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3 Startup Failures & What We Can Learn From Them

By examining Vine, Quibi and Glitch, we can learn from the mistakes of others and understand how to avoid some of their common pitfalls

Nicolás Cerdeira
3 Startup Failures & What We Can Learn From Them

Aspiring entrepreneurs often look to successful startups for inspiration and insights, but looking at startup failures can provide lessons that are just as valuable, if not more so!

By examining real-life examples of failed startups, we can learn from the mistakes of others and understand how to avoid some of the common pitfalls that many entrepreneurs face.

In this article, we'll take a look at the stories of three startup failures and extract valuable lessons that can guide entrepreneurs through the treacherous startup landscape on their journey to success.

Failed Startup #1: Vine

What Was Vine?

Long before TikTok became the massively popular video content hosting platform that it is now, there was another social media platform dedicated to short-form video hosting called Vine.

Founded in 2012, Vine allowed users to upload looping 6-second video clips — it kind of did to YouTube vlogs what Twitter did to traditional blogs, shortening them into bite-sized versions. In fact, Vine was acquired by Twitter for an impressive $30 million before it even officially launched!

After launching in 2013, Vine enjoyed a short period of immense popularity, even briefly becoming the most popular free app on iOS and Android around the middle of that year.

Vine’s short-form video format lent itself well to creative and humorous videos, especially prank videos, and the platform gave rise to numerous so-called “Vine stars,” including Logan and Jake Paul, who began their journey to internet fame on Vine.

Despite its early popularity, Vine was shut down in 2017, and many of its influencers moved on to find success on YouTube, TikTok, and other social media platforms.

Why Did Vine Fail?

Vine’s failure can be attributed to a few key factors, including monetization problems, fierce competition, a failure to meet market needs, and issues with management, leadership, and overall strategy.

For starters, the biggest problem was that Vine simply wasn’t making any money. Although Vine influencers were making money themselves through direct sponsorships, Vine never implemented sponsorships or advertisements directly within the platform. 

This meant that, despite having a huge user base, the platform wasn’t monetized in any way, and there was no incentive for big creators to stay loyal to the platform when they could move on to others that offered better monetization opportunities for their content. This led to declining user engagement and brings us to the next reason why Vine shut down: competition. 

If you were on social media back around 2013-2017, you might remember how fiercely platforms like Instagram, Facebook, Snapchat, Twitter, and YouTube were competing for our attention at the time, with companies constantly implementing features similar to each other in order to try and capture a larger market share.

Many other social media apps were able to successfully implement their own versions of short-form video sharing, and Vine users jumped ship to more popular video-sharing platforms with better features, particularly Instagram with its longer 15-second video feature.

Speaking of video length, the third reason why Vine shut down was a failure to meet market needs in this department — users clearly wanted to create content that was longer than 6 seconds, but Vine stuck to its 6-second limit for too long, causing people to look elsewhere to share longer videos.

Combined with the fact that popular Vine content creators couldn’t directly monetize their followings on the platform, this failure to meet the content creation needs of users meant that Vine no longer had product-market fit. Lack of PMF causes 34% of startups to fail.

Lastly, Vine continuously struggled with its management, leadership (at its parent company, Twitter), and overall direction during its relatively short lifespan, which probably had a lot to do with the other problems that caused Vine to shut down.

Two of Vine’s founders left the company in 2014, which was by all accounts the app’s best year, and a third was later let go, implying that there may have been some internal conflicts after Twitter acquired the company.

While changes in leadership can sometimes be beneficial for a startup, in this case, it made it hard for Vine to find its direction, ultimately contributing to its failure and giving up its users to other platforms.

What Can We Learn?

Aspiring entrepreneurs can learn several valuable lessons from Vine's failure:

  • Adaptability Is Everything: The digital market is constantly evolving, and startups must be adaptable to changes in technology and user preferences in order to maintain product-market fit.
  • You Need a Monetization Strategy: Having a clear and effective monetization strategy is crucial for the long-term success of any startup. Startup founders should carefully consider their monetization strategy from the outset.
  • User Engagement Is Key: Building and maintaining user engagement is key to the success of any social media platform. Startups should prioritize user engagement and find ways to keep users coming back to their platform.
  • You Must Keep an Eye on the Competition: The competitive landscape can have a significant impact on the success of a startup. Startups should carefully assess the competitive landscape and find ways to differentiate their product or service.
  • Management and Leadership Is Very Influential: Strong leadership and effective management are crucial for the success of a startup. Founders should focus on building a strong team and creating a clear vision for their startup from the start.

Failed Startup #2: Quibi

What Was Quibi?

Quibi was a short-form streaming platform founded by Jeffrey Katzenberg and launched in April 2020. The name “Quibi” stands for “quick bites,” reflecting its focus on providing content in short, easily digestible segments. 

Quibi aimed to revolutionize the way people consume content on their mobile devices by offering high-quality shows and series with episodes lasting 10 minutes or less — it was kind of like a Netflix exclusively for your phone but with much shorter content.

One of Quibi's unique features was its “Turnstyle” technology, which allowed viewers to seamlessly switch between landscape and portrait modes while watching content, ostensibly optimizing the viewing experience for mobile devices.

The overall premise of Quibi was to provide users with a way to conveniently consume short video content on the go, such as while commuting to and from work on public transport.

Despite a high-profile launch and significant investment — $2 billion, to be precise — Quibi failed to attract a large audience and announced its closure in October 2020, just six months after its launch.

Why did Quibi fail?

The platform cited various factors for its failure, especially the impact of the COVID-19 pandemic, which affected its ability to attract and retain subscribers, as well as challenges in converting free trial users into paying subscribers.

While COVID-19 certainly impacted the success of startups around the world, Quibi’s founder himself has even said that it’s not fair to blame the company’s failure entirely on the pandemic. 

It’s true that global lockdowns meant that Quibi’s target market was anything but “on-the-go,” but the company faced a range of other problems, including low-quality content, misguided marketing efforts, missing features, leadership problems, a lack of problem validation, and, perhaps surprisingly, over funding.

In an effort to compete with established streaming services, Quibi mass-purchased as much content as it could get its hands on, much of which were projects that had already been rejected by other streaming services. Needless to say, this caused quality problems with Quibi’s content.

Adding to the quality problems was the fact that Quibi was purchasing content that was originally intended to be long-form and chopping it up into short segments, leading to a less-than-optimal viewing experience for users.

Next on the list of reasons behind Quibi’s failure were its marketing efforts. Rather than promoting its content, Quibi focused on hyping itself up as a new, unique platform revolving around “quick bites.” 

This ultimately led to misunderstandings of what Quibi actually was — people who saw Quibi’s high-profile Super Bowl and Oscars ads reportedly thought they were for a food delivery platform due to their emphasis on “quick bites.”

Adding to the problems with its marketing efforts, Quibi failed to understand the importance of certain features to its target audience — particularly, social sharing features. 

Unlike other platforms that encourage social sharing and virality, Quibi did not have robust social features that could have helped increase its visibility and attract new users.

Next up on the list of factors contributing to Quibi’s downfall are problems with its leadership. Despite having high-profile leadership with experience at majorly successful companies, like Disney, it was evident that Quibi’s leadership was disconnected from its audience, and even the tech world as a whole.

There were also reports of internal conflicts and disagreements among Quibi's leadership, which may have impacted the company's ability to make strategic decisions and adapt to changing market conditions.

Being far removed from the tech world (much of Quibi’s leadership had closer ties with Hollywood than tech) also meant that Quibi never actually validated the existence of the problem they were trying to solve. 

If they had, they probably would have realized that people prefer to watch short clips on YouTube, TikTok, and Instagram when they have a few minutes to spare rather than watch shows and movies that are simply chopped up into pieces.

Lastly, the fact that Quibi had so much funding up front also likely played a role in it shutting down so fast. 

By raising $2B from investors right at the start, Quibi put itself in a position where it had to kind of make an “all-or-nothing” play, either becoming a highly profitable top competitor to Netflix or failing to provide a return on investment and shutting down. 

If Quibi had started out along a more traditional fundraising path, scaling slowly, it may have been able to become a small yet profitable streaming service, rather than burning through a huge amount of funding very quickly and having nothing to show for it.

What Can We Learn?

Startups and their founders can learn several important lessons from Quibi’s failure:

  • Quality Content Is Essential: While quantity and availability of content are important, quality should never be compromised. Startups should prioritize providing high-quality, engaging content that resonates with their target audience.
  • Marketing Strategy Can Make or Break a Product: Clear and targeted marketing efforts are crucial for attracting and retaining users. Startups should ensure that their marketing accurately reflects their product and highlights its unique value proposition.
  • Understanding Audience Needs Is Key: It's essential to have a deep understanding of your target audience's preferences, behaviors, and needs. Startups should conduct thorough market research and validate their ideas with potential users before launching.
  • Unexpected Market Conditions Are Sometimes Unavoidable: External factors, such as the COVID-19 pandemic, can have a significant impact on a startup's success. Startups should be flexible and willing to adapt their strategies accordingly.
  • Building Social Sharing Features = Free Marketing: Social sharing features can help increase a startup's visibility and attract new users. Startups should incorporate social sharing functionality into their platforms to encourage virality and user engagement.
  • Leadership Should Be Connected To Their Audience: Leadership should understand and be connected to their target audience, and the overall industry, in order to build and grow a viable product that users actually want.
  • Strategic Funding Is Better Than Overfunding: Startups should carefully consider their funding strategy to avoid overfunding, which can create unrealistic expectations and put pressure on the company to achieve rapid growth. It’s better to focus on sustainable growth and profitability than pursue aggressive expansion at all costs.

Failed Startup #3: Glitch

What Was Glitch?

Glitch was a social MMO, or massively multiplayer online, browser game launched by Tiny Speck, a game development company founded by Stewart Butterfield and others. 

The innovative game emphasized creativity and collaboration among players, rather than revolving around combat like other MMO games. It featured a vibrant and whimsical world where players could explore, socialize, and create together by gathering resources and crafting. 

Players could join groups, which essentially functioned like chat rooms, and collaborate on doing everything from growing trees and plants to cooking.

Like many online games, Glitch’s business model was free-to-play with in-game purchases available.

While this type of business model certainly works for many online game startups, it requires maintaining a large, active user base to be profitable. Glitch had a goal of attaining 200,000 active customers, but the company was never able to achieve this, and was shut down in 2012.

However, not all startup failures are the end of the story…

In the case of Glitch, the startup’s founders were able to pivot and use their remaining funding (around $6 million) to work on developing what eventually turned into Slack, the massively popular team chat platform used by companies all over the world to communicate and collaborate.

Slack sprung from a communication tool that the Tiny Speck team had originally developed for internal use while working on Glitch. They created the platform to avoid large amounts of internal email — a perfect example of finding product-market fit by solving your own problem.

Why Did Glitch Fail?

As mentioned above, the reason for Glitch’s failure was mainly that it struggled to reach its goal of retaining a large number of players, which it needed to turn a profit.

Despite some early popularity, Glitch’s founders recognized that they just weren’t going to reach their goal of 200,000 players in time, and made what turned out to be the right decision to shut Glitch down and pivot to the development of Slack as a commercial tool.

What Can We Learn?

  • User Retention Is Important: While acquiring new users is important, retaining them is crucial for long-term success. Startups should focus on building a loyal user base and providing a compelling reason for users to keep coming back.
  • Knowing When To Pivot Can Lead To Success: When faced with challenges or failure, startups should be willing to pivot and adapt their strategies. It’s understandable for startup founders to be attached to their initial ideas, but knowing when to let them go and try something new can lead to a different type of success.
  • Product-Market Fit Is Everything: It's essential to ensure that there is a strong product-market fit for your product or service, either by solving a real problem you have or validating a problem that potential customers have.
  • Pivoting Using Existing Resources Is Advantageous: When an idea isn’t working, startups can (and should) leverage existing resources, including funding and development teams, to create new opportunities, rather than exhausting resources trying to make the initial idea work.

Wrapping It All Up

Examining the stories of failed startups like Vine, Quibi, and Glitch provides us with valuable lessons and insights into the challenges of building a successful business. 

Although each of their stories is unique, these case studies all highlight the importance of adaptability, understanding market needs, effective monetization strategies, user engagement, and strong leadership, among other things.

From Vine, we learn the significance of adapting to market changes, having a clear monetization strategy, and prioritizing user engagement. 

Quibi's failure teaches us about the importance of quality content, effective marketing, understanding audience needs, and strategic funding. 

Finally, Glitch's story emphasizes the value of user retention, knowing when to pivot, achieving product-market fit, and leveraging existing resources for success.

Ultimately, startup failures can be valuable learning experiences that guide entrepreneurs on their journey to building successful and sustainable businesses —  whether it takes one idea or 100!

Editado por

Raquel Rojas

3 Startup Failures & What We Can Learn From Them
Nicolás Cerdeira
Founder at Failory
Nico is the founder of Failory, a newsletter for startup founders. Failory's mantra is that you can learn more from failures than from successes. Every week, Nico writes about a failed startup and analyzes what went wrong so that other founders can avoid these mistakes. Since its inception, Failory has published 150+ articles analyzing different startup failures and 100+ interviews with failed startup founders.


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