Top Startup Failures of 2020

Why 1310 startups failed in 2020, with total funding of $2.3B.

How startup funding works.

We’ve reached 2021, a new year full of optimism and hope for the close ending to this pandemic; last year’s top 10 startup failures opened up many interesting discussions I had with people, and we definitely needed a 2020 version, so what happened with startup failures this year?

2020 ended with 809 startup failures with total funding of $2.3B — compare it how much wealth Elon Musk gained this year, and it wouldn’t be big of a deal, but $2.3B is still a lot of money in terms of new companies just starting.

The startup community isn’t all about fancy offices, big mission statements on the wall, few PlayStation rooms, and ping pong tables. And not all of them reach a happy state of being profitable or reaching an initial public offering.

Rationally not every failed startup is a failure; some drove innovation that benefited many other companies and people. Others just made the CEO rich, as the case with WeWork.

But let’s keep things exciting; here are the top startup failures that occurred in 2020.

9. Inboard Technology, Inc.

An electric skateboard startup, Inboard Technology is the creator of the M1™: The world’s first skateboard with motors inside the wheels.

Total funding: $12M

Short reason: Investors backed off.

Long reason: Thy initially raised more than $400,000 on Kickstarter. According to the company, despite hitting key goals, investors decided to push the company into liquidation. That decision came as a shock and gave little time to come up with options.

8. Starsky Robotics

Starsky Robotics is a San Francisco-based autonomous trucking company.

Total funding: $20.3M

Short reason: The problem was too difficult.

Long reason: According to the company, the problem was too difficult to solve; they also pointed out that other startups in the same area will fail. Although others rejected the claim and argued the company failed because of its failure, and not the whole industry.

7. Awok.

E-commerce company offering approximately 70,000 products across 30 plus categories. The vision has always been the preferred E-Commerce channel across all its locations, where customers are assured of an affordable, effortless, and seamless shopping experience.

Total funding: $30M

Short reason: Covid-19 pandemic.

Long reason: Although e-commerce boomed during the pandemic, the company stated that it closed its operations due to the global pandemic. However, an insider of the company stated that industrial and warehousing space shortage due to the pandemic was the major issue.

6. Omni Projects, Inc.

Omni provides access to the things you need through its rentals platform. Omni is bringing rentals to communities by partnering with local businesses so everyone can have access to more items — from bikes and surfboards to camping equipment and air purifiers.

Total funding: $35.3M

Short reason: No clear market fit.

Long reason: It offered a service at an unsuitable price, according to the company, the service was great for the consumer. But looking at what it would take it scale and operate, it would be difficult and expensive. In other words, the market didn’t welcome the service at a price that sustained the company's operations.

5. Honestbee

Honestbee provides on-demand, online concierge and delivery services from retailers in Southeast Asia. It owns and operates an e-grocery website for delivering groceries to the user’s place.

Total funding: $46M

Short reason: Ran out of money.

Long reason: The company had a history of burning cash thanks to its unproven business model to work in the Asia Pacific.

4. Atrium Legal, Inc.

Atrium builds products and services to help automate legal workflows, innovate new processes within law firms, and help firms identify and attract new clients.

Total funding: $75.5M

Short reason: No market fit.

Long reason: The company wanted to automate legal workflows in traditional firms, according to the CEO — the company shut down after falling to figure out how to deliver better efficiency than a traditional law firm

3. Coho Data, Inc.

Coho Data is delivering true linear scale-out infrastructure solutions for the enterprise private cloud.

Total funding: $76.4M

Short reason: No market fit.

Long reason: The product was not good enough for the market; it was a storage platform that only works with one single switch vendor intended to be used by enterprise private cloud companies. What could go wrong?

2. Vector Launch, Inc.

Vector Launch, Inc. (formerly Vector Space Systems) is an American space technology company aiming to launch suborbital and orbital payloads.

Total funding: $102.8M

Short reason: They ran out of money.

Long reason: A major investor backed off, which led to other investors to back off as well, there was no clear reason stated as to why it ended up that way, but it seems that investors didn’t see enough potential of it reaching a profitable business.

1. Essential Products, Inc.

Essential is a mobile, and home devices company focused on creating consumer technology products for the 21st century.

Basically, it was a smartphone startup, they built and sold a mobile phone called the Essential Phone.

Total funding: $330M

Short reason: No market fit for their product.

Long reason: They stated that “there was no clear path to deliver the product to customers” — in other words, there was no market fit, so it took the company $330M to notice the product wasn’t welcomed enough in the market.

Photo by Emilio Garcia on Unsplash

The bottom line

We can notice that many of the top startup failures last year had a clear cause for not developing a well-fitted service or product for the market at a sustainable price. Arriving at the necessary conclusions for a startup before burning millions of dollars has been a real dilemma, especially for those backed by venture capitalists.

Another issue with startup failures is that they get low attention, making it harder for new startups to find information and learn from older failures. The hype is significantly different compared to when a startup gets new funding rounds.

The goal is not to avoid all failure; that would be impossible and means avoiding success, but a more reasonable goal is to burn less money until a startup figure out what needs to be figured out.

But, for a more optimistic view of 2021, I hope to see more businesses make it to a profitable phase, where they can deliver even better products and services.

I work as a frontend developer for Gjensidige Insurance in Stockholm, I am excited about software development, exploring new things, and books — adamhn.com

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