33 Startups That Died Reveal Why They Failed

We love a good entrepreneurial success story — entrepreneur as protagonist overcomes obstacles and builds a thriving, successful company (and become wealthy while doing so). We want to hear about, learn from and even replicate what they’ve done.

However, this survivorship bias is problematic. Jason Cohen of Smart Bear Software does a nice job articulating this issue stating:

"The fact that you are learning only from success is a deeper problem than you imagine … drawing conclusions only from data that is available or convenient and thus systematically biasing your results."

Luckily, the startup community often courageously shares their stories — even when things don’t end well.

This list was compiled by ChubbyBrain and was suggested by Founders @Fail.

Failure #1: "I had the Next Big Thing: Condom Key chains"

Article: StoryLog, "How My Startup Failed"

Excerpt:There was no doubt about it: I had discovered The Next Big Thing. Like Edison and the light bulb, like Gates and the pc operating system, I would launch a revolution that would transform society while bringing me wealth and fame. I was about to become the first person in America to sell condom key chains.

Failure #2: "We took on Mint.com and lost"

Article: Marc Hedlund's Blog, Why Wesabe Lost to Mint

Company:  Wesabe

Author:  Marc Hedlund

Excerpt: Even before we launched, we heard about other people working on similar ideas, and a slew of companies soon launched in our wake. None of them really seemed to get very far, though, and we were considered the leader in online personal finance until September 2007, when Mint launched at, and won, the first TechCrunch 40 conference.

From that point forward we were considered in second place at best, and they overshadowed our site and everyone else's, too. Two years later, Mint was acquired by Intuit, makers of Quicken (and after Mint's launch, the makers of Quicken Online) for $170 million. A bit less than a year later, Wesabe shut down.

Failure #3: "We thought, 'We'll attack this problem a few years before Microsoft and Oracle notice it and recognize it as a problem.'"

Article:  ArsDigita – From Start-up to Bust-up

Company:  ArsDigita

Author:  Philip Greenspun

Excerpt: For roughly one year Peter Bloom (General Atlantic), Chip Hazard (Greylock), and Allen Shaheen (CEO) exercised absolute power over ArsDigita Corporation. During this year they

1. Spent $20 million to get back to the same revenue that I had when I was CEO
2. Declined Microsoft’s offer (summer 2000) to be the first enterprise software company with a .NET product (a Microsoft employee came back from a follow-up meeting with Allen and said “He reminds me of a lot of CEOs of companies that we’ve worked with… that have gone bankrupt.”)
3. Deprecated the old feature-complete product (ACS 3.4) before finishing the new product (ACS 4.x); note that this is a well-known way to kill a company among people with software products experience; Informix self-destructed because people couldn’t figure out whether to run the old proven version 7 or the new fancy version 9 so they converted to Oracle instead)
4. Created a vastly higher cost structure; I had 80 people mostly on base salaries under $100,000 and was bringing in revenue at the rate of $20 million annually. The ArsDigita of Greylock, General Atlantic, and Allen had nearly 200 with lots of new executive positions at $200,000 or over, programmers at base salaries of $125,000, etc. Contributing to the high cost structure was the new culture of working 9-5 Monday through Friday. Allen, Greylock, and General Atlantic wouldn’t be in the building on weekends and neither would the employees bother to come in.
5. Surrendered market leadership and thought leadership