- Today we're gonna look at the biggest
startup failures of all time,
and there are a lot of newcomers to the list.
Four out of top five are new
since I made the list in 2019.
There's been a lot of major crashes
in the last couple of years.
I've researched all kinds of sources
and made a list of the top 10 biggest failures
ranked after how much was invested in them.
And, yes, we're talking billions and billions of dollars
just on this list.
(Upbeat music) This is "Raw Startup"
I've always been an entrepreneur.
I've raised 100s of millions of dollars for Reno,
and we have over 60 million users all over the world.
I've always been fascinated
]with what you can learn from the big successes,
but also the big failures.
I've been especially fascinated
by all these massive failures,
thinking, "How the heck did this happen?"
That's what we're gonna look at today.
Finally, we'll look at an overview of the 10
to see what they have in common,
and see if we can learn anything from that.
You will be surprised by some of the findings on this list,
so stay tuned for that.
Always remember that behind any startup
there are real people,
real people that have invested blood, sweat, and tears
into these startups.
Building a startup is rough,
going down with a startup is even rougher
so well done for trying.
I have nothing but respect for people that try
and most people on this list really tried,
but unfortunately there's also some serious mismanagement
and fraud on the list.
With that, let's get going.
Number 10, Abound Solar.
Abound Solar just makes the list at number 10
with 800 million invested the day they shut down in 2012.
One more thing about the list,
we will start at the bottom and build our way up to the top.
All amounts are converted to today's value
so they can all be compared.
Abound Solar was a manufacturer of thin film solar panels.
A lot of money was flowing into R&D in solar
as the cost of polysilicon skyrocketed in 2008,
and the industry was looking for alternatives.
However, when the cost plummeted it was hard to compete.
Abound Solar is not the only solar company on the list,
it's been really hard to find good information
about what happened here
but it looks like the cost structure changed completely
as the price of polysilicon plummeted
and they just couldn't compete anymore.
If you know something about about Abound Solar,
put in the comments so we can learn more about them.
With that, let's move to number nine, and this is a big one.
Number nine, Theranos.
Theranos, the big scandal of 2018
comes into the list as number nine
with 830 million invested the day they shut down in 2018.
Theranos was making a blood testing device
that you could test you for any disease you can imagine,
from only a small drop of blood.
Theranos was run by the very charismatic Elizabeth Holmes,
with the very, very deep voice.
- This is what happens when you work to change things.
And first they think you're crazy, then they fight you,
and then all of a sudden you change the world.
- And it did look like Elizabeth Holmes
was gonna change the world back in 2014.
She was on top of the world
and the cover of every business magazine in the US,
but there was a problem, the product didn't really work.
Sure there was a device, the Edison,
but it never worked as they claimed.
Actually, it never really worked.
They misled investors and bullied employees.
And it all came crashing down
when the Wall Street Journal started looking at Theranos,
things were not what they looked like at Theranos.
Elizabeth Holmes and her partner, Sunny Balwani,
were in 2022 convicted to 11 and 13 years in prison
for the fraud at Theranos.
All this is very well documented.
I read the book "Bad Blood", highly recommend it.
There's also a HBO documentary, a podcast,
as well as a TV series called "The Dropout".
So many things went wrong at Theranos,
obviously no product market fit,
but also fueled by mismanagement and fraud.
That's it, let's move to number eight.
Number eight, Better Place.
Better Place comes in on the list as number eight
with 864 million invested the day they shut down in 2013.
Better Place was building a global network
of battery charging and battery switching services
for electric cars.
The key was the battery switching,
that meant you have a fully charged battery in minutes
instead of waiting for a long charge.
I always felt that this was a way too cumbersome solution
to a problem that would solve itself
in a few years when the batteries got better.
Building a global network of battery changing stations
just didn't feel like the right solution.
In total Better Place ended up selling 1,500 cars,
that's not a lot considering there was over 800 million
invested in the company,
and they actually didn't build the cars themselves.
They partnered with car manufacturers
to actually build the cars.
Still, Better Place spent half a million
on every single car sold, that just feels like a lot.
Better Place clearly never found a product market fit,
users were not willing to buy these cars
with this special battery replacement technology.
On top of that, very few car manufacturers
were ready to support the project.
I think there's a basic lesson for entrepreneurs here,
find a problem that's big enough and that you can solve.
I think Better Place did neither.
Number seven, Jawbone.
Jawbone comes in on the list as number seven
with 1.2 billion invested the day they shut down in 2017.
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,
but always felt like Fitbit could offer similar products
but 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 is clearly a question of product market fit,
even if they had product market fit,
it did look like the competition
had a better product market fit.
There's a little bit more to Jawbone,
Jawbone has something that a lot of other companies
on this list have too,
we'll get to that at the end of the video.
In such a capital intensive industry like hardware,
there just isn't room for a lot of mistakes.
Hardware is just very hard.
With that, let's get to number six,
and this one is a little bit different
than all the other traditionally funded startups.
Number six, Go.com.
Go.com comes in on the list as number six
with 1.3 billion invested the day they shut down in 2001.
Go.com was not a traditional startup,
Go.com was a startup inside Disney.
I added Go.com to the list
as Disney made it public how much they invested
and lost in Go.com,
and that number certainly qualified them for this list.
Disney wanted to build a portal
that had all the content that Disney provide it,
Disney also acquired the search engine Infoseek
and Infoseek came apart of Go.com.
Things did not go as planned for Go.com.
There was legal problems,
a search engine called GoTo.com sued Go.com
because the logos were too similar.
Disney actually lost the case, and have a look here
you can see the two logos next to each other,
but Disney could not use the logo anymore.
After three years of not getting where they wanna go,
Disney in January, 2001, decided to shut down Go.com.
They announced that they were shutting down Go.com
as well as the search engine,
laying off around 400 people
and I guess Disney's .com bubble had burst.
Next is the first new entrance on the list,
number five, Katerra.
Katerra comes in on the list as number five
with 1.7 billion invested the day they shut down in 2021.
Katerra attempted to revolutionize the construction industry
by using technology to streamline the design,
engineering and building process.
According to Katerra itself,
they failed because of COVID-19
and the inability to raise more funds.
That might be what killed them in the end,
but it does look like there was a lack of focus
and they never really found a product market fit.
On top of that, they had SoftBank as their primary investor.
SoftBank can mess up any good company,
we saw that with WeWork.
They invest too much money set, set too ambitious goals,
and you end up with a company with no focus at all.
That might well have been what happened here.
SoftBank can really mess up any startup.
And now things are getting interesting,
we are getting to a big one, number four, FTX.
FTX comes in on the list as number four
with 1.8 billion invested
the day they shut down in late 2022.
FTX was a high profile cryptocurrency exchange
and crypto hedge fund,
and it was a shocker when it all came crashing down in 2022.
They spent money like crazy,
they had their own FTX arena in Miami
and they were endorsed by everyone.
- You know what, I'm in.
- Although some smart people said, no.
- Eh, I don't think so.
And I'm never wrong about this stuff, never.
- The founder was Sam Bankman-Fried, also known as SBF.
Now more like Sam Bankrupt-Fraud.
He was the hero of the crypto community
and known as the generous billionaire.
- The guy you see next to me
is the most generous billionaire in the world.
- Now it does look like he was generous
with other people's money.
FDX is really worth the full video and I might just do that,
but here's some of the madness we know about already.
According to the bankruptcy lawyer,
the governance was worse than Enron.
For example, their auditor was only available
in the Metaverse.
True story, they could only reach their auditor
through the Metaverse.
This company was run by a bunch of kids
with little to no experience, from an apartment in Bahamas.
Still, they managed to raise a lot of money.
FDX was a massive embarrassment
for the biggest venture funds,
and the list of investors was the biggest and the brightest.
Investors like Sequoia, Iconiq, NEA, Tiger Global,
Insight Partners, and BlackRock,
they clearly didn't do their due diligence.
On top of all the money lost by investors
there is the customer's money,
and that could be 8 billion, and mostly lost,
a tragedy for a lot of people.
Founder SBF has been arrested and extradited to the US.
He went from hero to an orange jumpsuit
in a very short time.
He will also go to prison for a very, very long time.
But one big lesson here is
do whatever you want with your own money,
but don't mess with other people's money.
They will put you in jail, simple as that.
Number three, Quibi.
Quibi comes in on the list as number three
with 2 billion invested the day they shut down in late 2020.
Quibi was a short form content streaming service
that launched in April, 2020,
and shut down less than a year later.
The service was founded
by Meg Whitman and Jeffrey Katzenberg,
both whom had very successful careers
in tech and entertainment industries.
Great people, lots of money, what could possibly go wrong?
According to Quibi, the official explanation was
that the idea just wasn't strong enough
to justify a standalone streaming service,
and because of the timing, timing as in COVID-19.
This makes sense,
but it was not the only reason Quibi failed.
Before we get to that,
I did a full video on the reasons why Quibi failed
so please check it out,
we can learn a lot from Quibi's failure,
linked in the description.
In short, the founders were arrogant
and broke every single rule on how to build a startup.
That is why they failed, no MVP, too much funding,
no product market fit, and they did all the-
they were always bound to fail,
with or without the pandemic.
And we are getting to the top.
Number two, Solyndra.
Solyndra comes in as number two with 2.1 billion invested
the day they shut down in 2011.
Now, that's a lot of money invested and lost,
and actually Solyndra was number one on the list
when I did it in 2019, so we have a new number one.
Solyndra was a manufacturer of thin film solar cells.
The secret sauce to the product
was that it didn't use polysilicon.
Not using polysilicon was an advantage, as it was costly
and there was a shortage of polysilicon in 2008.
In 2008, the price of a kilogram of polysilicon was $400,
that was great for Solyndra,
however, Solyndra quickly lost the advantage
as the price fell to $50 over the next few years,
and today it's even lower.
The high price was due to a shortage
and over the next few years supply increased,
and rapidly took the price way down.
As the price of polysilicon fell,
Solyndra just couldn't compete anymore
and lost to cheap Chinese solar panels.
Solyndra solar panels were just too expensive.
In its core, that's a lack of product market fit,
they just couldn't build a product
at the price that the market was willing to pay.
I'm not gonna get into politics
but Solyndra was a bit of a hot potato,
as some of the money lost
were loans from the federal government.
And in some circles the Obama administration
was blamed for the loss.
Before we get to number one, make sure you stay tuned
when we look at what they have in common
and what we can learn from them in just a second.
Also, if I missed somebody, put in the comments.
If you like the content, also make sure you subscribe.
And we are at number one, we have a winner,
the biggest startup failure of all time.
Number one, Argo AI.
Argo AI comes in at number one
with a staggering 3.6 billion invested
the day they shut down in 2022.
This is the biggest startup failure
in the history of startups.
Argo AI developed self-driving technology
and are the first casualty of the self-driving revolution,
even before we have self-driving cars.
They were focused on developing
autonomous vehicle technology
for use in ride hailing and delivery services.
Argo AI has partnerships with several major automakers,
including Ford and Volkswagen.
This is not a bankruptcy but Argo AI was disbanded
and tech and some employees were taken over by Ford,
as Volkswagen, the biggest investor,
decided not to invest anymore in Argo AI
after they had a quarter where they lost over $800 million.
Yes, this is definitely a failed startup.
So why did they fail?
I think we've realized over the last few years
that fully autonomous driving
is a bit further out than we expected.
This meant a lot of automakers were betting on
driver assist systems instead of fully autonomous.
Argo AI was betting on fully autonomous
and you could say they were just too early
and ran outta money.
Okay, so that's the list, now to the exciting part,
what can we learn from this list?
Looking at the list, it becomes pretty clear
that one thing that's almost always there,
the lack of product market fit.
And the real mistake here is that these companies scaled
before they have a product market fit,
and that's just a no-go.
And then we have timing on number one for Argo AI.
Honestly, I don't think they could know.
The timing just changed on self-driving cars
and they couldn't know, and then they just ran outta cash.
The timing was off, they were too early.
Finally, there's fraud.
Not much to learn, just don't do it.
Another interesting observation here
is that all the startups are in the US except for FDX.
FDX is in the Bahamas, very close to the US,
mostly founded and funded in the US
so basically a US company too.
It's interesting that only US made the list,
actually, the geography gets a little bit more crazy
as seven out of 10 are from California.
All seven are either from San Francisco or Los Angeles.
Incredible that seven out of 10 on this list
are from two cities in California.
Sure, there are some really big laws in California
and you're tempted to think,
"Hmm, they make some horrible investments in California."
However, California looks bad
because the willingness to make big bets is in California.
This is where people invest a lot of money into startups
and are willing to take a lot of risk.
When you make big bets you will win some and lose some.
And we have to remember,
the number of winners here is even more staggering
than the losers.
Companies like Facebook, Google, Apple, Cisco,
Intel, Oracle, eBay, Salesforce.
You know, I could keep going.
There are so many great companies in California.
There was one more thing I noticed
when I researched these companies,
something that probably is a contributing factor.
Most of these companies have very charismatic leaders
that are very good at raising money.
An example of this is hos Hosain Rahman of Jawbone.
Here's what Fortune Magazine said about him
in a 2017 article,
"Jawbone had all the elements of a Silicon Valley legend.
Its CEO was a larger-than-life fellow named Hosain Rahman,
who talked big and was a master of raising
and spending money."
Now, let's play a little game here,
what if we replace the company and founder in this quote?
The quote is just true
for a lot of the founders on the list.
Take Elizabeth Holmes, probably still true.
Take SBF, probably still true.
It does look like the founders on this list
were better at raising and spending money
than actually running a startup,
and those are two very different things.
That's it, if you want more content just like this,
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Thank you very much for watching "Raw Startup".
Now stop watching and go build something.
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