5 instances when multi-billion dollar startups went bust

Starting a startup is no doubt a stressful endeavor, and one filled with a plethora of steps and decisions that can make or break its success. While many startups eventually make it big, becoming billion-dollar success stories with venture capital backing and revolutionary products, not all of them make it through to the end.

In this article, we’ll explore five startups worth billions that unfortunately went bust. The modern notion of a startup has been around for decades, but more recently, with more available funding and more venture capitalists willing to take a chance, startups have become more common, as have their success stories.

However, not all of them are successful. While some startups are wise with their money or pivot away from original plans and ride a wave of success, not all startups are so lucky, and in many cases, these startups fail before making it big, despite having billions of dollars of funding.

1. WeWork

WeWork, a co-working space startup, was hailed as the world’s second most valuable startup with a whopping $47 billion valuation in 2019. But the company’s effort to go public sadly fell through after significant issues arose over its corporate governance and sustainability. The company had racked up venture capital money, which had inflated its worth and largely came from Japanese tech giant SoftBank. WeWork's chief executive, Adam Neumann, had owned a large portion of the company's shares and blocked out any dissenters.

Additionally, Neumann had made significant bets against his own company and had become too proactive outside of his role as CEO, leading to the concern of inadequate corporate governance of the company. Private investors were further concerned with the amount of money the company was pouring into the market, as well as its lack of clear revenue model and sustainability.

The subsequent fallout from the failed WeWork IPO saw its valuation drop from $47 billion to merely $4.4 billion, making it a cautionary tale for venture capital-funded startups. Ultimately, WeWork’s failure to go public is a reminder of the importance for these startups to focus on better corporate governance and clear pathways for sustainable profitability. With so much venture capital money floating around, these startups must take the necessary measures to reduce the risk of failure, just like WeWork did.

2. Juicero

Once hailed by Silicon Valley as its “Luxury Juicer,” Juicero inc. quickly dismantled in 2017 as one of the highest-profile startup flops of the decade. Having benefited from a major influx of venture capital, the company had developed an innovative device, a $400 dollar smart juicer with the potential to revolutionize the way people prepared fresh juice.

Unfortunately, the reality fell far short of expectations; within weeks of its launch, avid consumers had made the eyebrow-raising discovery that the juice packets used by the device could be effectively squeezed by hand. The Juicero saga serves as a troubling reminder to the investment community about the danger of pouring millions of dollars into untested concepts. Investing can be a tricky prospect, particularly when evaluating a product that has yet to experience any real-world application.

In Juicero’s case, the startup was not able to demonstrate to potential investors the true potential of their product. Photos and diagrams of a prototype were no substitute for evidence of actual revenue, or a steady flow of customers. It’s with a heavy heart that we bid adieu to companies like Juicero; grand ideas that fizzle out due to a lack of funds, market research or vision. As the competition for startups and venture capital funding intensifies, it’s never been more important for these soon-to-be tech moguls to get their foot in the door from the very beginning.

3. Theranos

The downfall of Theranos was nothing short of a devastating disaster for the Silicon Valley startup. They had seemingly guaranteed success with their revolutionary blood-testing technology, managing to secure an incredible $9 billion valuation on the back of their venture capital funding. However, their downfall was shocking, as the world was rocked in 2018 when the truth was revealed - the technology was inaccurate and unreliable, leaving the entire workforce and investors bewildered.

The ambitious and highly-regarded Theranos had in fact been playing a dangerous game, as all diagnostic tests had to be validated, something the company had failed to ensure. This meant that test results were both unreliable and incorrect, leading to a worthless product that cost the investors billions, both in real dollars and reputation. The scandal rocked the healthcare industry, and led to high-profile legal battles, class-action lawsuits and criminal charges against the company's founders.

The failure of Theranos, with its multi-billion dollar valuation, is one of the most prominent examples of a venture capital-funded startup going bust. The case serves as an important reminder of the risks associated with investing in seemingly revolutionary technology and untested markets, particularly for venture capitalists and other investors, who must do their due diligence to ensure profitability and accuracy.

4. FTX

It was a total shock when FTX filed for bankruptcy on November 11, 2022 and statements made by then-CEO Bankman-Fried confirmed the public's worst fears. According to him, customer withdrawals had surged earlier in the month and the company could no longer meet the demand.

At the time, FTX had been valued at several billion dollars, making it one of the highest-valued venture capital-backed startups of all time. Its rapid ascent and abrupt fall have left many investors questioning the sustainability of the startup industry, with critics now contending that irresponsible funding and lack of assets in reserve could be the downfall of many promising multi-billion dollar startups.

With FTX, the bubble seemed to burst on an enterprise with no clear warning signs, proving that scams and volatility could be lurking behind the scenes of even the most promising investments. One thing is for sure, the unforeseen bankruptcy of FTX is a cautionary tale for investors to not just focus on profits, but to also aim for sustainability and consider the undisclosed risks that could be present in their investments.

5. Quibi

The fifth and final startup to go bust was the once ironically named Quibi, the multi-billion dollar, short-form video streaming service. Valued at a staggering $1.75 billion upon its launch in April 2020, the company was predicted to be an overnight success. However, just 6 months later, it announced it was shutting down due to a lack of subscribers and the COVID-19 pandemic.

While Quibi was undoubtedly a revolutionary idea, unfortunately, it simply fell short at the last hurdle. Following a huge initial build-up and a slew of star-studded Hollywood promotions, it failed to engage with the majority of its potential audience. Its high monthly subscription fees were not a great start and were a clear deterrent for many potential customers.

Similarly, the shorter viewing times of approximately 10 minutes made it almost impossible to become invested in the stories, which are essential to creating a loyal fan base. In July 2020, Quibi officially threw in the towel, ending an ambitious venture with its tails between its legs. According to the company’s CEO, the COVID-19 pandemic had crippled its ability to stay afloat, and sign up or renew subscribers. Ultimately, the money and time it had poured into this project amounted to nothing; although, it could have potentially revolutionized the streaming space if it had received adequate venture capital funding and a culture of corporate innovation. Ultimately, it serves as a thorn in the side of the venture capitalist community, having injected $1.75 billion into a dream that just wasn't meant to be.

Conclusion

Overall, the tragic stories of these five multi-billion dollar startups demonstrate just how volatile the startup scene is and how perilous even the most promising, ambitious business venture can be. With all the Venture Capital invested and the risks taken, startups are an ever-growing yet unpredictable part of our economy. The recipe for success isn’t foolproof, but those who strive and fail without fail, inspire those who are brave enough to undertake the venture of starting their own business.

We may never know why these multi-billion dollar startups abruptly failed, but their stories remain as a reminder of what can happen when the tide doesn’t turn in our favor. It’s a harsh reality that sometimes even the brightest ideas and most strategic plans aren’t enough to secure success. When dealing with the fickle business of startup funding, the only thing we can do is stay vigilant, be prepared, and never give up.