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This file photo taken on March 13, 2014 shows a man entering the doors of the "WeWork" co-operative co-working space in Washington, DC.
This file photo taken on March 13, 2014 shows a man entering the doors of the "WeWork" co-operative co-working space in Washington, DC.
Photo: MANDEL NGAN, AFP/Getty Images
Workers in October 2017 at a WeWork location in San Francisco, which provides shared office space and other amenities on a membership basis. At a retail mall in Portland, Ore., GGP has created space for a WeWork facility as it looks to convert its properties into “lifestyle” centers in the words of its CEO Sandeep Mathrani.
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Workers in October 2017 at a WeWork location in San Francisco, which provides shared office space and other amenities on a membership basis. At a retail mall in Portland, Ore., GGP has created space for a
... more
Photo: Mike Short / Bloomberg
You know Juicero was going to make this list. But there are many more.
You know Juicero was going to make this list. But there are many more.
Photo: Kanoa
Kanoa (San Francisco)
What could have been the Airpod before Airpods hit the market ultimately became known as the “Fyre Festival of wireless earbuds.” Kanoa launched a crowdfunding campaign in 2015, seeking pre-orders for its turquoise, pentagon-shaped Bluetooth-enabled wireless earbuds for $150 per pair. Kanoa founder Cival Van Der Lubbe promised “earphone innovation that sets a new standard in true wireless audio performance.”
Why it failed: Kanoa took thousands of customer pre-orders – Van Der Lubbe reportedly claimed 50,000 of them – for a product it never made. Kanoa’s manufacturer assembled just 25 pairs of the earbuds – one of which was skewered by an online reviewer. Unable to raise enough funding to keep its lofty promises, Kanoa shut down in August 2017, leaving its thousands of pre-order customers empty-handed and fighting for refunds, and Van Der Lubbe vanished from sight. One Facebook group of unhappy customers are attempting a class-action lawsuit to recoup their money.
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Kanoa (San Francisco)
What could have been the Airpod before Airpods hit the market ultimately became known as the “Fyre Festival of wireless earbuds.” Kanoa launched a crowdfunding campaign in 2015, seeking
... more
Photo: Kanoa
Plastc (Palo Alto)
Why schlepp around a wallet full of cards when you can carry just one card? That was the pitch of Plastc, a “smart card” that carried all the information of a person’s credit, debit, and gift cards and had its own touch screen with biometric security features. The price of that convenience was $155, and the company sold its cards before they were made, raising a reported $9 million from 80,000 pre-orders in 2014.
Why it failed: Plastc’s window of opportunity in the smart-card market lasted a good week or two. But when Apple Pay and other mobile wallets took off in 2014, Plastc was immediately doomed. It kept customers waiting by delaying delivery dates, and a life-saving $6.75 million investor pulled out at the last minute. Plastc announced it was shutting down in April 2017 and “exploring options” for Chapter 7 bankruptcy while leaving its jilted customers contacting their credit-card companies hoping they could secure refunds on orders they’d made months earlier.
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Plastc (Palo Alto)
Why schlepp around a wallet full of cards when you can carry just one card? That was the pitch of Plastc, a “smart card” that carried all the information of a person’s credit, debit, and
... more
Photo: Plastc
Pebble (Redwood City)
It was the most money ever raised for a Kickstarter project: The Pebble smartwatch was offered for presale in 2012 three years before the Apple Watch was born to disappoint people. In one month, almost 69,000 people pledged over $10.2 million for a watch that didn’t exist yet. The first Pebble watch sold for $99 at presale and $150 upon its release in 2013, promising the ability to display people’s phone messages on your wrist.
Early reception was strong: By the end of 2014 Pebble had sold 1 million smartwatches, with a devoted fan base. After Venture capitalists got on the bandwagon, Pebble raised a total of $59 million. That led to another Kickstarter campaign, including the Pebble 2 and Pebble Core fitness tracking device, which raised almost $13 million.
Why it failed: Fitbit bought parts of Pebble for under $40 million in December 2016, effectively ending the company and rendering its Kickstarter orders void. As
the Chronicle reported, “Pebble was never able to expand beyond its base of early adopters, especially as Apple and Samsung put marketing muscle behind their products, and the popularity of specialty fitness trackers like Fitbit grew.”
Pebble refunded the Kickstarter orders, and the 2 million Pebble watches sold since 2013 have been slowly dying due to lack of updates and support.
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Pebble (Redwood City)
It was the most money ever raised for a Kickstarter project: The Pebble smartwatch was offered for presale in 2012 three years before the Apple Watch was born to disappoint people. In one
... more
Photo: Liz Hafalia, The Chronicle
WrkRiot (San Francisco)
Some startups achieve infamy by failing despite good intentions and lots of hype. WrkRiot, founded in 2015 by Isaac Choi, is a different story. WrkRiot, a job searching platform, is accused of scamming its employees, and Choi is accused of making up his credentials.
Why it failed: In 2016, a former marketing employee at WrkRiot published a Medium post accusing WrkRiot of not paying her or other workers, and going to such lengths as forging wire transfer documents to keep them working without paying them. The company shut down its site soon afterward. Also, the New York Times could not verify Choi’s claims that he graduated from the business school at New York University and that he worked at JP Morgan for four years. A former WrkRiot advisor wrote in a blog post, “I should have gotten to know the company and its leadership better before associating myself with them and lending them my credibility.”
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WrkRiot (San Francisco)
Some startups achieve infamy by failing despite good intentions and lots of hype. WrkRiot, founded in 2015 by Isaac Choi, is a different story. WrkRiot, a job searching platform, is
... more
Photo: Wrkriot
Juicero (San Francisco)
The writers of “Silicon Valley” had to be disappointed they never imagined this infamous, cold-pressed fiasco. While many tech products are difficult to scrutinize, anyone could see what the Juicero was offering: a Wi-Fi connected juice-presser priced at $699. Its crash-and-burn life was equally simple.
Juicero was led by a raw-food vegan CEO who convinced investors to pitch in $134 million for the idea.
“Not all juice is equal,” Juicero founder Doug Evans
told the New York Times in 2016 as the Juicero began its short and infamous life. “How do you measure life force? How do you measure chi?”
Why it failed: You can’t measure chi, but you can measure money. And when a viral
Bloomberg video showed you could just as easily make juice by squeezing Juicero’s proprietary fruit bags with your hand, the $699 price tag (later $399) became laughable. The Juicero also happened to be very expensive to produce:
$750 per press, by one estimate. By the time the company announced it was folding and refunding its customers, Jones was blowing fire at Burning Man and taking a
five-day water cleanse. From a raw water brand, of course.
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Juicero (San Francisco)
The writers of “Silicon Valley” had to be disappointed they never imagined this infamous, cold-pressed fiasco. While many tech products are difficult to scrutinize, anyone could see
... more
Photo: Michael Kovac/Contributor/Getty Images
Skully (San Francisco)
The Skully augmented-reality motorcycle helmet promised to protect its customers’ heads, while putting their wallets in grave danger. The startup founded by Marcus Weller promised a safer helmet with a built-in GPS display, a rear-view camera, and voice control. A 2014 Indiegogo campaign found plenty of enthusiastic customers for the $1,500 helmets, raising $2.4 million with 1,940 advance orders. Investors were enthusiastic as well, contributing $11 million in Series A funding in 2015.
Why it failed: Skully became another recent example of a young entrepreneur in over their head, tensions with board members, excess, and unfulfilled promises. The company couldn’t raise the money it needed to survive, all while a lawsuit alleged Weller was spending funds on strippers and sports cars. Weller received so many angry Twitter and Instagram messages from customers who never got helmets that he had to delete his accounts. Skully shut down in August 2016, though it may get another life under new ownership. The rebranded Skully Technologies vows to deliver its high-tech helmets by summer 2018.
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Skully (San Francisco)
The Skully augmented-reality motorcycle helmet promised to protect its customers’ heads, while putting their wallets in grave danger. The startup founded by Marcus Weller promised a
... more
Photo: Wareable.com
Teforia (Mountain View)
It was like the Juicero, but for tea. The founders of Teforia bet that people would pay $1,000 or more on an internet-connected device that made brewing tea easier, with pre-packaged teas called “sips” and an “infusion globe” that was “hand blown by a glass artisan.” The company got $5.1 million in seed funding and $12 million in Series A funding.
Why it failed: Did we mention you’re paying $1,000 for tea? While Teforia was aimed at a big-spending clientele, and reviewers
such as the Chronicle said its tea was solid, the company couldn’t get enough people willing to pay for it. The company announced it was shutting down in October 2017.
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Teforia (Mountain View)
It was like the Juicero, but for tea. The founders of Teforia bet that people would pay $1,000 or more on an internet-connected device that made brewing tea easier, with pre-packaged teas
... more
Photo: Carlos Avila Gonzalez, The Chronicle
Lily Robotics (Berkeley)
Two UC Berkeley students in 2013 founded a company that offered a camera drone you could throw in the air – if you pre-ordered it for anywhere from $499 to $899. Expecting about 5,000 orders in 2015, Lily Robotics received over 60,000 of them and all the hype that came with $38 million in customer funds.
Why it failed: Like Icarus, the Lily drone flew too high for its own good. The company couldn’t keep up with all the orders it got and failed in its promise to deliver its drones in 2016. Investor funding also got more conservative that year, making it that much tougher to stay alive. Lily shut down in January 2017, on the same day it was sued by the San Francisco district attorney’s office for false advertising and unfair business practices. Among other complaints, the office said Lily used a promotional video featuring a “much more expensive, professional camera drone that requires two people to operate.”
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Lily Robotics (Berkeley)
Two UC Berkeley students in 2013 founded a company that offered a camera drone you could throw in the air – if you pre-ordered it for anywhere from $499 to $899. Expecting about 5,000
... more
Photo: Lily Robotics
Homejoy (San Francisco)
At a time when on-demand services were popping up everywhere – an Uber for (blank) – Homejoy was the It company for housekeeping. It raised $38 million in 2013 and expanded to 30 cities in six months, offering drastic discounts for first-time customers, then expecting them to pay up to $35 an hour for regular service.
Why it failed: Those first-time customers simply wouldn’t stick around once their discounts ended, and Homejoy couldn’t make enough to sustain its rapid growth goals. "Retention was clearly bad, and that's what killed us," a former employee
told Forbes. The final nail in the coffin came with four lawsuits by workers seeking employee status. Homejoy shut down in July 2015.
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Homejoy (San Francisco)
At a time when on-demand services were popping up everywhere – an Uber for (blank) – Homejoy was the It company for housekeeping. It raised $38 million in 2013 and expanded to 30
... more
Photo: Associated Press
Move Loot (San Francisco)
“We’ve been growing like crazy, we’ve grown on average 40 percent every month,” Move Loot co-founder Jenny Morrill (pictured)
told the Chronicle in 2015. The company aimed to succeed as a curated online furniture consignment shop for people who had recently moved, and it attracted $22 million in funding. Move Loot picked up furniture for free, kept the goods in a warehouse, and sold it while taking its cut.
Why it failed: While it may have been founded on a useful idea, Move Loot didn’t work in practice. Sellers and buyers complained of missed pickup or delivery dates, non-existent customer service, and unpaid refunds. Move Loot’s
Yelp page shows 2.5 stars on 272 reviews. In June 2016, Move Loot
sold its customer list – whatever was left of it – to on-demand home services Handy.
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Move Loot (San Francisco)
“We’ve been growing like crazy, we’ve grown on average 40 percent every month,” Move Loot co-founder Jenny Morrill (pictured)
told the Chronicle in 2015. The company aimed to
... more
Photo: Connor Radnovich, The Chronicle
Meerkat (San Francisco)
Live-streaming video was still a niche activity in 2015 when Meerkat burst on the scene at South by Southwest. With smartphone cameras working at a much higher caliber than in years past and social-media sharing more popular than ever, the time seemed ripe for someone to capitalize, and for a fleeting moment, it seemed like CEO Ben Rubin’s Meerkat would outshine Periscope and any other competitors. Early Meerkat investors included YouTube co-founder Chad Hurley and actor Jared Leto.
Why it failed: The darling of 2015 announced its demise in fall 2016. Twitter acquired Periscope for $100 million and gave it an insurmountable leg up in gaining users, and once Facebook Live became a verb … you know the rest. Rubin has since pivoted to a group video chat app called Houseparty.
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Meerkat (San Francisco)
Live-streaming video was still a niche activity in 2015 when Meerkat burst on the scene at South by Southwest. With smartphone cameras working at a much higher caliber than in years past
... more
Photo: Liz Hafalia, The Chronicle
Secret (San Francisco)
The Verge
called Secret “the most scandalous social network.” Alexis Ohanian helped give it an initial investment of $300,000. Silicon Valley offices and parties were abuzz in 2014 about an app where you could see nameless messages posted by your phone contacts – sort of like Snapchat for texting. Judging from the $35 million Secret raised, the market for juicy, familiar gossip was strong.
“Secret is an app for the introvert in you," co-founder Chrys Bader said as the company was emerging. "All these other social networks are for the extrovert."
Why it failed: Secret’s appeal was also its biggest liability: being able to post anonymous messages left it ripe for bullying. A Tech Crunch reporter confronted CEO David Byttow about this in an interview, and
later wrote as Secret was shutting down, “He seemed incredulous, and I’m not sure he ever took it seriously enough.”
Secret’s redesign also exposed it to criticism as “a
shameless clone of Yik-Yak,” one of its then-competitors. Byttow announced in a
2015 Medium post that he was shutting Secret down and returning its remaining money to investors.
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Secret (San Francisco)
The Verge
called Secret “the most scandalous social network.” Alexis Ohanian helped give it an initial investment of $300,000. Silicon Valley offices and parties were abuzz in 2014
... more
Photo: Meerkat
Sprig (San Francisco)
Sprig was one of the first apps to prepare and deliver its own organic meals, at first offering about three options with drivers operating in certain neighborhoods to keep delivery within 15 minutes. The company raised $56.7 million in funding and eventually expanded its menu.
Why it failed: While most of its competitors, including Postmates, UberEats, and Grubhub, delivered food prepared from independent restaurants, Sprig couldn’t scale its food preparation to keep up with deliveries. CEO Gagan Biyani shut down the company in May 2017.
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Sprig (San Francisco)
Sprig was one of the first apps to prepare and deliver its own organic meals, at first offering about three options with drivers operating in certain neighborhoods to keep delivery within
... more
Photo: Paul Chinn, The Chronicle
Beepi (Mountain View)
For people nervous about buying or selling their car independently, Beepi promised to solve their problems by vetting the sales and delivering the cars themselves. The startup was valued as high as $560 million and had up to 300 employees.
Why it failed: Former Beepi employees
told Tech Crunch the company was burning through $7 million a month due to “grossly high salaries” and wasteful expenditures such as a $10,000 sofa for a conference room. The company was also accused of trying to raise its valuation too high, too soon. Beepi ran out of cash and made two unsuccessful attempts to sell itself before finally selling off its assets in early 2017.
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Beepi (Mountain View)
For people nervous about buying or selling their car independently, Beepi promised to solve their problems by vetting the sales and delivering the cars themselves. The startup was valued as
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Photo: Michael Macor, The Chronicle
Hello (San Francisco)
Sleep gadgetry was taking off when Hello launched in 2016. Founded by James Proud, a Peter Thiel entrepreneurial fellow, Hello created a $129, ball-shaped bedside sleep tracker called Sense, along with a smaller tracker that went inside a person’s pillow. Early response was promising, with a $2.4 million Kickstarter campaign and a $40 million funding round. Hello was valued up to $300 million, and the Sense was being stocked on Target and Best Buy shelves.
Why it failed: Too many users said the product didn’t work. A
Verge reviewer said the Sense was “marginally better than a sham product." Add in factors like voice-powered home assistants such as Alexa, and the challenges of scaling for the likes of Best Buy, and it was a bad equation for the company. Hello said goodbye in July 2017.
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Hello (San Francisco)
Sleep gadgetry was taking off when Hello launched in 2016. Founded by James Proud, a Peter Thiel entrepreneurial fellow, Hello created a $129, ball-shaped bedside sleep tracker called
... more
Photo: Lea Suzuki, The Chronicle
Quixey (Mountain View)
What Google did for website searches, Quixey aimed to do for searching within and between mobile apps. The company’s goal of “deep linking” apps to each other attracted interest from players as big as Alibaba, gaining it over $130 million in funding and a $600 million valuation.
Why it failed: For one thing, Google
also wanted to be the Google of deep linking within apps, and it had the inside track to do so. Meanwhile, Quixey suffered from missed revenue targets, senior executive turnover, a drying investment environment, and
tension with its biggest investor, Alibaba. It shut down in March 2017.
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Quixey (Mountain View)
What Google did for website searches, Quixey aimed to do for searching within and between mobile apps. The company’s goal of “deep linking” apps to each other attracted interest from
... more
Photo: Leah Millis, The Chronicle
Luxe (San Francisco)
Instead of hailing an Uber driver on your phone, you could use this app to hail a valet to pick up your own car and bring it back when you were ready. The idea was popular enough that Luxe raised $75 million in funding with a $160 million valuation.
Why it failed: As with so many other on-demand apps, Luxe couldn’t develop its business beyond a fun idea. The costs that came with dispatching a valet at a moment’s notice and renting the parking space to store enough cars to be profitable were too much, and in September 2017 Luxe
sold its platform, staff, and key assets to Volvo.
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Luxe (San Francisco)
Instead of hailing an Uber driver on your phone, you could use this app to hail a valet to pick up your own car and bring it back when you were ready. The idea was popular enough that Luxe
... more
Photo: Siana Hristova, The Chronicle
Sidecar (San Francisco)
In an alternate universe, they would be calling on-demand startups “like Sidecar for (blank).” Sidecar CEO Sunil Paul
patented mobile ride-hailing in 2002 and the company began giving rides in 2011, a year ahead of UberX and Lyft. While Uber was driving customers around in black luxury cars, Sidecar was seen as the more affordable, friendlier alternative.
Why it failed: While so many startups fail despite massive amounts of funding, Sidecar couldn’t generate enough to keep up with its competitors – it’s $35 million paled in comparison to Lyft’s and Uber’s billions. Also, its app delivered a clunkier experience where users had to choose between several vehicles with different prices. In a two-horse industry, Sidecar was squeezed out. After an unsuccessful pivot to delivery service, it folded in December 2015 and GM acquired Sidecar's assets, including that valuable patent to launch its own car-sharing service, Maven.
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Sidecar (San Francisco)
In an alternate universe, they would be calling on-demand startups “like Sidecar for (blank).” Sidecar CEO Sunil Paul
patented mobile ride-hailing in 2002 and the company began giving
... more
Photo: Michael Short / Special To The Chronicle
SpoonRocket (Berkeley)
SpoonRocket was one of the first, along with Sprig, to offer its own on-demand menu of hot food, delivered by one of its drivers in 15 minutes (though in practice they were
known to take longer). SpoonRocket received $10 million in Series A funding, eventually adding such items to their menu as
Halloween candy.
Why it failed: With Caviar, Postmates, and others entering the mix, there wasn’t enough room at the table for every food-delivery app. SpoonRocket’s
2016 demise came a year before Sprig’s.
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SpoonRocket (Berkeley)
SpoonRocket was one of the first, along with Sprig, to offer its own on-demand menu of hot food, delivered by one of its drivers in 15 minutes (though in practice they were
known to take ... more
Photo: Brant Ward, The Chronicle
SpoonRocket (Berkeley)
SpoonRocket was one of the first, along with Sprig, to offer its own on-demand menu of hot food, delivered by one of its drivers in 15 minutes (though in practice they were
known to take longer). SpoonRocket received $10 million in Series A funding, eventually adding such items to their menu as
Halloween candy.
Why it failed: With Caviar, Postmates, and others entering the mix, there wasn’t enough room at the table for every food-delivery app. SpoonRocket’s
2016 demise came a year before Sprig’s.
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SpoonRocket (Berkeley)
SpoonRocket was one of the first, along with Sprig, to offer its own on-demand menu of hot food, delivered by one of its drivers in 15 minutes (though in practice they were
known to take ... more
Photo: Nathaniel Y. Downes /San Francisco Chronicle
WeWork documents reveal it owes $18 billion in rent and is burning through cash as it seeks more funding
- The office-leasing startup WeWork plans to raise more funding through a $500 million bond sale, according to the Financial Times.
- It's the first time the company is raising money from debt investors after it raised billions in venture capital from backers such as SoftBank.
- WeWork disclosed startling underlying numbers for its business in its bond-sale documents, such as that it owes $18 billion in rent.
- The company's revenue rose dramatically last year, but its costs rose faster.
WeWork, the office-leasing startup, is looking to raise more cash through its first bond sale, despite already raising billions in venture funding.
WeWork is planning to sell $500 million (£358 million) in high-yield notes, per reports from the Financial Times and Bloomberg this week.
And bond documents reviewed by the two publications reveal some startling numbers — here's a summary:
- WeWork owes $18 billion in rent. The company has more than 14 million square feet of office space, with suitably massive lease obligations, though WeWork has the option of closing locations if it can't pay those bills.
- WeWork is burning cash. Revenue from memberships more than doubled last year, to $822 million, but expenses also more than doubled, to $1.81 billion. Net losses came to $934 million, according to Bloomberg.
- It isn't really about tech startups. About 20% of WeWork's occupants are in financial, legal, and business services, while 15% work in software.
- A focus on bigger companies means higher occupancy rates. Filling desks — and keeping them filled — is an important metric for WeWork, which says it has done so with 81% of them, higher than its minimum requirement of 60% occupancy to cover costs.
- Like other tech CEOs, Adam Neumann controls the company. He has more than 65% of the voting power.
WeWork has expanded rapidly, helped by the $4.4 billion it raised last year from its main backer, SoftBank. According to its bond documents, the company had 220,000 members as of March and 251,000 desks across 234 locations.
Skeptics worry that WeWork is overly exposed to market shifts that could affect its occupants and their willingness to pay membership fees. But the optimistic view is that WeWork's leases eventually generate more cash than its costs as occupancy rates rise and the company gets its upfront spend on the "fit-out" for new properties out of the way.
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SEE ALSO: Rivals say WeWork uses 'aggressive' tactics like snooping on their operations and poaching tenants