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15 Businesses That Failed Despite Having Millions in Funding

13 February 2021

Success of a Business Does Not Depend Entirely on Its Funding. Sometimes, Even Highly Funded Businesses Fail Drastically.

Despite so many businesses aiming to become the next unicorn with funding, funding alone doesn’t guarantee success. Startups fail for many reasons. In the case of these businesses, massive boosts in funding were not enough to make them work proving that not all problems can be solved with money.

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1

South African Airways

South Africa’s national airline, SAA, has a past littered with near bankruptcy and then huge government bailouts. You might think people ride on elephants in Africa, but it’s not true, South Africa is a fast developing largely cosmopolitan country, with plenty of other airlines successfully competing in the capitalist economy.

The most recent bail out was $1.8 billion from the deep pocketed government. This is to help the airline to resume operations now that national Covid-19 travel bans have lifted. But before take-off SAA has to settle creditors debt to the tune of three quarters of the pay-out. The rest will be used towards retrenchment packages and for working capital.

If history is anything to go by, until the business operates as an independent business it’s always going to need a bailout like most trust fund kids do.

2

Essential Products

You might think that all your start-up needs, is an injection of funding and you’ll be a market competitor. Well. if Essential Products is anything to go by, startups fail despite having enormous amounts of funding.

After a total of $330 million of funding and only bringing one smartphone to market, the company is closing down. The Essential Phone didn’t get the sales figures expected, and a lukewarm reception to the device didn’t help.

The Essential smart home devices and an operating system didn’t make it off the draft sheets either. Despite funding the whole thing was essentially…a bust.

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3

LeSports

LeSports scored high in the funding department but it was only an early lead with no follow through. The Hong Kong based sports streaming company is part of LeEco, a mainland China based conglomerate with 99 problems and cash flow a big one!

LeSport has mounting debt from unpaid rent which eventually forced their sudden closure. But it is also confirmed that LeSport had 30 subscription related complaints filed with the Consumer Council.

So exactly how much funding had they received before this big bust? Well, a whopping $1.7Billion was secured from funders and yet it still wasn’t enough to secure a touchdown.

4

Solyndra

One way to irk your investors is to fudge figures to attract their monies and then do just the things that make startups fail. If Solyndra was a movie, this would be their trailer.

We’ll admit, solar energy is a tough game to be in. Even China’s SunTech Power and the US’s First Solar are struggling to make a profit and stay afloat. But their struggles are nothing compared with the mistakes made by Solyndra.

They drummed up funding to the tune of $1.22 billion, and then went after a $535 million loan guarantee from the US Department of Energy. However after a 4 year investigation, in 2015 the Inspector General’s Office released a scathing report showing that Solyndra’s officials gave inaccurate information to mislead the Energy Department to secure their loan.

That aside Solyndra did continue to make money moves, one being looking into licensing out its copper indium gallium selenide (CIGS) technology.

5

Theranos

Now a company that will need an official trailer for their movie, is Theranos, which will star Jennifer Lawrence as Elizabeth Holmes.

Forbes named Holmes the youngest and wealthiest self-made billionaire, all thanks to her revolutionary blood testing tool. The company was valued at $9 billion, and now, nothing.

The concept was incredible. A simple pin prick could detect a plethora of illnesses, except it didn’t work. Sadly, people received tragic news of having cancer, or leukaemia, only to be told they were false results.

Those that received accurate results had to wait for days, despite the technology supposedly taking a few minutes, and that’s because they were literally sending the blood to a lab for testing.

Foxbusiness.com reported that the trial will start March 2021.

6

Roadstar.ai

It’s 2021 and the dreams of getting 1,500 self-driving cars on the road in China by 2020 are clearly not going to materialize. Wu Capital and state-backed Shenzhen Capital Group also didn’t foresee this prediction not panning out and invested a total of $128 million

CEO Xianqiao Tong, CTO Liang Heng and Chief Scientist Guang Zhou formed the company in 2017. All three had experience in this field, having worked at Google, Tesla, Apple, and NVIDIA.

Things looked promising when Roadstar.ai provided self-driving shuttle service at the 2018 Shanghai World AI Conference and 2018 World Internet Conference in Wuzhen.

But the brakes were put on quickly when Tong and Heng announced they had fired Zhou. They accused him of receiving kickbacks during fundraising, hiding codes and entering false data into a government regulatory report.

The Drive.com’s Alex Roy calls it the “Theranos of self-driving cars” adding it’s a “trough of disillusionment.” Moral of the story? An immature team and management can be a reason why even the most wonderful startups fail.  

7

Better Place

This venture-backed business developed and sold battery-charging and battery-switching services for electric cars. Shai Agassi launched the Better Place electric-car company in Israel, in 2007.

He had a big dream, “To help end the global auto industry’s reliance on oil.” And big investors loved the idea, from HSBC Group, Morgan Stanley, General Electric, Vantage Point Capital Partners, and the conglomerate Israel Corp., its biggest shareholder. Between them, they invested $850 million!

The idea was excellent. The batteries on electric cars are h*llishly expensive, which drives the cost of the vehicle up. Better Place invented a removable battery that could be swapped out at battery-switching stations within 5-minutes by robots. What a pleasure… you wouldn’t have to wait hours for your car battery to charge.

The company was faced with all sorts of hurdles, from local authorities delaying the progress for various reasons, to Better Place’s assumption that all car manufacturers would develop cars with removable electric batteries. Only Renault bit.

Sadly, Better Place didn’t get to charge their glasses, as they filed for bankruptcy in 2013.

8

Seven Dreamers Laboratories – Laundroid

*sigh*… Aluxers, imagine a machine that’s a washing machine, dryer, ironing and laundry-folding robot rolled into one.

Well, Seven Dreamers decided to turn imaginary wonderings into reality. They developed the Laundroid, and it was meant to do all that and more. Except, despite $104 million in funding, was a failure and Seven Dreamers filed for bankruptcy in Japan.

They had a less ambitious device which just sorted and folded laundry, but at times, couldn’t even do this task on a simple t-shirt.

Since then, a Californian based company has launched Foldimate, which is also a machine that folds laundry that apparently works.

If you’ve had experience with this, we’d love to hear from you!

If you want to know more about companies  that are on the verge of bankruptcy and why startups fail, check out 15 Companies That Will Soon Go Bankrupt.

9

WeWork

So, who’s to blame for the failure of Wework? Was it Adam Neumann’s fault, the former CEO? Was it the current climate? Was it all smoke and mirrors to reveal there was really nothing in the background? Well, a bit of everything to be honest.

Valued privately at $47 billion at one stage, the company in its basic form, was a co-working company which at one stage was Manhattan’s largest private tenant.

What worked well in WeWorks success was that they didn’t merely rent co-working space, but included financial, legal, IT and everything else needed to run a successful business.

We recommend you listen to Billion Dollar Loser, The Epic Rise and Spectacular Fall of Adam Neumann and WeWork – available on audible.com – for a fantastic in-depth look into the companies failure.

Fastcompany.com states, “WeWork could have saved itself if the board had stepped back to ask if they could deliver on its promises and if they had the capability to execute at every stage of expansion. They needed to measure and quantify whether they had the people, skills, and resources to successfully carry out their initiatives.”

The company is doing better, and just a week ago it was reported that they would be going public. Aluxers, your guess is as good as ours as to how this will pan out.

10

Jawbone

Founded as AliphCom in 1999, Tech and Wearable company, Jawbone, was once worth over $3 billion. They had hoped to have a good go in the wearables market with their Jawbone Fitness Tracker, but with stiff competition and lengthy legal battle with FitBit, the company suffered severe financial loss.

The company originally made military-grade audio hardware but branched out by adding Bluetooth speakers and wearable tech.

Problems dogged the company, with inventory shortages, the departure of several executives and terrible customer service… it was like ticking all the right boxes to make startups fail. They entered liquidation in 2017.

11

Juicero

The details are not that juicy for this failure… in fact, it’s amazing the company were able to squeeze out so much money from investors. Really, they must have been bananas to think that this was a great idea, and it all went to pulp in the end, anyway along with $120 million in investors money.

This $400 dollar juicing machine worked with pre-packaged fruits and veggies that you would pop into the machine and it would squeeze out the contents. You could only buy the pre-packaged bags if you owned a Juicero machine.

On a side note – the machine was originally selling at $699 but we digress.

Turns out, the machine wasn’t anymore effective then using your hands to squeeze out the contents.  

Orange ya glad you didn’t waste $400 on this machine?

12

GNC

Aluxers, it’s been a hard road for GNC – specializing in health and nutrition related products, including vitamins, supplements, minerals, herbs, sports nutrition, diet, and energy products. You would think a company like this would thrive during the pandemic, but sadly not.

We’ve really gone into depth in this video, 15 Businesses that are failing because of the Coronavirus, highlighting other businesses that also didn’t make it. Be sure to give it a watch.

GNC has been around since 1935 when its first shop was opened by David Shakarian in Pittsburgh. It was called Lackzoon and specialized in yoghurt and other health foods.

The pandemic caused the business to shut down 1,200 stores and they filed for bankruptcy in June 2020. This is just one story but it is how many good startups fail.

Bloomberglaw.com confirms, “GNC Holdings Inc. won approval of its bankruptcy reorganization plan that cantered on a $770 million sale to its largest shareholder, keeping open at least 1,400 of its nutrition supplement stores and saving thousands of jobs.”

13

Abound Solar

We mentioned one solar company earlier, Solyndra, and here’s another one. Abound Solar received funding in the region of $614 million, and despite that, couldn’t brighten up their own future.

Three key figures jumped ship:

  •         Tom Tiller, Abound Solar’s CEO.
  •         Russ Kanjorski, VP of Marketing
  •         Julian Hawkins, Senior VP at Abound Solar.

Abound Solar was the manufacturer of cadium telluride thin-film photovoltaic modules for solar panels. It’s a little sketchy as to the exact reasons behind the failure, but it was described as being caught between a rock and a hard place. Waiting for investors money to come through and needing to spend to extend the company.

The company shut operations in 2012.

14

Guvera

It’s more than 3 years since Guvera shut down operations. The Australian music streaming company wanted to take on Spotify and Apple, but since Darren Herft & Claes Loberg started the company in 2008, have failed to do so.

The company raised over $180 million, but it’s unclear where all the money went to. Herft has since been “banned from managing an Australian corporation for two years,” according to themusicnetwork.com

The Australian Securities and Investments Commission (ASIC) stated that Herft “improperly used the Guvera Group structure for his gain and the gain of others in circumstances where there were significant conflicts of interest in the operation of the companies within the group.”

The ban will end on the 21st of December 2021. The takeaway here is that if there’s not a gatekeeper in front of your business vault, it’s a way to earn a ban and make startups fail.

15

Arrivo

In November 2018, roughly 30 employees were furloughed by Arrivo. By the end of the month, more than half were informed not to return to the office. They received this hard blow via SMS according to 2 former employees of the futuristic transportation start-up.  

With funding of $1 billion from Genetec America, what went wrong?

Let’s find out.

The company didn’t have a long run, having started in 2017 by Brogan BamBrogan, a former SpaceX engineer. The company had hoped to commercialize a hyperloop, which is a “proposed mode of passenger and freight transportation,” according to Wiki.

Reports suggest Arrivo had a very tense working environment, guidance wasn’t paramount and there was a severe lack of planning. Eventually it was the inability to secure Series A funding of their project that led to the young company’s demise, and they did arrive at their projected destination.

Question:

Aluxers, sh*t happens and startups fail, but what advice would you like to dispense to some of these companies on our list? We’d love to hear from you!