Top 10 Biggest Startup Failures in History (Don’t End up on This List)

We all have a dream of living the life we have always wanted. The possibility of making billions of dollars through a startup can be a reality!

Success is achievable!

Our dream of becoming big is attainable…

Only if we accept failure as part of the deal.

This article is a MUST READ for anyone who is thinking about starting their own startup or has done so in the past. It provides insights and advice on how to avoid the pitfalls that have led to some of the biggest startup failures in history.

Most successful startups have failed dozens of times before they finally succeeded.

History proved that some have overcome those failures, while others have not.

Today, we will take a look back at the biggest startup failures of all time, to learn from them.

What do they have in common?

How can we avoid falling into that trap?

Having researched all kinds of different sources, I have compiled a list that shows the top 10 biggest failures in terms of how much was invested in them.

It’s no secret that billions and billions of dollars are lost in this Top 10 list alone.

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The thing that fascinated me the most about both failures, as well as successes, was how people manage to make these really BIG mistakes.

It’s something worth looking into today, isn’t it?

Remember that behind any startup there are real people, and they may have even sacrificed more than you know.

Building a business is tough – going down with one can be much worse!

So well done for trying; I don’t judge those who didn’t make the cut either way because we all tried our best in this crazy world of entrepreneurship where anything could happen at any time…

But let me tell you: Mismanagement or Fraud – definitely deserve some serious attention from an expert eye (no offense meant here), so please do not ignore what has been uncovered on these companies listed below—you never know when something bad might come back around again.

With that, let’s get to the list!

Beginning at number 10, the list is sorted based on how much was invested and lost. All figures have been converted to today’s value so that they are comparable.

#10 TERRALLIANCE – $352 Million Invested

They didn’t go bankrupt but rather got a new team, new investors and completely pivoted the business in 2009.

Terralliance was in the business of finding oil but in a different way. By using low-flying airplanes, they found pockets of oil. A very innovative idea, but it didn’t pan out.

Still, it was a very interesting journey. Founder Erlend Olson really wanted to use US U-2 spy planes for this work, however, U-2 planes aren’t available for commercial use, they are strictly for military use. Instead, Olsen went to Russia and acquired two surpluses Russian Sukhoi SU-27 fighter jets. I guess everything is for sale in Russia if you have the money to spend – and Olsen certainly had the money.

As the story goes, Olsen told his investors that their success would result in a quick IPO valued at more than $60 billion dollars. That would, in his own words, make him a three-commas guy.

Yes, that is a billion with a B!

Olsen really had a way with words. After having spent almost $300 million he said:

“We spent like NASA during the Apollo program, and we were on our way to the moon as well,”

In 2009, Terralliance ran out of money due to aggressive spending, and the game was over. The situation was so bad that some investors sued Olsen.

Apart from all the big-spending founders, I think we can say that Terralliance never found a product-market fit, the product never really worked.

#9 AMP’D MOBILE – $400 Million Invested

In 2005, Amp’d Mobile launched as a new mobile phone provider targeting younger demographics and offering downloadable videos along with streaming audio/video content.

This was an intriguing service at the time since it enabled customers to enjoy their favorite movies on the go or while they were traveling without having to deal with DVD rentals in addition to all of these modern tools for social networking!

Amp’d seemed like it would be the perfect online streaming service for people that want access without cable or satellite TV bundles, but then they only lasted 24 months!

So what happened, why did they only exist for 24 months?

It’s always hard to know why a company is shutting down.

There are many theories about what went wrong with them including their credit check policy which may have been too strict and alienated potential customers who were not as well educated on finances – so basically everyone except your typical American male teenager might want something different than you typically think when looking at internet-connected gadgets these days…

The service was offered to too many people who could not afford it. On top of that, they were also offering 90 days of credit. Guess what, after 90 days almost half the customers failed to pay their bills! Imagine that!

Although Amp’d had some success they just ran out of cash, they couldn’t pay their providers, and had to shut down.

I would call this mismanagement, at least they made some really really poor business decisions.

#8 PAY BY TOUCH – $420 Million Invested

Pay By Touch was a payment provider that offered biometric authentication at the point of sale which was supposed to be a low-cost alternative to other payment options.

There really isn’t that much information about Pay By Touch out there. There is a good article from SF Gate where it is pretty clear that this went wrong even before it started, so stay tuned, stay tuned because this goes south very very quickly.

This was the first picture I could find of founder and CEO John P. Rogers and yes it is what you think it is – a mug shot. (insert the image here)

In Minnesota, before Pay By Touch was ever founded, Roger’s chiropractic business collapsed in lawsuits and unpaid bills.

Two girlfriends have filed complaints against him, one alleging abuse and the other claiming he trashed her home, SF Gate reports. At a traffic stop, police charged him with cocaine possession. That’s where the mug shot came from.

You look at that background and your first thought may not be that he is the obvious candidate to raise almost half a billion dollars in Silicon Valley, nevertheless, that is what happened, investors, great job on vetting this guy. I mean come on!

According to one insider, only a minimum background check was made because Roger had such a common name.

Seriously?

Well, I guess I’m not going to fall into that category!

Mr. Rogers has some serious character flaws which would seem to be a major red flag when you are investing billions of dollars into a company. And it seems to me, a man with those kinds of character flaws should not be running a company with that kind of money involved.

If I were an investor in Pay By Touch, I’d want to know everything about the guy running the show. Including stuff that isn’t public. Like what his hobbies are, what his passions are, and stuff like that.

One thing I know for sure is, if you are going to raise hundreds of millions of dollars from investors, you damn well better have a strong personal relationship with each of them. You need to know what makes them tick, what turns them on, and what turns them off.

In addition to having a shady past, Rogers was a very good spender of money. He spent $150 million buying out competitors, hired like crazy, and at one point 750 people worked for Pay By Touch.

In 2007 Pay By Touch lost $137 million with revenues of only $600,000. This clearly wasn’t going to last and in May 2007 the company couldn’t meet payroll, they were in real trouble.

The investors tried to save the company by making changes at the top, but Rogers made it impossible. San Francisco investor Phillip Bright said to SF Gate that at one point he received a series of “over the top” and “unbelievable” phone calls from Rogers where he was “screaming and cursing – the language was worse than a drunken sailor.”

I don’t think there was anything wrong with the basic idea of Pay By Touch and we do actually pay by biometrics on our phone these days, so they got something right.

However, this was complete and utter mismanagement and it really doesn’t matter how good your idea or concept is, in the end, it is all about execution.

#7 WEBVAN – $570 Million Invested

Webvan is one of the most famous crashes from the first dot-com crash. In many ways, a very interesting case it also was one of the really big eCommerce bets founded only a couple of years after Amazon in 1996.

Webvan was an online grocery store where customers could get products delivered to their homes within a 30-minute window of their choosing.

Make sure you also check out my other video on why startups fail (make an external link to the video for SEO). You will see a lot of the stuff that hit Webvan in that video.

• First, there is premature scaling. Webvan expanded to 10 markets right away and invested aggressively in very expensive infrastructure in all those markets. That just meant that the money ran out fast.
• Then there was bad timing neither all the tech nor the customers were ready for Webvan, it was just too early.
• Then there is the Product Market Fit which very much relates to the bad timing.

Back in the late ’90s neither technology nor customers were ready for Webvan so there was no way of getting a Product-Market fit. We are barely buying groceries online now 20 years later, so I’m pretty sure the market wasn’t ready in the late ’90s.

They should have taken the time to grow one or two markets at the time, figured it all out, and then scaled later. Although, I’m sure the investors were breathing down their necks to expand like crazy and that may well have killed the company.

This is easy to see now, but I still think there is a lot we can learn from this looking back at it.

Finally, a case with no drama, no mismanagement, or criminal behavior. Thank you, Webvan for just going for it. Sometimes it just doesn’t work, that is life in Startups.

#6 ABOUND SOLAR – $688 Million Invested

Abound Solar is one of the companies that was hard hit by polysilicon plummeting in 2008. They were producing thin-film for solar panels, but when costs dropped to an all-time low they couldn’t compete anymore and lost money hand over fist until finally shutting down.

Other companies on this list also experienced problems with their cost structure changing after prices went crashing down while trying new technologies which led them towards bankruptcy.

#5 THERANOS – $714 Million Invested

Theranos was making a blood-testing device that could test you for any disease you can imagine, from only a small drop of blood.

Theranos was run by the charismatic Elizabeth Holmes with a very deep voice. And it did look like Elizabeth Holmes was going to change the world back in 2014, she was on top of the world and on the cover of every business magazine in the US.

But there was a problem, the product really didn’t work. Sure there was a device, The Edison, but it could never do what they claimed it could do. Actually it never really worked.

They misled the investors and bullied their employees and there might also have been criminal behavior. It all came crashing down as The Wall Street Journal started reporting that things were not as they looked at Theranos. We still don’t know if there was criminal behavior as it is still in the courts here in San Francisco.

All of this has been well documented. I’ve read the book Bad Blood. I highly recommend it. There is also an HBO documentary and a podcast about it.

So many things went wrong at Theranos. Obviously, no Product-Market fit, but all fueled by fraud and mismanagement. This is a crazy story and pretty soon there will be a Hollywood movie about it too. So read the book or wait for the movie that, according to rumors will star Jennifer Lawrence as Theranos founder Elizabeth Holmes.

#4 BETTER PLACE – $742 Million Invested

Better Place is building a global network of battery-charging and battery-switching services for electric cars.

The key was this battery switching that meant you could have a fully charged battery in minutes instead of waiting for a long charge.

I personally always felt that this was a way to a cumbersome solution to a problem that we won’t have only a few years from now as batteries become better and will charge faster. Building a global network of battery replacement stations just didn’t feel like the right solution.

In total Better Place ended up selling 1,500 cars, which is not a lot considering over 700 million was invested in the company and Better Place didn’t actually design and build the cars.

They partnered with car manufacturers that built the cars. Still, Better Place basically spent half a million for every car sold, which feels like a stretch.

Better Place clearly never found product-market fit and users just weren’t buying the special cars with battery replacement and only very few car manufacturers actually started to produce these cars.

There is a really basic lesson for all entrepreneurs here, find a problem that is big enough and that you can solve. I don’t think Better Place did that.

With that, we’re getting to the top of the list as we move into the Top 3

#3 JAWBONE – A Billion and 28 Million Investment

Jawbone developed and produced wearable technology such as wristbands, wireless Bluetooth headsets, and related technology.

Jawbone was always struggling. They were in fierce competition with Fitbit and very often it looked like Jawbone lost to the competition with Fitbit offering similar products at lower prices.

Jawbone also had multiple legal disputes with Fitbit. In 2015 Jawbone accused Fitbit of stealing trade secrets, in 2016 there was a patent dispute that Fitbit won.

This was clearly a question of Product-Market fit. Even if they sometimes had a product-market fit it seemed that the competition had a better product-market fit.

In such a capital-intensive industry there just isn’t room to make very many mistakes. Hardware is just very hard.

#2 GO.COM – One Billion and 143 Million Invested

Go.com was not a traditional startup that had investments from investors. It was a website that Disney invested in. I added Go.com to the list as Disney actually made it public how much was invested and lost in Go.com and that amount qualified them for this list!

Walt Disney wanted to build a portal that contained all the content the company provided. Disney also acquired the search engine Infoseek, which became part of Go.com

Things did not go according to plan. There was legal trouble as a Search Engine called Goto.com sued Disney as the Go.com logo looked too much like Goto.com’s logo.

Disney lost the case and they couldn’t use their logo anymore. I guess you can judge for yourself.

After 3 years and not getting to where they wanted to, Disney, in January 2001, announced that they would be closing Go.com and its search engine, laying off approximately 400 employees. I guess even Disney’s dot-com bubble had burst.

#1 SOLYNDRA – $822 Million Invested

Solyndra was a manufacturer of thin-film solar cells, and the secret sauce to their product was that they didn’t use polysilicon. Not using this expensive semi-conductor material gave them an advantage over other companies because it became difficult for suppliers in 2008 when there were even shortages of top technologies like these at one point costing about $400 per kilogram!

However, Solyndra quickly lost that advantage as the price fell to $50 over the next few years and today it is even lower. The high price was due to a shortage and over the next few years, supply increased rapidly and took prices way down.

As the price of polysilicon fell Solyndra just couldn’t compete anymore and lost to cheap Chinese solar panels. The panels from Solyndra were just too expensive.

At its core this is a lack of Product-Market fit, they just couldn’t build a product at the price the market was willing to pay.

I’m not going to get into politics, but Solyndra is a bit of a hot potato as some of the money lost was loaned from the federal government and in some circles, the Obama administration was blamed for this loss.

So there you go!

After Reading About the Top 10 Biggest Startup Failures…

Let’s see how it can help you.

How should you go about doing things differently if you want to succeed and ensure you don’t fall victim like many others?

• Understand that failure is part of the process – Just because something didn’t work out doesn’t mean it was a total loss. What appears to be a complete failure on the surface is actually a “failure with a purpose.” Look at failure as an opportunity to learn.

As an example, let’s look at the top 10 startup business failures listed above. If we learned something from them, we can better plan our ideas and avoid making the same mistakes.

• Reduce the chances of failure – Once you accept the fact that failure is a part of the business process, you can begin identifying ways to lessen the chances of failure. And the best way to do this is identifying the factors why those startups fail.

Now, going back to the list of startup business failures mentioned above, it becomes pretty clear that there are two reasons why these really big failures happen.

Either they never:

#1 Find a product market fit, or

#2 There is some mismanagement or bad decisions.

In some cases, there are both.

Check out this list again:

Take Theranos. There clearly was no product-market fit but on top of that some really bad mismanagement. The same probably goes for Terralliance too.

Another interesting observation for this group is that they are ALL from the US, not one single startup from anywhere else in the world made this list.

Actually, geography is even crazier. Not only are they all from the US, but 9 out of 10 are also from California.

#1 SOLYNDRA CALIFORNIA, USA

#2 GO.COM CALIFORNIA, USA

#3 JAWBONE CALIFORNIA, USA

#4 BETTER PLACE CALIFORNIA, USA

#5 THERANOS CALIFORNIA, USA

#6 ABOUND SOLAR COLORADO, USA

#7 WEBVAN CALIFORNIA, USA

#8 PAY BY TOUCH CALIFORNIA, USA

#9 AMP’D MOBILE CALIFORNIA, USA

#10 TERRALLIANCE CALIFORNIA, USA

All 9 are either in the San Francisco Bay Area or Los Angeles. Incredible to see 9 out of 10 are from only 2 cities.

Sure there are some really big losses here in California and you are tempted to think that they make some really bad investments in California. However, California looks bad because this is where most investments are made and there is a willingness to take really big bets here.

When you take really big bets you will win some and lose some. We have to remember that the number of big winners here is even more staggering – companies like Facebook, Google, Apple, Cisco, Intel, Oracle, eBay, Salesforce – you know I could keep going.

There is one more thing that I noticed researching the companies and specifically their founders, something that probably is a contributing factor. All these companies have very charismatic founders that were really really good at raising money.

An example of that was Hosain Rahman of Jawbone. Here is what Fortune magazine said about him in a 2017 article:

“Jawbone had all the elements of Silicon Valley legend. Its CEO was a larger-than-life fellow named Hosain Rahman, who talked big and was a master at raising (and spending) money” – Fortune Magazine 2017.

It looks like the founders were often a lot better at raising money than actually running a startup. Those are two different things.

Conclusion

Failure is part of the deal when it comes to startups. This means that there are plenty of lessons to be learned from those who have fallen on their faces in recent years.

Thankfully, these failures can serve as an important reminder for any entrepreneur looking to follow in their footsteps and start a company of their own.

These 10 biggest startup business failures should be enough motivation for anyone with dreams of becoming big someday – but only if they accept failure as one possible outcome along the way.

What does this mean for entrepreneurs? For starters, it’s imperative not just finding a product-market fit, but also avoiding mismanagement or making bad decisions along the way.

In other words, make sure your idea is sound before you go all-in on it. And this is easier said than done, especially if you are like most entrepreneurs who have a “can-do” attitude.

So, go ahead and start your own company today – just remember not to make these mistakes so you don’t end up on this list tomorrow!