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Five Startups That Failed

(and how not to make the same mistakes)

Some companies start with one employee and grow to hundreds. Others begin with hundreds and end with one. Whether a startup fails or succeeds is not always predictable. Companies can receive millions in funding only to flame out. Here are five startups that failed… and how to not make the same mistakes.

YikYak

Yik Yak was an anonymous social media app aimed at a younger audience. The app was location-based and allowed a social network to form in close proximity. This feature was popular in colleges and quickly became widely downloaded.

However, two years after receiving funding, the company failed. As a result, Yik Yak rose quickly and fell just as fast.

Yik Yak's anonymous platform was ripe for cyberbullying. The company made the news for several incidents of users posting threats of violence and for the bullying of its users.

While this app faced the same issues of moderation that plague many companies, their users were in a location-based bubble. The same feature that helped the company gain steam also exacerbated its issues. In an attempt to fix this, the company implemented a security measure that limited the accessibility of the app to it's the school-aged target audience, which eliminated many of it's users.

Beyond this, the app failed to grow.

How not to make the same mistake

Downward trends in user experience can be seen in data, especially in the churn rate, which is when customers leave or cancel a service. Causal makes it easy for your whole team to track downward trends and rectify the issue.

Shyp

Shyp was a company built on the trend of simplifying and speeding up the shipping process. For just $5, Shyp would pick up a package and deliver it to the right shipping company. Shyp users wouldn't even need to package their product, as it would be taken care of from start to finish.

The company received $62 million in funding. Shyp expanded to several major cities and attempted to stay ahead of the curve with new features and partners. The app-based company understood the craze of on-demand services and seemed like it would have a bright future. So what happened?

While the idea of easy shipping was promising, it was ultimately unsustainable. A $5 flat fee fell short of the funds needed to send bigger packages. The company introduced varied pricing to rectify this, which curbed its appeal and 'simplicity.'

The company laid off employees and attempted to downsize, but the damage was done.

Shyp's focus on early expansion and its financial errors cost the burgeoning business cash and decreased its Startup runway.

How to avoid this mistake

Startup runway is the amount of time a company can sustain its operations with the funds they have. By calculating the runway in advance, a company can place for the amount of time it needs to start producing revenue.

Casuals Startup Runway Calculator can help map out a timeline for a company. Our models are interactive, allowing you to map the changes to the runway as funds increase or decrease.

Quibi

For a short time, Quibi ads were everywhere. This streaming startup advertised the idea of 5-10 minute shows for 'quick bites' of television.

This company seemed promising due to its expert founders and claimed to change how people stream their shows.

However, this company only lasted six months. Quibi raised an impressive $2 billion.

So why did Quibi fail?

It may be easy to blame this company's failure on the Covid-19 pandemic. However, the company was based on streaming on the go at a time when most people stayed home. While the timing was unfortunate and may have quickened the demise of this company, there are other factors at fault.

The company's shows didn't gain steam and failed to generate excitement. With the change of user behavior due to the pandemic, shows on the go became irrelevant. Quibi didn't adapt to this change. Quibi was also meant for phones, not television, to make it more travel-friendly. However, for users at home, watching on the phone wasn't as attractive. In addition, Quibi's price wasn't competitive (in a competitive market), and major giants were offering more for less.

Ultimately Quibi didn't seem to thrive in its notoriously saturated market.

How not to make the same mistake

Market analysis is vital for any company. To succeed, a company needs to understand demand, target marketing, pricing, and competition. Compared to giants like Netflix and Hulu, Quibi offered too little.

Causal makes market analysis easy by bringing all the analytics to you. Our models give you all the information with none of the hassles.

HomeShare

HomeShare had an ambitious promise. Offer place in luxury buildings to renters who wouldn't normally be able to afford it.

The company would divide a property into smaller 'units', making the rent more affordable. The company would match users, provide rent protections and offer dividers.

Homeshare couldn't deliver on their expensive promise. When HomeShare failed, they could not pay their outstanding bills or uphold any commitments made to their customers.

How not to make the same mistake

This company acted unethically and failed to plan for the cost of their service. Cost-based pricing is essential to have a sustainable business.

Arrivo

Arrivo was a company that offered an incredibly ambitious high-speed travel system called the hyper-loop. The company claimed the hyper-loop would fix issues such as traffic and slow travel.

Eventually, after not being able to fulfill its original goal, the company ran out of funding.

How to avoid the same mistake

Startups have significant risks. Startups hoping to corner the market have even more. Arrivo, like many startups, ran out of runway and failed to generate enough revenue in time.

How Causal can help

Causal's Startup Suite can help a company determine how much funding they need for an adequate runway, how well their company is doing, and how they can compensate employees.

Our interactive and straightforward models will bring all of the data to your fingertips, so you can make informed decisions to keep your company running.

Build your own financial models for free

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