm sure more food delivery and taxi startups will fail in the next few years. Such aggressive markets, hoping that they can undercut their competitors for longer and conker the market.
Is death so hard to bear?
[1] http://www.bonappetit.com/restaurants-travel/article/maple-d...
2. I fear Blind will go the way of Yik Yak. A lot of rude behavior on it.
3. I'm not a fan of wearable devices. I suspect people enjoy collecting health gadgets more than actually getting healthier. I also found a Jawbone speaker in the gym and couldn't figure out how to get it to work with my iPhone. But that's probably my fault :P
Can confirm. I have several wearables lying around no longer being used. The difference between the fitness devices that I use (smart scales, gps trackers) and the ones that I don't (pedometer/heart rate wearables) basically seems to be that the ones I use are measuring and recording data I was previously interested in before getting a device that tracked it. Ultimately, I can't get excited about a pedometer because I simply don't care about how many steps I take.
Also, the fact that the pedometers require near constant use to be worthwhile means that there's some degree of mental energy devoted to them - is it charged, am I wearing it, etc. A smart scale I step onto for a few seconds each day and my garmin head unit is only used when I'm riding my bike so there's almost no conscious overhead.
> the pedometers require near constant use to be worthwhile
> means that there's some degree of mental energy devoted
> to them - is it charged, am I wearing it, etc.