5 High Profile Tech Companies That Crashed And Burned
An interesting fact: Digestion and absorption begins, not in the stomach, but in the mouth. In addition to the mechanical breakdown of food from chewing, an enzyme called amylase chemically converts carbohydrates into simple sugars, which brings me to today’s topic: Sam Bankman-Fried was not the only overrated CEO to drive a billion-dollar company into the ground. It happens all the time. Today, I’m going to reveal 5 financial Hindenburg moments that everyone forgot about:
Welcome to Leonard Innovation where we work together to solve the problems of everyday entrepreneurs. My name is Justin. Thank you for tuning in. Now, let’s look at our first financial disaster.
Webvan was a company that fulfilled online orders for groceries. They launched in 1996 and within 3 years, they went bankrupt. The problem had to do with mainly inexperienced management and an unsustainable business model. None of the executive team had experience in the supermarket industry. Another issue was they would offer grocery deliveries to rural areas. When you do that, you are probably breaking even or maybe even losing money. After the company went belly up, their assets were later acquired were Amazon.
Pets.com – Founded in 1998, the company was supposed to be the largest retailer of pet supplies. Amazon, by the way, was an early investor in Pets.com. But the problem they faced had to do with their business model. You see, pet supplies can be found everywhere. While you are buying groceries, you can also buy pet supplies. So would you rather wait a few days to get your order or just go to the local pet supply store and get it the same day? So the business model was their undoing.
Theranos was a consumer healthcare tech startup. It was led by Elizabeth Holmes, a student at Leland Stanford Junior University also known as Stanford University. She was only 19 when the company was founded. I remember her wearing black turtlenecks like Steve Jobs whenever she appeared before the media. But Theranos developed a process for detecting multiple health pathologies from a single drop of blood. The problem was… the device didn’t work. The claims were overstated. They were mostly lies. She was later charged with fraud and the company’s assets had to be liquidated.
Quibi was a short-form video streaming platform. It was led by Meg Whitman who was at one time the CEO of eBay. The site hosted videos with a max length of 10 minutes. The concept of featuring short videos was derived from research which showed that younger viewers preferred short-form video content. So, what caused Quibi to tank? A combination of management decisions and lack of traction. On paper, they should have done well because they launched during the pandemic. But in the end, not enough people were interested in Quibi and they had to dissolve the company. It was Roku that ended up with much of their assets.
WeWork is still around but they too had a Hindenburg moment. They are a network of physical and virtual coworking spaces or office spaces. The virtual part just means they provide physical mailing addresses for companies… without them having to lease a space. So basically, a remote mailbox service. From the beginning, there were questions as to whether the business model was sustainable. Also, a lot of companies are overvalued and lack sufficient proof of concept. WeWork was no exception. The company was set to go public, meaning featured on the stock market, but the board of directors began to question whether then CEO Adam Neumann was going to be the guy to lead the company to the promise land. Neumann ultimately withdrew the paperwork that would have taken the company public. And at that moment in time, WeWork had burst into flames in mid-air before crashing to the ground. He was subsequently ousted by the board of directors.
Financial disasters are common. Amazon almost crashed and burned but got lucky. When I started my business in the late 90s, Amazon was on the brink of bankruptcy. Without a doubt, they would have faced certain doom, but CEO Jeff Bezos was able to raise a venture round of funding. This gave Amazon the lucky break or financial cushion they needed to survive the dot com crash that had plagued many high-profile startups during the mid to late ‘90s.
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