3 Startup Failure Horror Stories
Halloween, the time to be scared, binge eat candy, and obviously make questionable choices. In the spirit of this glorious holiday we wanted to showcase three unique stories of startup failure. The narratives below feature feelings of angst, hatred, disbelief, and eventual triumph. Each of these bright young entrepreneurs has a unique perspective from which we can learn.
Sit back, relax, and grab some insights from these spooky stories of startup failure.
CHAPTER 1: YOU WANT TO SUE ME?
My junior year, I was a member of a team working on a dynamic medical wheelchair cushion. It was three seniors who were studying entrepreneurship… and me, the only biomedical engineer. It started off all peachy with the team lead, a paraplegic, meeting with me to discuss the concept and figure out the design brief. He wanted to have a medical product on the market in 8 months. I told him that even if I was working in a team, it would take 3+ years. That wasn’t what he wanted to hear.
The first pitch competition went smoothly. We won People’s Choice. That was when things took a turn for the worse. Because I was working on this part-time during school by myself, I couldn’t deliver a fully-functional prototype up to their specs. I pulled a couple of all-nighters and eventually delivered an MVP to the school competition. We won first place. Initially, I thought the other founders would be happy, but the only thing the CEO could talk about was how I didn’t deliver as expected. I told him that I needed a full team to work on the project, and that I was going to incorporate it into my senior capstone. I had found us a team and was really excited to introduce him to the other members. He told me to immediately stop any work until he drew up a term sheet for the founders.
As soon as money entered the picture, he got really anxious. It took him a month to draw up a legal contract in which he had 40% ownership with 20% going to every other founder. No vested interest, and no reimbursement for the $250 or so I spent on parts for the prototype. He even cut out the designer that was doing contract work with us. I didn’t sign the deal. I told him that I would sign away all IP as long as the company reimbursed me for labor and parts. Since I already had the senior design team, I pivoted and decided to work on a pneumatic feedback system under one of my professors in the hopes of doing it for free to eventually pass it on to the startup.
When I told the CEO, he yelled at me about how I was trying to steal his idea and his money. I tried to explain how I was trying to help but he wouldn’t hear it. He emailed the Dean, the Department Chair, and my senior design adviser and it all came to a boil when he wheeled into the Engineering building during the summer. I was working on a consulting project with some friends while a Girl Scout camp worked on LEGO Mindstorms in the atrium. He launched into a tirade, shaking his fist and nearly spitting in my face as he screamed curse words at my face while I sat passively by.
He threatened to sue me and told me that he would make sure I could never work on a project in the same field. All I said was, “Do what you will.” Ten minutes later, my professor walked down the hall and told me a very angry business student had a tantrum in his office. The good doctor told me that it was a good thing we were stopping the project now because it was a dead-end industry and a dead-end partnership.
I guess he was right, because two years later I haven’t heard anything about the medical wheelchair cushion startup and now I’m raising funding for my own company. I never ended up getting sued. It really boils down to the true difference between the two of us: I’m focused on delivering a great product and he is focused just on making money. The last time I saw the disgruntled CEO was at a networking event the following summer. He completely avoided me.
– Elliot Roth, Developer and Biotech Enthusiast, student at VCU
CHAPTER 2: PATENTS…EFFING PATENTS
This entire thing started while I was college. I was sitting in class and I wanted to take notes but my laptop was out of battery. I realized the one electronic product that I had that was 24/7 charged was my phone.
I wanted to take notes on my phone but the screen was too small. At the same time, the only tablet that had comparable performance to my phone was the iPad that was like $400. I was wondering if there was a way to make my phone into a tablet when I needed.
So came up with Momento. It was supposed to be something like a screen-extender but two ways. You dropped your phone into it. It charged your phone while turning it into a large screen tablet. Since all the functionality came from your phone the device itself just needed to be a screen with a microprocessor and cables. I could make these for super cheap like 10 bucks each and then sell them for 50 bucks. Why pay $400 for an iPad when you already paid $600 for an iPhone that does the same shit.
The technical stuff was hard, but I engineered it with my brother. We got a working prototype.
The problem was that for this thing to work the way we really wanted it, we needed a specific part. It’s called an MHL 3.0 chip. There is only one company on earth that makes them, and luckily they were willing to sell them to us! Which meant we could start producing them here! I was in the process of filling the order when the department head I was talking to stop responding to my calls. Turns out that while they were filling the order they got bought out by a larger company.
They were no longer doing business with small fry guys like me, so I had to partner up with a larger company to get my investment going. I went to a pitch night on Long Island, and I also submitted my idea to Quirky. I paid a graphic artist to do renderings, but all of this cost a lot of money.
I got a patent pending on my idea, then I applied to Quirky. It went really well and I breezed through my rounds making it up to the Quirky review where in the final week my idea would be evaluated with a live audience. Well, like five days before the evaluation was supposed to go through, I got an email from Quirky. Apparently, they were dropping their current format… because the company went bankrupt.
Then, I got the worst news of my life. One of my partners while digging around the web had found a product called the TRANSMAKER. The guys at TRANSMAKER had debuted their idea the same time I did, and it was sponsored by a huge company in China. Being a huge R&D company, these guys basically built their entire product by the time I had my first prototype working.
It was basically the exact same thing as my idea. They had thought of it at the same time and built a gigantic factory in anticipation of their product. I was so confused! I had searched high and wide to make sure nobody had the same idea as me. How the eff could this have happened?
Well the reason the TRANSMAKER never debuted in the US, and the reason it took me so long to hear about is the same reason I couldn’t make my product. Effing patents.
Asus had a patent on this idea. Well, you can’t patent an idea but you can patent every freaking way to implement it. And, when you have the high priced corporate attorneys that Asus has you can push any company out the market with lawsuits. That is what happened to TRANSMAKER. They got sued to oblivion by Asus and could never actually make their product, and I realized this would happen to me if I ever made it. Besides no large corporation was interested in partnering with me anyway. So, I called it quits and I stopped development.
This was my dream; it wasn’t just an app but a real physical product. I felt like Steve Jobs or Bill Gates making something so complicated, yet valuable, out of my backyard. But you know what? Always dream, and screw the haters. I’ll be back.
– Berkay Sebat, Programmer at Inform Applications, Hofstra University grad
CHAPTER 3: THE BIKE SHARE FROM HELL
I owe Hofstra University everything. Yes, I actually owe them my life in loans but that’s another story. Hofstra recruited me to play golf. They offered degrees in entrepreneurship and sustainability studies. They hosted the “Capital One Venture Challenge” from which I earned my first seed investment. They provided me with a scholarship to study abroad in Amsterdam for six months. Hofstra gave me course credits to intern with a start up in NYC and see first hand how it’s done. Everything was lining up for my startup bike share business, GreenWay Ventures, to launch our first bike system on Hofstra’s campus.
And then it happened… three months after graduating. The same bureaucratic system that helped me get started ended up crushing GreenWay under its own weight. It finally hit me; Hofstra was playing a big game of “Hot Potato” passing me off between administrators, deans, and attorneys. An organization that big cannot affect change with the necessary speed needed for innovation. Hofstra taught me more with that experience than they ever could have in the classroom.
I learned very quickly that managing each stakeholder’s needs and expectations was vital and was definitely the most challenging aspect. I was chasing down insurance agencies from as far as Chicago looking for someone to write a policy for the bike share system. Selling sponsorship spots on a system that did not even exist yet proved to be its own test. I fought every battle out there only to end right where I started my sophomore year when my professor told me the University would never let us put a bike share on campus. Although painful at the time, I consider it a pivot not a failure. I took what I learned and moved on.
I’ve had a lot of help from a lot of different people along the way. Two people in particular. After years of working on different projects side by side, we said enough was enough. Dan, Connor and I always knew if we had one project to work on together we would knock it out of the park. We quit our jobs and started Jump Suit Group. Seven months in, we have 14 clients from Georgia to Maine and are looking to hire. Starting a business is not easy, especially if you quit every time someone says no. You need to embrace change and learn to roll with the punches. I look at all my black eyes like trophies now.
Although these startups did not exactly work out for the young ‘treps, lessons can be learned from each story to inspire us as we all try and change the world.
Chapter 1 Takeaway: Don’t just focus on the money, focus on building a great product.
Chapter 2 Takeaway: Dream, always effin’ dream.
Chapter 3 Takeaway: It’s not easy, but embrace change and roll with it. You will be successful.