Some Lessons from the 90% (Failed Startups)
Do Not Overcomplicate Your Company or Product!
Juicero was a juice company that collected fresh organic fruits and vegetables for customers and put them in single-serve packets. It provided pre-sold packages of diced fruits and vegetables and removed the need for washing, cutting, and preparing for people to drink the juices. It brought convenience by providing a Wi-Fi-connected juice press that automatically squeezed the single servings packets into a glass of cold fresh juice. Juicero's mission was to help people eat better by making it easier to consume fresh raw foods.
Juicero failed to build a profitable business after raising substantial funds under the claim of innovation and disruption. The company received funding from high-profile investors before users realized the machines were useless. The $699 price tag was too high for most customers, and the machine only worked with Wi-Fi. Also, the company put a scannable QR code on each packet serving. The device would not function unless it detected the presence of the code. People could not press homemade packets but had to order them from Juicero, which cost between $5 and $7.
Bloomberg News published a video proving that simply by hand squeezing the packets, you could get a full glass of juice and that the $700 machine was useless. After that, Juicero went bankrupt and has been considered another absurd Silicon Valley startup product that raised huge funds but didn't solve any real problem. Juicero raised $118.5M.
25 Years Later, Basic Business Fundamentals Still Apply!
Pets.com, an early e-commerce company, sold pet accessories and supplies direct to consumers. Although short-lived, Pets.com managed to have some success during a time without online platforms for e-commerce, warehousing, customer service, and so on. Pets.com launched in August 1998 and went from an IPO on the Nasdaq to liquidation in 268 days. This was an example of one of the many failures of the dot-com bubble of the early 2000s. $300 million of investment capital vanished with the company's failure. At the beginning of the internet, there was a rush to fund these companies with little oversight. Everyone wanted in. Pets.com was a cautionary example of a high-profile marketing campaign with a company that had weak fundamentals.
Rapid Growth is Expensive!
Homejoy was a platform that connected independent professional cleaners with clients. They started with $38M in funding. The expectation was that there would be a return on investment in time.
Homejoy grew fast; within half a year, it had branches in 30 cities. To attract customers, Homejoy offered the services at a discounted rate. This strategy made the growth stage expensive. Three problems led to the collapse of Homejoy. The first problem was the costly promotional offers at the beginning. Secondly, the expansion was too rapid. The rapid growth did not help Homejoy stabilize. Thirdly, the independent cleaning contractors did not receive adequate training. Expanding too fast can be a recipe for failure.
Don't Dig In; evolving technologies, competition, and customer experience must be assessed constantly!
Blockbuster Video, founded in 1985, was the leader in the video rental space. At its height in 2004, Blockbuster employed 84,300 people worldwide and had 9,094 stores. However, they were unable to transition towards a digital model, and they filed for bankruptcy in 2010. In 2000, Netflix offered to buy Blockbuster for $50M. The Blockbuster CEO, John Antloco, was not interested in the offer because he thought Netflix was a "very small niche business" and it was losing money at the time. Today, the Netflix subscriber count as of 2022 is 224 million, and they generated $31.6B in revenue last year.