Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio.
Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,
Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio
Speaker 1: and I love all things tech. And those of you
Speaker 1: who have listened to my show for a while have
Speaker 1: heard me talk a few times about the infamous dot
Speaker 1: com crash that happened around two thousand, two thousand one.
Speaker 1: And one of the factors, and there are lots of factors,
Speaker 1: but one of them that contributed to the problem was
Speaker 1: that you had a lot of companies popping up that
Speaker 1: were based around novel and potentially awesome ideas, but they
Speaker 1: had no real way to generate revenue. And that's a problem.
Speaker 1: A company might be centered on a fantastic idea, one
Speaker 1: that appeals to a lot of people, but if there's
Speaker 1: no way to monetize the bis no, then you're living
Speaker 1: on borrowed time. You can only operate for as long
Speaker 1: as you have the money to fund it, which means
Speaker 1: you're hustling for investments from venture capitalists or you know,
Speaker 1: even better, for some bigger company to come along and
Speaker 1: scoop you up in a lucrative acquisition. Now, perhaps that
Speaker 1: larger company will actually find a way to monetize your idea,
Speaker 1: or maybe integrate your idea with other existing products and
Speaker 1: services that that company already has. Either way, for some companies,
Speaker 1: this ends up being a pretty dangerous game. It doesn't
Speaker 1: always pay off. While a company like Twitter might manage
Speaker 1: to hang around for years before developing a viable revenue model,
Speaker 1: others will fade away. So in this episode, I want
Speaker 1: to look at some tech startups that didn't survive and
Speaker 1: not really focus on the dot com crash because that
Speaker 1: was a particularly rough time that that affected a lot
Speaker 1: of companies, both good and bad. I'm going to look
Speaker 1: at stuff outside that era. Now. To be clear, I
Speaker 1: don't necessarily think that all the companies I'm going to
Speaker 1: talk about today were bad, or that the people who
Speaker 1: are working on them weren't working hard enough or anything
Speaker 1: like that. Like I said, good ideas can fail, and
Speaker 1: on the opposite side, bad ideas can sometimes really take off.
Speaker 1: A business is financial success isn't necessarily tied to how
Speaker 1: good an idea it is, you know, which is kind
Speaker 1: of frustrating, But that's capitalism, baby. So let's talk about
Speaker 1: a few companies that made a go of it but
Speaker 1: came up short in you know, more recent years. To
Speaker 1: set the stage, it is very easy for us to
Speaker 1: assume that a tech startup is one of the best
Speaker 1: bets to get rich quick. We see reports in the
Speaker 1: news all the time about companies where the valuation skyrockets.
Speaker 1: I mean, you hear about unicorns all the time in
Speaker 1: tech news. Those are startups that reach a billion dollar valuation,
Speaker 1: and most of those companies at least well many of
Speaker 1: those companies are in the tech sector. Right. It's not
Speaker 1: just tech sectors that are billion dollar unicorns, but that's
Speaker 1: typically the way I hear about it. Then again, I
Speaker 1: also cover technology for a living, so I'm already biased.
Speaker 1: But the fact of the matter is that, according to
Speaker 1: the Harvard Business School, nearly nine out of ten startups
Speaker 1: actually fail. So for every big success we hear about
Speaker 1: in the news, there are nine companies that didn't survive.
Speaker 1: And heck, I'm not even sure that this takes into
Speaker 1: consideration companies that initially appear to be a monumental success
Speaker 1: and then like a decade later, completely implode when it
Speaker 1: becomes clear that it's all, you know, built around a fantasy.
Speaker 1: Cough Faroness Cough and of course more rea. Suddenly we've
Speaker 1: had the COVID nineteen pandemic playing a major role in
Speaker 1: all factors of our lives, including business startups that were
Speaker 1: tied to activities that were meant to bring a lot
Speaker 1: of people together in a physical space. Suddenly they found
Speaker 1: their use case eliminated. You know, when I did my
Speaker 1: episode about the video service Quimby, I talked about how
Speaker 1: the pandemic has played a part and pulling the rug
Speaker 1: out of the use case for that service. And if
Speaker 1: you don't know what Quimby is, the original idea was
Speaker 1: to create a short form video content platform and they
Speaker 1: would serve up high production value videos like think TV
Speaker 1: level production value to subscribers, and each of those videos
Speaker 1: would be around ten minutes in length or shorter. The
Speaker 1: idea was that people would watch these videos on their
Speaker 1: mobile devices well, you know, like waiting on stuff like
Speaker 1: let's say you're in line at the coffee shop or whatever.
Speaker 1: Because the pandemic meant that the use case scenarios kind
Speaker 1: of went away because people were spending greater amounts of
Speaker 1: time at home. Quimby is still around right now, and
Speaker 1: the company has tried to pivot a bit by offering
Speaker 1: up the service on platforms beyond mobile devices. But you
Speaker 1: get my point. So let's talk about some big and
Speaker 1: maybe a few not so big. But you know recent
Speaker 1: tech startup failures, and one of the ones I want
Speaker 1: to cover existed for more than a decade, it received
Speaker 1: an enormous amount of financial backing, and yet it's still
Speaker 1: ultimately failed. That company was General Magic, and I should
Speaker 1: really do a full episode about this company, as it
Speaker 1: was incredibly innovative and important, and yet for years, not
Speaker 1: that many people outside the computer and telephone industries and
Speaker 1: Silicon Valley really knew much about it. Now that has
Speaker 1: changed over the years. There's a documentary that came out
Speaker 1: about this company, and that documentary came out in and
Speaker 1: so that's a great resource to learn more about it
Speaker 1: if you want to. But the founders of General Magic
Speaker 1: were incredible. They saw the writing on the wall before
Speaker 1: pretty much anyone else did. Heck, you might even argue
Speaker 1: that they saw the writing on the wall before there
Speaker 1: was a wall there. They were looking beyond the PC
Speaker 1: to see what was coming next down the pipeline, like
Speaker 1: what was going to be the next big revolution in computing,
Speaker 1: And they were convinced that the future would be centered
Speaker 1: around communications devices and mobile devices. So they got to
Speaker 1: work developing technologies that would converge into a form factor
Speaker 1: that we would recognize as sort of a proto smartphone.
Speaker 1: And keep in mind the company actually formed around n
Speaker 1: and that was before there was even a worldwide web.
Speaker 1: General Magic would do a lot of pioneering work that
Speaker 1: would later be intrinsic in smartphone design, both from a
Speaker 1: hardware standpoint and a software and user interface standpoint. The
Speaker 1: company itself had spun off from Apple, which, of course,
Speaker 1: Apple would go on to execute on many of the
Speaker 1: ideas General Magic kind of came up with and do
Speaker 1: it with enormous success. So what happened? I mean, if
Speaker 1: General Magic's ideas were so radical and transformative, why isn't
Speaker 1: the company around today? I mean, why didn't it stick around?
Speaker 1: There's not just one reason that I can point to
Speaker 1: to explain all this, but there's a collection of issues
Speaker 1: that contributed to its ultimate failure. For one, when the
Speaker 1: company started working on an operating system called magic Cap.
Speaker 1: They were doing that for an announced project. It was
Speaker 1: sort of a partnership project with Sony and A T
Speaker 1: and T was involved to feature creep became a huge issue.
Speaker 1: Feature creep is what it sounds like. During the design
Speaker 1: and development process for a product, people begin to add
Speaker 1: more and more features to the original concept, which causes
Speaker 1: that concept to bloat, and more importantly, it creates delays
Speaker 1: as the development teams have to figure out how to
Speaker 1: turn those ideas into reality. That's not easy to do.
Speaker 1: Feature creep often originates as a well intentioned idea, kind
Speaker 1: of a wouldn't it be cool if this thing we're
Speaker 1: working on could also do this other thing, but it
Speaker 1: can frequently lead to disaster or to halfhearted implementations where
Speaker 1: the product just doesn't seem very good because too much
Speaker 1: was going into it. That was a big problem for
Speaker 1: General Magic. Worse than that, though, is that when the
Speaker 1: Sony Magic Link, the product that was using this operating
Speaker 1: system they had developed. When that finally came out, hardly
Speaker 1: anyone bought it. The Magic Link was a p D,
Speaker 1: a personal digital assistant in a sort of tablet form,
Speaker 1: a small tablet form like the screen was about the
Speaker 1: size of a big smartphone, but it was a very
Speaker 1: clunky device is very thick, and this was not a
Speaker 1: knock against Sony I don't blame the company. I don't
Speaker 1: blame General Magic because the state of the art of
Speaker 1: technology in the early nineties meant it would have been
Speaker 1: impossible to make something as sleek and sexy as the
Speaker 1: smartphones of today. Keep in mind, this is more than
Speaker 1: a decade before the iPhone would come out, and it
Speaker 1: got some good reviews from you know, to tech writers
Speaker 1: of the time, but that didn't translate to actual sales.
Speaker 1: So despite having some really super smart and creative people
Speaker 1: working on and creating innovation in a space that hadn't
Speaker 1: seen it in ages, and it had the backing of
Speaker 1: big companies like Sony and A T and T, General
Speaker 1: Magic ultimately failed to get a foothold in the market.
Speaker 1: The general consensus is that it was just too soon
Speaker 1: for those technologies to gain traction. Now, you could argue
Speaker 1: that it's kind of like virtual reality, which also tried
Speaker 1: to establish a place in the market in the nineteen nineties,
Speaker 1: but it failed to do so and it almost totally
Speaker 1: faded away from public consciousness. However, we could actually argue
Speaker 1: that smartphones are not just here, they dominate the technology space,
Speaker 1: whereas VR is still kind of trying to find a
Speaker 1: place today. I mean, there's a niche market for VR,
Speaker 1: but it is not what I would call a mainstream technology,
Speaker 1: certainly nowhere near as ubiquitous as mobile tech. Now I'm
Speaker 1: gonna let off of general magic for now. That's just
Speaker 1: an overview of what happened, but if you guys want
Speaker 1: to hear a full episode on it, let me know. Next,
Speaker 1: I want to talk about a company that I'm guessing
Speaker 1: most of you probably have never heard about, and it
Speaker 1: was called Atrium Legal Technology Services, Incorporated, and the idea
Speaker 1: was to pair legal services with software. The original concept
Speaker 1: for the business was to create a law firm that
Speaker 1: could offer basic legal services at lower fees than the competition,
Speaker 1: partly through the use of software which would help automate
Speaker 1: certain processes and make things more efficient. When I say
Speaker 1: legal services, I'm mostly not talking about litigation. I'm talking about,
Speaker 1: you know, other stuff that you typically need to employ
Speaker 1: legal services for in order to get it done. So
Speaker 1: in early twenty twenty, the company actually completely shed the
Speaker 1: technology part of that business. They laid off nearly a
Speaker 1: hundred people, and they slimmed down to a more traditional
Speaker 1: law firm, again, one that's not pursuing litigation, but rather
Speaker 1: providing other legal services to tech companies in particular. In
Speaker 1: the end, while the idea to use software to help
Speaker 1: streamline things seemed really promising, the company just couldn't find
Speaker 1: a way to fit the software and the legal services
Speaker 1: together in a way that made sense. And that's sometimes
Speaker 1: the case. You'll hear of a business that has an
Speaker 1: idea that, at least on the surface level, seems like
Speaker 1: a great idea. Right, it seems like a no brainer.
Speaker 1: Let's take this traditional process, will inject technology into it
Speaker 1: and will make it more betterer. But there's not always
Speaker 1: a logical or helpful way to integrate technology into a process.
Speaker 1: Or it might be that the technology itself has to
Speaker 1: reach a new level of adaptability or capability before it
Speaker 1: will really be helpful. Like it's just too early to
Speaker 1: bring that tech in. It's going to cause more problems
Speaker 1: and it'll solve. So it might not even be a
Speaker 1: quote unquote bad idea. It might just be one that's
Speaker 1: not viable under current circumstances. It could be that we're
Speaker 1: gonna see something like Atriums Technology Division emerge in a
Speaker 1: few years, and at that point it will work great.
Speaker 1: This kind of reminds me of when I was a
Speaker 1: kid in high school and at that time, computers were
Speaker 1: just starting to become, you know, like a high school fixture.
Speaker 1: But it was one of those things where everyone recognized
Speaker 1: the value of technology, but not everyone had a good
Speaker 1: way to implement it into the educational process. So you
Speaker 1: would have classrooms with computers in them, but not really
Speaker 1: a meaningful way to use those computers for any good purpose.
Speaker 1: They just kind of took up space. And that was
Speaker 1: a real issue and continued to be an issue well
Speaker 1: through my high school years, where schools were competing to
Speaker 1: get funding to buy stuff like computers and ultimately not
Speaker 1: finding good ways to use it, which then turns into
Speaker 1: a perception that schools are wasting money, even though no
Speaker 1: one wanted to waste money. People wanted to make the
Speaker 1: computers be a part of the educational system. It's just
Speaker 1: that we didn't have all the pieces in place to
Speaker 1: make that a reality. You know, teachers didn't have the training,
Speaker 1: the software wasn't fully there yet. So it wasn't one
Speaker 1: single person or institution's fault. It was a collection of
Speaker 1: issues that ultimately made it a painful process. Now, the
Speaker 1: Atrium story also makes me think of a totally unrelated
Speaker 1: one of the Apple Newton, which I talked about a
Speaker 1: little bit in a recent episode. The Newton is the
Speaker 1: device that led to the coining of the term personal
Speaker 1: digital assistant or p d A. Now, granted, we don't
Speaker 1: really talk about the Newton anymore because or even PDAs anymore,
Speaker 1: because smartphones have emerged to take that spot. Right, p
Speaker 1: d a's aren't needed. Smartphones do pretty much everything the
Speaker 1: PDAs used to do. But before we had smartphones, the
Speaker 1: p d A was a high tech way to manage
Speaker 1: calendar appointments, to take notes, to build out a contact list,
Speaker 1: and you know, other business e business type of things.
Speaker 1: The Newton was one that really captured a lot of
Speaker 1: attention when it was being promoted, and its most anticipated feature,
Speaker 1: I think, was that it would be able to interpret handwriting.
Speaker 1: So you could use a stylus and you could write
Speaker 1: on the Newtons screen and the Newton would detect your
Speaker 1: handwriting and interpret it and convert the script you're writing
Speaker 1: into text, which would mean you could just jot down
Speaker 1: notes and the Newton would build out a text file
Speaker 1: for you. There was one teeny tiny problem. The handwriting
Speaker 1: recognition technology was completely unreliable. There were numerous reports of
Speaker 1: people having issues with the Newton's ability to detect or
Speaker 1: understand their handwriting, and what had been a huge selling
Speaker 1: point for the device morphed into more of a punchline,
Speaker 1: and it really ended up hurting the Newtons sales, even
Speaker 1: after Apple attempted to fix the issues. Now a couple
Speaker 1: of decades later, we have devices that can do what
Speaker 1: the Newton was trying to do more reliably, or we
Speaker 1: have devices that use alternative approaches to handwriting recognition, you know,
Speaker 1: like swipe keyboards to make it really easy to take notes,
Speaker 1: or you can even skip the physical note taking entirely
Speaker 1: and use a voice to text app to dictate notes
Speaker 1: directly into text. The problem with the Newton wasn't the
Speaker 1: idea necessarily, but rather that the ability to execute that
Speaker 1: idea wasn't fully mature when the product launched. Moving on
Speaker 1: to another product that failed to find a place in
Speaker 1: the market, let's talk about the Uh Yeah, Oh you
Speaker 1: y A. This project, which originated back in two thousand twelve,
Speaker 1: aimed to bring a video game console device that would
Speaker 1: run on the Android operating system, you know, the OS
Speaker 1: that runs on Android phones. The company's Kickstarter was one
Speaker 1: of the most successful of all time. They raised more
Speaker 1: than eight million dollars on Kickstarter, and unlike another entry
Speaker 1: that I'll get to on this list, the Yeah was
Speaker 1: actually a real thing. Backers started receiving their consoles and
Speaker 1: two thousand thirteen, and the console went on sale to
Speaker 1: the general public not long after that. And it worked.
Speaker 1: You could download games to the console, you could play
Speaker 1: those games on a television. It was a lower price console,
Speaker 1: too much lower than the competition. It was at dollars retail,
Speaker 1: but despite the initial interest from backers, it failed to
Speaker 1: catch on with a wider gaming audience and sales were blackluster.
Speaker 1: The company tried to stay afloat, but it was clear
Speaker 1: that the Uyah was going to be a disappointment and
Speaker 1: there wasn't enough money to fund the development of a
Speaker 1: successor that would keep up with future versions of the
Speaker 1: Android operating system. Because, of course, the danger is if
Speaker 1: you build out physical hardware that runs a specific operating
Speaker 1: system and the operating system gets more advanced, the hardware
Speaker 1: may not support the later versions. In Razor acquired Uyah's
Speaker 1: software assets for an undisclosed amount of money, and developers
Speaker 1: on Uya moved over to Razor. Not long after that,
Speaker 1: Razor announced the discontinuation of the console, which wasn't a
Speaker 1: big surprise. The company did commit to supporting the existing
Speaker 1: consoles that were on the market for the time being,
Speaker 1: but in twenty nineteen that support finally came to an
Speaker 1: end when Razors shut down all of Uyah services, including
Speaker 1: the app store. Many of the apps for Uyah would
Speaker 1: stop working as a result, effectively killing the consoles off completely.
Speaker 1: I think with Uya, the reason for this company's failure
Speaker 1: is largely due to a lack of interest in the
Speaker 1: general gaming market. The tech worked, it did what the
Speaker 1: company set out to do, It just didn't find a
Speaker 1: home in the marketplace, and ultimately that led to the
Speaker 1: demise of the company. When we come back, I'll cover
Speaker 1: some more failures and the lessons that we've learned from them.
Speaker 1: But first let's take a quick break. Okay. One business
Speaker 1: that I have done episodes on was movie Pass, a
Speaker 1: company that had some major ups and downs and appeared
Speaker 1: to be quote unquote dead more than once. The company's
Speaker 1: business was about offering up a subscription based service in
Speaker 1: which for a monthly fee, a user could go to
Speaker 1: the movie theaters and see a certain number of movies
Speaker 1: per month. The number of films you could see per
Speaker 1: month changed throughout the history of the service. At one
Speaker 1: point it was three films a month, and another point
Speaker 1: it was you can see a film every single day
Speaker 1: of the month. To really get a sense of how
Speaker 1: crazy the story of movie Passes, you should go find
Speaker 1: the episodes of tech stuff I did about them. Movie
Speaker 1: theater chains at large resisted movie Pass, and they made
Speaker 1: it really hard for movie Pass to actually put its
Speaker 1: service into reliable operation. Movie Pass was trying to build
Speaker 1: out a new approach to going to the movies, and
Speaker 1: to capitalize on that approach by gathering data about moviegoers habits,
Speaker 1: which in turn could become really valuable information for various advertisers.
Speaker 1: The revenue side of the business seemed, at least on
Speaker 1: the surface, to make sense, but the opposition of movie
Speaker 1: theater chains, which were already struggling in many cases, meant
Speaker 1: that there was a huge hurdle to get over. Movie
Speaker 1: Pass never quite managed to do that. Perhaps at the
Speaker 1: company had instead become a software company that could develop
Speaker 1: products for the movie chains themselves, such as developing apps
Speaker 1: that a movie chain like AMC could use to offer
Speaker 1: up to its own subscription service. That might have worked,
Speaker 1: but we just didn't see that happen. The cost of
Speaker 1: operation was great enough to necessitate a shutdown. In two
Speaker 1: thousand eighteen, the company just shut off for like a
Speaker 1: day while they tried to figure out more financing, and
Speaker 1: it continued to limp along for another year, but in
Speaker 1: late twenty nineteen, movie Pass shut down its ticketing service.
Speaker 1: This was after numerous changes and how the service was
Speaker 1: being operated, which was a source of constant frustration for
Speaker 1: movie Pass customers, and then in early twenty the parent
Speaker 1: company that owned movie Pass itself went bankrupt Sad Trombone Today,
Speaker 1: after we have had more than six months of dealing
Speaker 1: with COVID nineteen in the United States, I think it's
Speaker 1: pretty safe to say that movie Pass would not have
Speaker 1: survived much into twenty twenty. Even if there hadn't been
Speaker 1: so many problems towards the end of twenty nine, maybe
Speaker 1: movie theaters would have been eager to strike deals with
Speaker 1: movie Pass in the wake of COVID, hoping to you know,
Speaker 1: make up some cash with concession sales and stuff. But
Speaker 1: the drastic drop in theater attendance would likely have spelled
Speaker 1: doom for a movie Pass, even if it had made
Speaker 1: it further into the year. That being said, it's not
Speaker 1: like you can anticipate a once in a century pandemic,
Speaker 1: So I wouldn't hold movie Pass at fault if that
Speaker 1: had been the case. But it's a moot point because
Speaker 1: the company had sunk well before we really had an
Speaker 1: inkling about the scope of what was to come. The
Speaker 1: next company I want to talk about is one that
Speaker 1: I actually have kind of a personal history with, and
Speaker 1: it's a personal history I really regret, but I feel
Speaker 1: it's important to be honest and front with you guys. Also,
Speaker 1: it could serve as a warning for some of you
Speaker 1: to help avoid the same mistakes that I have made.
Speaker 1: So it's time to talk about yik Yak. Yik Yak
Speaker 1: was a regionalized like a localized and anonymized messaging service.
Speaker 1: So essentially, the idea was that users could post messages
Speaker 1: to a localized forum to talk about what's going on
Speaker 1: in the area, with particular focus on targeting college campuses.
Speaker 1: So in other words, the idea was that it could
Speaker 1: serve up as sort of the rumor mill for a
Speaker 1: region like a college campus, users would be able to
Speaker 1: see the posts that were relevant to whatever area they
Speaker 1: were in at the time, like what's going on. But
Speaker 1: the fact that it was anonymous meant that there was
Speaker 1: also a prime opportunity for people to abuse the service
Speaker 1: and other people. There were numerous issues with a person
Speaker 1: being called out on yik yak by anonymous accusers, right Like,
Speaker 1: you could get a bunch of people saying so and
Speaker 1: so is, you know, cheating on their significant other, or
Speaker 1: so and so is cheating on tests. I mean this
Speaker 1: was a college campus after all, or just so and
Speaker 1: so is a total scumbag. Reputations could be ruined and
Speaker 1: people could be harassed, and vulnerable populations could be ostracized
Speaker 1: and hassled, or even worse, it could get seriously ugly. Now,
Speaker 1: let's talk about my personal connection to this. That happened
Speaker 1: at a south By Southwest several years ago. I was
Speaker 1: put in charge of moderating a discussion with the founders
Speaker 1: of yik yak, and all of my questions had to
Speaker 1: be vetted beforehand. I couldn't just ask them anything I
Speaker 1: wasn't supposed to anyway, so I had to work with
Speaker 1: them to create a list of questions, and I was
Speaker 1: told by others that I should be really fair and
Speaker 1: really go after them right, like really nail them down
Speaker 1: for answers. But at the same time I was getting
Speaker 1: a lot of indicators from others that were saying that, no,
Speaker 1: you really don't want to do that. So I was
Speaker 1: in a bad position. There was really no way for
Speaker 1: me to succeed. It was just a bad idea for
Speaker 1: me to agree to do this in the first place. Now,
Speaker 1: as it turns out, when I asked these questions, and
Speaker 1: I had drafted a pretty long list of questions, the
Speaker 1: founders were really short with their answers, Like I was.
Speaker 1: It was like trying to get blood from a stone.
Speaker 1: I couldn't get them to give me longer answers, and
Speaker 1: before long I had run out of questions. I still
Speaker 1: had like twenty minutes to go with that speaking engagement,
Speaker 1: which meant that the audience Q and A session was
Speaker 1: much longer than anyone had intended it to be, and
Speaker 1: the audience did not have the same restrictions that I
Speaker 1: was working with. One of the first people to ask
Speaker 1: a question was Bartunde Thurston. If you do not know
Speaker 1: who it is, look him up. Because he's brilliant. He
Speaker 1: also hosts a podcast on our network called how to Citizen,
Speaker 1: highly recommended. Anyway, Barrettunde got right to the point and
Speaker 1: started to grill the founders about the problems that came
Speaker 1: along with anonymity, particularly harassment of vulnerable populations, and how
Speaker 1: it's incredibly easy to abuse the service, and it got
Speaker 1: super uncomfortable up on that stage. To this day, I
Speaker 1: regret that I agreed to moderate that panel, as I
Speaker 1: kind of felt complicit in supporting a narrative that I
Speaker 1: just didn't really believe in. And I'm really thankful for
Speaker 1: the audience who didn't let anyone up on stage get
Speaker 1: away with that, including myself. Right. So, yeah, that's just
Speaker 1: a warning out there for all of you that not
Speaker 1: every opportunity that's offered to you is necessarily a good opportunity,
Speaker 1: and it is okay to say no to stuff. Take
Speaker 1: it from me. I wish I had said no to
Speaker 1: that anyway. Yik Yak, while it received some very enthusiastic
Speaker 1: initial investments, eventually tried to address the harassment problems that
Speaker 1: were mounting up. People were really concerned about this, and
Speaker 1: the company decided to change things and forced users to
Speaker 1: abandon the anonymous approach. You had to make an account
Speaker 1: that was linked to your actual identity. That in turn
Speaker 1: caused the user base to revolt and a lot of
Speaker 1: them left the app. And you could say that the
Speaker 1: well had been poisoned, and yik yak would end up
Speaker 1: getting scooped up at by Square for a million dollars.
Speaker 1: Now a million dollars, that's that's no chump change, right,
Speaker 1: that's a princely some however, and its height, yik yak
Speaker 1: had reached a valuation of four hundred million dollars, so
Speaker 1: it was a huge drop off. Now. I've seen at
Speaker 1: least one analyst say that the company had made a
Speaker 1: mistake in pivoting away from its original use case. But
Speaker 1: I would respond to that with I don't think an
Speaker 1: app that enables abuse is one we really want to
Speaker 1: see become incredibly successful. Besides, we already have stuff like
Speaker 1: that like Twitter and Facebook that are allowing for ridiculous
Speaker 1: amounts of harassment. Okay, that's enough of that. Our next
Speaker 1: startup failure is another example of a great idea that
Speaker 1: turns out to not actually be possible. We could categorize
Speaker 1: these businesses as having fallen victim to wishful thinking. So
Speaker 1: in this case, the company was called Mark One and
Speaker 1: the product was called the Vessel, but spelled v E
Speaker 1: S S y L. I first heard about this back
Speaker 1: when the company was holding a crowdfunding campaign in order
Speaker 1: to get enough money for the development of the Vessel.
Speaker 1: I heard about it actually on another podcast, the Rooster
Speaker 1: Teeth podcast, where Rooster Teeth foul under Bernie Burns mentioned
Speaker 1: he had backed the campaign. He had intended to get
Speaker 1: a Vessel cup for fellow Rooster Teeth employee Gavin Free. Sadly,
Speaker 1: that gift was never meant to be and Mr Free
Speaker 1: has never received a Vessel cup because nobody did. The
Speaker 1: fundraising campaign was a success, with Mark One receiving a
Speaker 1: few million dollars from other ventures to boot, so they
Speaker 1: had some good startup money. But it turned out that
Speaker 1: making a cup that can identify the liquid poured into it,
Speaker 1: because that's what the vessel was supposed to do. No
Speaker 1: matter what you pour into it, it was supposed to
Speaker 1: tell you not just what it was that was inside
Speaker 1: the cup, but the nutritional value as well. It turns
Speaker 1: out that's actually pretty difficult. Now it's not as simple
Speaker 1: as throwing a sensor in with a microprocessor and maybe
Speaker 1: some Bluetooth capability. After numerous delays and numerous complaints from backers,
Speaker 1: the company tried to make the best of an increasingly
Speaker 1: bad situation, and one solution was to offer up an
Speaker 1: alternative product, one called Prime spelled p R y m E,
Speaker 1: essentially a water bottle that kept track of how many
Speaker 1: times you refilled it during the day. But there were
Speaker 1: widespread reports that these promised replacements just never arrived too
Speaker 1: many backers, and things turned even uglier. After a few
Speaker 1: sporadic updates on the official company blog, the company apparently
Speaker 1: shut down. Now. I say apparently because it's actually really
Speaker 1: hard to find definitive information on what happened or when
Speaker 1: it happened, but certainly by two thousand eighteen, the company's
Speaker 1: website and their social media handles were all shut down.
Speaker 1: Vessel remains one of the big cautionary tales for those
Speaker 1: who would otherwise, you know, fund hardware early on rather
Speaker 1: than just wait for a finished product. So sometimes things
Speaker 1: just don't work out. I have a lot of unanswered
Speaker 1: questions about the Vessel thing for examp Couple. A writer
Speaker 1: for The Verge one named Ellis. Hamburger wrote a piece
Speaker 1: that talked about how a prototype of the cup was
Speaker 1: able to detect with great accuracy whatever was being poured
Speaker 1: into it, including being able to tell the difference between
Speaker 1: two different types of gatorade. But I can't find much
Speaker 1: other information to back that up, and it really makes
Speaker 1: me wonder what was going on now. I'm not trying
Speaker 1: to say that Hamburger was inaccurate or trying to mislead
Speaker 1: the readership or anything like that. I mean, I just
Speaker 1: wonder where the problems ultimately were. And it's entirely possible
Speaker 1: that they did develop a working prototype, but that the
Speaker 1: working prototype was just way too expensive to turn into
Speaker 1: a production model, Like it could have been like, yeah,
Speaker 1: we got it to work, but it would cost five
Speaker 1: dollars and no one's going to spend that on a cup.
Speaker 1: I just don't know what actually happened. Now, if we
Speaker 1: want to go with a spectacular or public failure, one
Speaker 1: that was kind of a head scratcher even when it
Speaker 1: was available for purchase, we have to talk about Juice
Speaker 1: a Row. This started off in two thousand thirteen, again
Speaker 1: as a crowdfunding campaign, and the goal was to create
Speaker 1: a smart, high end luxury juicing machine, as in a
Speaker 1: machine that makes juice, and it would have a persistent
Speaker 1: Internet connection to give it some kind of smart capabilities.
Speaker 1: And it would also have a really high price tag.
Speaker 1: And the price tag was around four hundred bucks sometimes
Speaker 1: quoted as high as seven hundred bucks when it came
Speaker 1: out Home My Goodness, where people disappointed or enraged or
Speaker 1: just amused. The actual Juicer Row came out in By
Speaker 1: then the company had raised nearly a hundred twenty million
Speaker 1: dollars and then the problems started to roll in. See
Speaker 1: this cold press juicer would squeeze plastic bags from juice
Speaker 1: a row that were filled up with cut up fruits
Speaker 1: and vegetables. So you would put these juicer ro bags
Speaker 1: in the juicer Ro machine, close the machine, push a button,
Speaker 1: and after a few moments you'd have your juice. And
Speaker 1: I imagine the packages were really meant as a way
Speaker 1: for the Juicy Row company to build in recurring subscriptions,
Speaker 1: like a recurring revenue model, because he would pay one
Speaker 1: big upfront fee to buy the juicer, but then you
Speaker 1: would have a recurring fee in order to buy the
Speaker 1: packages that could work inside the juicer. Because you couldn't
Speaker 1: just you know, like put slices of fruit or or
Speaker 1: vegetables into the machine. It had to be in these bags.
Speaker 1: But the real headaches for the company came when folks
Speaker 1: started posting videos of themselves just squeezing the bags by hand.
Speaker 1: They were making juice as effectively and in fact faster
Speaker 1: than the Juicero machine itself. The videos showed that the
Speaker 1: machine was totally superfluous, it was expensive, it was slow.
Speaker 1: The company offered up a fairly weak defense, saying the
Speaker 1: Internet connectivity meant that the machine could avoid using packets
Speaker 1: that were past their expiration date, but that expiration date
Speaker 1: was already printed on the packages, meaning you just had
Speaker 1: to look at the package to see if it was
Speaker 1: good or not. As you can imagine, things did not
Speaker 1: go well, and by the company had shut down. Juicero
Speaker 1: became a mascot for companies that offer up solutions to
Speaker 1: things that turned out to not actually be a problem. Okay,
Speaker 1: how about we look at a company that appears to
Speaker 1: have failed largely because of bad leadership. For that, I
Speaker 1: submit the startup that was called BP. That was spelled
Speaker 1: B E E p I. So what was BP? Well,
Speaker 1: the concept was kind neat. It was like a peer
Speaker 1: to peer market for used cars. And here's how it
Speaker 1: would work. BP the company would create the online platform
Speaker 1: through which buyers and sellers could find one another. The
Speaker 1: company promised a cell price of a certain value for
Speaker 1: every car. And if you were selling your car on BP,
Speaker 1: and after thirty days you were unable to sell your car,
Speaker 1: the company BP would buy the car from you at
Speaker 1: that agreed upon price, you know whatever. It might be
Speaker 1: the low end of what you were hoping for, but
Speaker 1: you would still be able to sell your car and
Speaker 1: the company would take it over. Presumably the company would
Speaker 1: then sell it later down the line. As for buyers, well,
Speaker 1: BP would handle the inspection of the vehicles and delivery
Speaker 1: of the vehicle to the buyer's home, and even fill
Speaker 1: out the paperwork for the buyer's local d m V office.
Speaker 1: The proposition was really phenomenal. I mean, convenience was built
Speaker 1: in and buyers would suddenly be able to look at
Speaker 1: cars that they might not ever consider because of local scarcity.
Speaker 1: Like just imagine you're out in the boondocks somewhere and
Speaker 1: you really have your heart set on this particular type
Speaker 1: of sports car, but there's no place near you that
Speaker 1: has them. Well, this service could potentially be a solution,
Speaker 1: and it sounds too good to be true, right, Well,
Speaker 1: it's not that the company was running a scam, because
Speaker 1: that was not the case, and it's not like they
Speaker 1: didn't get investors either. The company raised nearly a hundred
Speaker 1: fifty million dollars in funding, which gave the company a
Speaker 1: valuation of more than half a billion dollars. The company
Speaker 1: geared up in fourteen, but it went off road and
Speaker 1: ultimately crashed by twenty sixteen. So what the heck happened?
Speaker 1: According to numerous reports, the big issue was that BP
Speaker 1: was burning through money at a pretty incredible rate. According
Speaker 1: to one of tech crunches sources, someone that the site
Speaker 1: said had been working for BP for at least a
Speaker 1: while before talking to tech Crunch, the company at at
Speaker 1: one point was turning through seven million dollars a month yauza,
Speaker 1: and most of that, according to that same source, was
Speaker 1: going to cover big salaries for the top management team
Speaker 1: or to cover unnecessary costs. So, in other words, it
Speaker 1: sounded a lot like the sort of stuff we saw
Speaker 1: in the years leading up to the dot com bubble
Speaker 1: bursting a decade earlier. A couple of decades earlier, companies
Speaker 1: flush with cash start spending that cash irresponsibly and that
Speaker 1: leads to an unsustainable situation. BP attempted to find a
Speaker 1: solution in the form of a buyer. The company itself
Speaker 1: tried to find another company to purchase them, but there
Speaker 1: were two failed attempts to do that. Two different companies
Speaker 1: considered it and ultimately backed out of the deal, and
Speaker 1: eventually BP had to resolve and its assets were bought piecemeal.
Speaker 1: It was a rather shoddy into what could have been
Speaker 1: a fairly bold move on the market. And just to
Speaker 1: be clear, BP had some other challenges apart from hemorrhaging money.
Speaker 1: I mean, there was a big trust issue to overcome.
Speaker 1: For the purchase of something as important as a car.
Speaker 1: It's a lot to ask consumers to hand over the
Speaker 1: duties of inspecting the vehicle to someone that they would
Speaker 1: never meet or even speak with, without knowing if the
Speaker 1: inspection is trustworthy. It's a huge request to have someone
Speaker 1: put down the thousands of dollars it would cost by
Speaker 1: a used car. Now, perhaps if BP hadn't been spending
Speaker 1: so much money, it could have built up that trust
Speaker 1: needed to become a viable business and it would still
Speaker 1: be around today, but due to mismanagement and out of
Speaker 1: control costs, it just beaped right the heck off. I've
Speaker 1: got a little bit more to say about failures in general,
Speaker 1: but before that, let's take a quick break. Why do
Speaker 1: startups fail? Well, as we've seen, there's not really a
Speaker 1: single answer for this, and in fact, in most cases,
Speaker 1: there are several contributing factors that can lead to failure,
Speaker 1: but there are a few patterns that tend to emerge
Speaker 1: if you look through enough examples. C B Insights did
Speaker 1: that when looking at postmortem reports. They actually talked with
Speaker 1: people who founded companies that failed and got really insightful
Speaker 1: information about what caused the failures, and they aggregated a
Speaker 1: top twenty reasons list as to why companies fail, and
Speaker 1: I want to give you a few highlights. So at
Speaker 1: the very top, the number one contributing factor was no
Speaker 1: market need, with of failures having that as one of
Speaker 1: the attributed causes for their failure. So what that means
Speaker 1: is that someone came up with an idea, they formed
Speaker 1: a business around it, and then ultimately discovered that nobody
Speaker 1: really wanted the thing they were offering. Actually, and this
Speaker 1: is a tough one. Now, on the one hand, you
Speaker 1: don't want to launch a company that's super similar to
Speaker 1: existing ones, because I mean, you're already behind, right. Your
Speaker 1: competitors might be really well established, Some of them might
Speaker 1: be really big companies, and they might have market tested
Speaker 1: products and services that people are familiar with. Now, unless
Speaker 1: those companies have a reputation for lousy products and services
Speaker 1: or customer service, it can be really hard to gain
Speaker 1: a foothold in those markets. Though. Sometimes consumers are just
Speaker 1: hoping that a new company will enter a field and
Speaker 1: shake things up, so it's not impossible, it's just really
Speaker 1: hard to do. Typically, the stronger poll is to come
Speaker 1: up with an idea that isn't already present in the market,
Speaker 1: something that's new and innovative and exciting and there are
Speaker 1: no competitors out there for you to have to worry about.
Speaker 1: But on the flip side, the danger of that approach
Speaker 1: is that, yeah, you might find out the idea is
Speaker 1: new and stuff, but you might also find out no
Speaker 1: one really cares. And that is a tough pill to swallow.
Speaker 1: I mean, I experienced this myself. I once tried to
Speaker 1: get funding for a video series a superhero comedy series
Speaker 1: that I wanted to do, and I promoted the crowdfunding link.
Speaker 1: I worked really hard. I got a lot of people
Speaker 1: who lent me their expertise and their their talent. We
Speaker 1: all put together a pretty compelling pitch and I failed
Speaker 1: to get it funded, which really indicates that either I
Speaker 1: didn't reach enough people or and this is the part
Speaker 1: that really hurts, I reached enough people. They just didn't
Speaker 1: care to see the finished product. And that happens. And
Speaker 1: it can feel awful when you pour your heart into something,
Speaker 1: but it doesn't mean that people made the wrong choice.
Speaker 1: It just might mean that you put more emphasis into
Speaker 1: something than other people do, and that happens. It stinks,
Speaker 1: doesn't feel great, but that's life in a distant second
Speaker 1: place to the no market need factor. CB Insights identified
Speaker 1: ran out of cash as a top contributor to business failure,
Speaker 1: with of the businesses they looked at listing that as
Speaker 1: one of the reasons they failed. We've seen that in
Speaker 1: some of the examples I've talked about in this episode,
Speaker 1: and it's what I was alluding to earlier in the podcast. Startups,
Speaker 1: particularly those with steep operating costs, are really operating under
Speaker 1: a ticking clock scenario. They need to establish a revenue
Speaker 1: generating business, you know, one that can cover operating expenses
Speaker 1: before investment money runs out. They might be able to
Speaker 1: keep things afloat by raising multiple rounds of funding or
Speaker 1: you know, securing some loans and if the idea is
Speaker 1: attractive enough, and that could work for a while, but
Speaker 1: ultimately they need to make revenue off the business or
Speaker 1: the cash will eventually run out. Investors aren't likely to
Speaker 1: pour endless amounts of money into a failing business, even
Speaker 1: with the sunken cost fallacy. That's the illogical belief that
Speaker 1: you're too invested in something and you can't walk away
Speaker 1: from it, so instead you just keep pouring more cash
Speaker 1: in with the hope of at least breaking even. The
Speaker 1: sunken cost fallacy is what casinos thrive on. They depend
Speaker 1: upon it, running up in third place as a contributing
Speaker 1: factor to failure with twenty three percent of startups you
Speaker 1: know listing it would be not the right team, which
Speaker 1: is true. If you've got a bad leadership team and play,
Speaker 1: it's really hard to succeed. I mean, you might succeed
Speaker 1: despite your team, but you're not going to reach the
Speaker 1: same heights as you would if you had a really capable, nimble,
Speaker 1: and knowledgeable team. This can happen a lot with tech startups,
Speaker 1: where you might have a founder who has a really
Speaker 1: strong background in engineering but not in business management, so
Speaker 1: they might have a great idea for making technology that works,
Speaker 1: but not a great idea of how to market and
Speaker 1: sell it and fund it. Likewise, you can also hit
Speaker 1: this point if you've got someone who has great business
Speaker 1: sense but they have a really weak grasp on what
Speaker 1: is actually technologically possible. And I'm not gonna do the
Speaker 1: cough joke again, but thoroughness leaps to mind. Now. I
Speaker 1: won't go through all the other factors, but I do
Speaker 1: want to name a couple more. Sometimes companies fail because
Speaker 1: some other company manages to do what they're doing, but
Speaker 1: you know, successfully. Sometimes it comes down to pricing or cost.
Speaker 1: The product or service ends up being too expensive for
Speaker 1: the market, but there's no real option to reduce prices
Speaker 1: because the operational costs of the company are themselves too high.
Speaker 1: Sometimes the company fails to pay attention to customers entirely
Speaker 1: and lose his focus. And usually again it's a combination
Speaker 1: of these and other factors that ultimately lead to failure. Now,
Speaker 1: the reason I wanted to do this episode in the
Speaker 1: first place was not for some sort of shot in
Speaker 1: Freuda as we examine the shortcomings of various companies. It
Speaker 1: was rather to illustrate the sort of lessons we can
Speaker 1: learn through these failures. I mean, honestly, failure is a
Speaker 1: better teacher than success is. Through failure, we learn what
Speaker 1: mistakes to avoid and where to put our focus. So,
Speaker 1: if you're ever going to work on a startup idea,
Speaker 1: you know some of the pitfalls that you need to
Speaker 1: be aware of. You need a good team in place.
Speaker 1: You need strong people on both the business and the
Speaker 1: products side. You need short and long term business plans.
Speaker 1: You need to test your ideas and make sure there's
Speaker 1: a place in the market for those ideas. Personally, I
Speaker 1: feel people should avoid the whole fake it until you
Speaker 1: make it approach, where you know, you pitch an idea
Speaker 1: that you think might be possible, but you don't really
Speaker 1: know that it is possible, and then it just becomes
Speaker 1: a race to see if you can make your idea
Speaker 1: work before the money runs out. That doesn't work out
Speaker 1: well most of the time. Also, if you are looking
Speaker 1: for investment opportunities, or you see a crowdfunding campaign that
Speaker 1: catches your eye. It's good to ask some really tough questions,
Speaker 1: even if you're just asking yourself before you contribute your
Speaker 1: hard earned cash to that endeavor. Now, I've done episodes
Speaker 1: about crowdfunding failures as well as outright scams and hoaxes.
Speaker 1: The hoaxes and scams tend to be slightly easier to avoid,
Speaker 1: I think, because there's usually at least some indicators that
Speaker 1: things are not on the up and up. Looking into
Speaker 1: the background of the people involved is always a good idea.
Speaker 1: Examining their goals and what they're promising is a must,
Speaker 1: And as the old saying does go, if it sounds
Speaker 1: too good to be true, it probably is. These scenarios
Speaker 1: are for the most part avoidable if we really employ
Speaker 1: critical thinking and we don't fall in for stuff that
Speaker 1: just sounds like wish fulfillment. But the other failures, the
Speaker 1: ones that are not based off misdirection or scams, those
Speaker 1: are harder to avoid. Right These can be people and
Speaker 1: companies that have sincere legitimate goals, and they might even
Speaker 1: achieve some of those goals. As we've seen failure does
Speaker 1: not necessarily mean having nothing to show for your work.
Speaker 1: Plenty of these companies failed after bringing a product to market.
Speaker 1: It's just that the market, for whatever reason, didn't receive
Speaker 1: the product with open arms. It's a lot harder to
Speaker 1: predict that kind of thing unless you hear of an
Speaker 1: idea and say, I don't understand why anyone would want that.
Speaker 1: I mean, if that's your reaction, that might be a
Speaker 1: red flag. It could be something that a lot of
Speaker 1: other people are also thinking. But then again, keep in
Speaker 1: mind that's coming from a guy who was pretty sure
Speaker 1: the iPad was going to be a total failure. I
Speaker 1: had seen so many tablet style devices failed to get
Speaker 1: a place in the general consumer market. And also I
Speaker 1: thought the name was pretty dumb, and I was pretty
Speaker 1: sure that was gonna be a flop, and I was
Speaker 1: obviously a billion percent wrong. So, as I said, figuring
Speaker 1: out if a product or service has the potential to
Speaker 1: be a big hit requires a lot of insight and
Speaker 1: maybe a little bit of luck, and I definitely didn't
Speaker 1: have enough of either one of those when I dismissed
Speaker 1: the iPad. Personally, I'd kind of like to see a
Speaker 1: readjustment to how startups get funding and support in the
Speaker 1: tech world in the first place, I feel there's way
Speaker 1: too much speculation going on, and it means that some
Speaker 1: things that could be great ideas don't get the support
Speaker 1: they need, while others that are far more far fetched
Speaker 1: or have limited value end up getting pushed into the stratosphere.
Speaker 1: There are some startup incubators out there that try and
Speaker 1: help founders create a strong base for their companies, complete
Speaker 1: with things like making up business plans and networking opportunities.
Speaker 1: I think that's a good step, but in some cases
Speaker 1: these can turn into what feels like a tech oriented
Speaker 1: fraternity and less of a genuine effort to help good
Speaker 1: ideas flourish. Now, these problems are not unique to technology.
Speaker 1: We see it in business across multiple industries, but tech,
Speaker 1: with its cool appeal and how it expands into every
Speaker 1: aspect of our lives, is particularly visible in this regard. Well,
Speaker 1: I hope you guys learned some interesting stuff in this episode.
Speaker 1: I barely scratched the surface of tech startup failures. I mean,
Speaker 1: the list of failed companies is hundreds of companies long.
Speaker 1: So if there are particular instances you would like me
Speaker 1: to cover, either companies that promise big things but fell short.
Speaker 1: Maybe there's some hoax or scams that you specifically want
Speaker 1: to know more about, or you want to know about
Speaker 1: some success stories about companies that started off in a
Speaker 1: humble way and grew into something truly spectacular. Let me know. Also,
Speaker 1: if you have any other requests for topics on tech stuff,
Speaker 1: reach out to me. The best way to do that
Speaker 1: is on Twitter. The handle is text stuff, h s
Speaker 1: doubable and I'll talk to you again really soon. Text
Speaker 1: Stuff is an I Heart Radio production. For more podcasts
Speaker 1: from my Heart Radio, visit the i heart Radio app,
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