5 Startups that Didn’t Make It by Artur Kurasiński

The post was originally published in Polish on Artur’s LinkedIn profile. Artur kindly agreed that we repost what we think is of great value to our readers.

90% of startups fail. Here are 5 examples of such failures in recent months along with the lessons to learn from their failures:

1. Health IQ – a health tech platform dedicated to health insurance. At one point, its valuation reached USD 450M, but eventually the company went bankrupt. What went wrong?

• Changes in strategy. The decision to introduce Medicare Advantage plans put a significant strain on their budgets.
• The controversial payouts to co-founders have raised many questions about the transparency of the company’s operations.
• The health industry is full of legal intricacies that the company neglected.
• There was a lack of a well-thought-out business strategy and financial management, which led to a huge hole in the budget.

2. FrontRow – an Indian learning platform. They offered hobby courses taught by celebrities. Despite funding and a wide user base, the company collapsed. Why?

• They undermined their own growth at all costs. Despite raising a lot of capital and an ARR of $4 million, their margin was -250%.
• Initial success can’t compensate for a lack of sustained user engagement.
• The idea of releasing cohort courses was promising. However, it didn’t save the startup.
• If your product doesn’t meet the needs of the market, even a lot of funding won’t help.

3. Braid – a fintech designed to manage a budget jointly. Despite securing USD 10M in funding, the project collapsed. What went wrong?

• They became dependent on many entities, which slowed down the decision-making and the progress and led to collapse.
• They relied on a single sponsoring bank, which paralyzed their operations for months.
• They relied on third-party software, which hindered their progress, lowered their margins, and eventually led them to create their own solutions.

4. WeWork – Once valued at USD 47B, this is a notorious provider of coworking space. Currently, their shares are worth less than $1. What went wrong?

• They were doomed by a mismatch between long-term liabilities and short-term revenues.
• They weren’t prepared for the growing popularity of remote work after the pandemic.
• Lack of stability in management. Departure of co-founders, CEO, and CFO. Frequent changes in the company’s management can discourage investors.
• Artificial valuation by investors who have pumped billions of dollars into the company, inflating its valuation to unsustainable levels.

5. Checkout X – They allowed Shopify merchants to integrate other payment providers that were not offered on Shopify. After reaching USD 600K a month in revenue, they had to go out of business. Why?

• Being deeply rooted in a single platform’s ecosystem can lead to sudden disasters if the platform changes its policies. Shopify has stated that the creation of public checkout apps is prohibited.
• Shopify later blocked Checkout X and the startup had to shut down.
• If your service becomes too popular, your host platform may become your competition.