Close to $1.50 billion worth VC Funding is said to Go in-vain this Year with the List of Dead Startups increasing

 

Startup’s shutting down are a part of the ecosystem- considering today’s dynamic entrepreneurial environment. Investors are taking a step back before taking any big decisions on their investment strategies as there is a cautious mood in the market.

 

Some of the startups which closed their operations in the year 2017 are

 

Luxe

LUXE

The San Francisco based innovative startup which promised to end the menace of parking in busy cities with an app that would provide valets to your location to take away your car until you needed it back, has closed its app in April 2017. The company had raised capital close to $100 million by the year 2016. It has been said that it would regroup with a new product in the coming days.

With its recent purchase of IRL parking garages, the company has become more of a traditional valet service than what it initially started as. Its operations have not closed yet with rumors doing the round of Uber planning to acquire it.

Although the concept of providing valets at door step was innovative, it was not cost effective and viable as a business model due to its  high cost ratio either to maintain a team of valets or rent parking spaces.

 

Sprig

SPRIG

The on-demand meal service company based in San Francisco started with the concept of smart phone based home deliver food service which promised to provide local organic food with seasonal ingredients. The company had raised capital of more than $50 million from Battery Ventures and angel investors such as Andrew McCollum one of the co-founder of Facebook and Justin Waldron co-founder of Zynga.

The model could not work with its CEO Gagan Biyani stating that “The demand for Sprig’s convenient, high-quality food was always incredibly high, but the complexity of owning meal production through delivery at scale was a challenge.” The company was not able to expand its market in other cities as a result of which its revenue started shrinking and it had to shut down operations.

The company failed to differentiate itself from a food supply or service company as managing financials with this model became difficult owing to rising cost.

 

Jawbone

JAWBONE

The San Francisco based wearable giant was considered as a pioneer in wearable devices with products involving fitness trackers and portable speakers. It had raised a capital of $ 1 billion from venture capital firm like Andreessen Horowitz, JP Morgan Asset Management and private investors like Yuri Milner.

It struggled to cope with the competition from companies like Fitbit and lost considerable share among the wearables market. It struggled in making payments to its vendors, resulting in production shutdown, in wearable segment, in July 2017. The company was planning to venture into healthcare hardware and software space with a name Jawbone Health Hub.

The company got entangled with legal problems with Flextronics and Fitbit pushing it to divert its concentrate from actual business to legal problems.

Stayzilla

STAYZILLA

The Bangalore, India based company was initially launched as an online hotel bookings agency by the named Inasra. They renamed it to Stayzilla and shifted the idea to a hotel aggregator model around 2010. They had received funding from Matrix partners and Nexus venture partners of around $70 million from 2012 to 2016.

On 23rd February 2017, the company announced that it has decided to shut down its operations owing to its inability to develop local network and execution of expansions plans resulting in high costs and low revenue.

What looked strange in Stayzilla's case was that the company had good funds enclosed, but it lacked in long term strategies to compete with already established competitors nor it was able to discern its offering.

Hello

HELLO

It was started by James Proud, one of the recipient of billionaire Peter Thiel entrepreneurial fellowship in 2011. The company had developed a sleep tracker which need not be worn on one's wrist, the company had positioned itself as a fitness and health tracking device to provide an optimal sleep environment and build good habits around sleep using its app on smartphone.

The company had got funding from Temasek in 2015 of $40 million with its overall valuation estimated around $300 million. They got stiff competition from voice-powered assistants like Alexa and Google Home and were not able to carve a niche for themselves in the market which resulted in shut down of their operations.

The shutdown of Hello serves as a cautionary warning when gadget startups go over aggressive and need to spend funds wisely.

 

Maple

MAPLE

A New York based food delivery service company which used a unique model wherein it priced its service including tips and delivery charges with a free gourmet sugar cookie with each meal. It was backed by David Chang owner of Momofuku restaurant.

It had raised capital of $29 million, its idea of trying to differentiate itself from other startups by owning the whole process of the food cycle did not work well in practice as costs kept soaring resulting in the management decision to shut down operations and join hands with London based Deliveroo who will use Maple’s technology to help accelerate growth and efficiency across its platform.

The company should have isolated itself either as a food production or service company as owing the full production and supply cycle in a food business is always a challenge because of the cost as well as with the soaring operations.

Yik Yak

YIK-YAK

It was a social media app which was mired with many harassment scandals. It allowed people to create and view discussion threads within a 5-mile radius. The company had raised a capital of $73 million and was valued $400 million.

Yik-Yak was originally funded by Atlanta Ventures, in April 2014, it secured funding of $1.5 million from Vaizra investments and Azure Capital Partners.

Unfortunately the app was not able to retain users on its platform nor could it generate interest to increase new users. It closed its operations in April 2017. Further its engineering team was acquired by Payments company Square for a price of $3 million.

Some changes in the app like mandatory use of handles was one of the key reason for decline in popularity. It also was an eye opener to other companies that people are very sensitive to change.

Quixey

QUIXEY

This mobile application was launched in 2009 as a search engine catering to the growing app marketplace. The company had attracted capital of $133 million by 209 and was valued at $600 million by 2015.

Quixey introduced functional Search technology which searched  data from multiple blogs, review sites and other social media platforms to help user get an idea about exactly how each app functions. The search engine further helped users to find apps without knowing the name and description.

The company was not able to attract more people to use its search engine, as a result it tried to shift its model from search engine to advertising app, but could not sustain its relation with the Chinese tech giant Alibaba. Alibaba had signed a deal to invest about $110 million in the company but finally withdrew its association owing to differences with the management.

 

Beepi

Founder & CEO of BeepiOwen Savir

The company had created a marketplace for buying, selling and leasing used cars, with the entire transactions carried out using a PC or a smart phone. In May 2015, the company had raised VC funding of close to $300 and was valued close to $600 million.

With all the capital in hand the company could not execute the model and in February 2017 and its attempted merger with Fair.com also failed. The company finally sold all its assets in the process to shut down operations.

Beepi is a good case of a startup with a good idea, but failed to create a solid execution process eventually resulting in lack of strong customer base.

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