30 startups that lost millions of investors' money
Augmented virtual reality glasses, smart luggage, high-end tea infusers, LED lights, gourmet food delivery, and Wi-Fi-connected juicers are just some of the 30 startups that lost millions of investors' money. Stacker looked to CB Insights, a private company financing and angel investment database, to rank the brilliant ideas that busted after million-dollar Kickstarter campaigns had foretold otherwise.
The stories behind the failed startups vary as much as the products and services themselves. New York City startup Aereo fought to stay alive, bringing its battle to the U.S. Supreme Court, which confirmed the company infringed on broadcast copyrights. Meanwhile, startup A Better Place promised to change the world with electric cars, but only managed to scare up some temporary hype. And then there is Elizabeth Holmes, founder of Theranos, a health-care startup that was busted by the Wall Street Journal for dubious blood-testing services.
Stacker saw specific trends among the failing companies, with the biggest losers coming out of Silicon Valley. Another noticeable trend was the time in which it took these startups to fail. While many of them ceased business at around six years, others took only a couple of years to lose all the privately invested money. The startup at the top of this list, however, involved losing taxpayers' dollars in addition to private investor funds. The company “used the money, along with hundreds-of-millions more from private investors, to build a new facility,” Fox News reported, but was forced to shut the doors of its state-of-the-art factory less than a year later.
Some of these companies were before their time and weren't ready to succeed, such as RDio, the music streaming service that was seen as the future. Unfortunately for them, that future belonged to Spotify, who effectively took them off the air with its larger music library. SideCar saw Uber come along, overtake it, and stamp out its place in the market, leading the company to accuse Uber of predatory pricing practices.
Read on to find out all about the 30 startups that lost millions of investors' money.
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- Disclosed funding: $15 million
When CastAR's Kickstarter campaign raised more than $1 million from a $400,000 goal in 2013, a bright future for the augmented and virtual reality glasses seemed imminent. The Magic Wand joystick allowed the controller to position objects in space and the RFID Tracking Grid let users identify, track, and augment physical objects across a surface. “It was too early, and the challenges it faced were incredible,” reports VentureBeat.
#29. Lily Robotics
- Disclosed funding: $15 million
Before it crashed and burned in 2017, Lily Robotics looked like it would fly high among the top drones in the industry. Founders Antoine Balaresque and Henry Bradlow raised $1 million in seed money for the four-rotor camera helicopter, and former NFL quarterback Joe Montana even backed the drone that had a pre-order price of $499, and some 60,000 customers. After a few delayed launches, in January 2017, all investors received an email stating they should expect a refund from the failed startup.
- Disclosed funding: $17.2 million
Teforia could not sustain financing long enough to educate tea drinkers on the "smart kitchen space" product even after securing $5.1 million in seed funding in 2015 and another $12 million in 2016. "There may have been room for a product at the higher-income bend for tea consumers," reports TechCrunch, but paying $649 to simplify the task of brewing tea just wasn't enough.
- Disclosed funding: $21.5 million
Lantern turned down its lights and laid most of its 25 member staff off in 2018 after having offered users tools to support them deal with anxiety and body image for six years prior. The $50 monthly service fee included a life coach who used digital cognitive-behavioral therapy to assist users. The six years Lantern lit up lives was not in vain, according to the company's website. The company's homepage now states: “That's why we founded All Mental Health, a nonprofit with a mission to deliver free and engaging mental health education.”
- Disclosed funding: $27 million
BlueSmart was the highest crowdfunding project for a travel device in its time before it shut down in 2018 because of a smart luggage travel ban. The carry-on suitcase, which connected to smartphones and could be controlled by a phone app, came with a digital scale, tracking system, and a built-in battery charger. BlueSmart sold its intellectual property, designs, and branding to Travelpro in 2018, according to the Verge, who reported the company had 650,000 suitcases worldwide when it was banned.
- Disclosed funding: $33 million
Cuil search engine went live on July 10, 2008, and shut down two years later after raising $33 million in venture capital. Despite positive post-launch user metrics, the site did not see 200,000 unique monthly visitors in any month during 2009. The vice president leaving the company a month after the search engine's launch forecasted Cuil's eventual demise less than two years later.
- Disclosed funding: $33.5 million
After the founders of Stayzilla got arrested for financial fraud in 2017, India's version of Airbnb got crushed like a building in the old school Godzilla films. The $33.5 million raised over four funding rounds between 2013–16 helped create a directory of 15,000 listed stays in 11,000 Indian cities, toppled when founders and college roommates Yogendra Vasupal and Sachit Singhi failed to pay loans. Vasupal launched the company under the moniker Inasra Technologies in 2005 before changing it to Stayzilla in 2010.
- Disclosed funding: $33.5 million
After its founding in 1998, software company Agillion went through $33.5 million in a matter of three years before going belly up by 2001. “Agillion spent heavily to promote itself on the Super Bowl broadcast and sent employees on an expenses-paid trip to Cabo San Lucas in Mexico,” according to the Associated Press. That would later cost six former executives who were sued by a U.S. bankruptcy trustee for their extravagant spending sprees.
#22. Laguna Pharmaceuticals
- Disclosed funding: $34.5 million
Unspecified safety issues in the third phase of the heart drug trial shut down Laguna Pharmaceuticals. “We didn't fail. The drug failed.” Bob Baltera, Laguna CEO, said in a 2015 Xconomy report of the company founded in 2006. Business Insider reports Laguna is among nine other failed health-care startups which shut down after five years, some of which cost investors hundreds of millions.
#21. SideCar Technologies
- Disclosed funding: $36.3 million
The Series A funding for ride-hailing and business-to-business service SideCar Technologies in 2011 was $10 million; however, the great start didn't foretell the San Francisco-based company's 2015 failure. SideCar was the pioneering app that gave passengers an estimated price as well as matching carpool passengers, according to Reuters, until it was not. SideCar blamed its demise on Uber, suing the company for predatory pricing that was "designed to drive SideCar out of the market while Uber acquired a dominant market position," according to the lawsuit.2018 All rights reserved.