Top Failed Startups in 2016: Lessons from Near Misses

While many startups shut down in 2016, it doesn't mean they were failures. True failure is more about abandoning your commitments or making poor business decisions. Of the several notable failures in that year, we'll focus on five prominent examples to learn from their pitfalls and avoid similar traps.

A Deep Dive into Notable Failures

PowaTag - An Ill-Fated Begin

PowaTag, founded in 2007 by Powa Technologies, aimed to revolutionize mobile payments. Despite a promising market valuation of 2.6 billion in 2014 and a series A funding of 76 million, the company's flawed business model led to its downfall. It turned out that the company was worth only 106 million, leading to a significant loss of reputation. This case highlights the critical importance of accurate valuation and realistic financial planning in startup success.

TinyOwl - Financial Struggles

TinyOwl, an app for food ordering created in 2014, faced financial challenges after raising 15 million across four funding rounds. Yet, it was unable to cover delivery costs, deal with negative margins, and maintain a good food quality standard. The company had to lay off over 600 employees in September 2015 and January 2016. This serves as a stark reminder of the importance of sustainable business practices and financial transparency in the early stages of a startup's growth.

Fashionara - A Retail Venture Gone Wrong

Fashionara, an e-commerce platform for fashion niche, launched in 2012 and raised 4 million. However, its business plan failed to cover deep discounting, resulting in decline. The company’s niche strategy of operating in two segments - footwear and accessories - suffered from intense competition and the rise of copycats. Its lack of funding eventually led to its shutdown. This failure underscores the risks of underestimating competition and not adapting to market dynamics.

PepperTap - Grocery Delivery’s Noisy Exits

PepperTap was a grocery delivery startup launched in 2014, raising 50 million, including a substantial 36 million in a series B round. However, fierce competition from established players like Bigbasket and Grofers proved too much for PepperTap to handle. Its failure after one year of operation highlights the necessity of a strong competitive strategy and continuous innovation in a rapidly changing market.

FranklyMe - The Challenges of Video Micro-Blogging

FranklyMe, a video micro-blogging platform created in 2014, aimed to connect celebrities with fans. Despite raising 600,000, the platform failed to capture market attention. The founder highlighted the ongoing challenges in video creation and consumption, suggesting that successfully launching a video-based platform requires a sophisticated understanding of audience behavior and technological infrastructure.

Lessons Learned

These failed startups of 2016 teach us several important lessons:

Accurate Valuation: Companies must ensure their business valuation is realistic, avoiding overvaluation and subsequent disappointment. Sustainable Business Practices: Financial transparency, cost management, and sustainable growth strategies are crucial even for startups that secure substantial funding. Market Adaptation: Continuous market analysis and adaptability are essential to avoid being outperformed by competitors. Underestimating Competition: Properly understanding and preparing for the competitive landscape is vital in securing a sustainable market position.

Each startup’s failure is unique and offers valuable insights for future entrepreneurs and investors. By learning from these case studies, we can build more resilient and innovative startups in the future.