Startup Failures Explained Step by Step: What Went Wrong at Quibi, WeWork, Juicero, Webvan, and Other Cautionary Tales
In April 2020, Quibi launched with $1.75 billion in funding, a roster of Hollywood celebrities, and the backing of Jeffrey Katzenberg, one of the most successful entertainment executives in American history. Six months later, Quibi shut down completely. Nearly two billion dollars had been spent on a product that almost nobody wanted.
The speed and completeness of Quibi's failure was remarkable, but the pattern behind it was not. Startup failures follow recognizable trajectories--predictable sequences of decisions, assumptions, and market interactions that lead from ambitious vision to expensive collapse. Understanding these trajectories is valuable not because it makes failure avoidable (some degree of failure is inherent in entrepreneurship) but because it reveals the specific decision points where alternative choices might have produced different outcomes.
The startups examined here did not fail because their founders were incompetent. In most cases, the founders were experienced, intelligent, and well-resourced. They failed because they made specific, identifiable errors in judgment about products, markets, timing, and execution--errors that are common enough to constitute patterns and instructive enough to serve as warnings.
Quibi: The $1.75 Billion Bet on Short-Form Premium Video
The Vision
Jeffrey Katzenberg, former chairman of Walt Disney Studios and co-founder of DreamWorks, and Meg Whitman, former CEO of eBay and Hewlett Packard Enterprise, launched Quibi (short for "quick bites") with a specific thesis: there was an underserved market for high-quality, short-form video content designed specifically for mobile phones.
The pitch was that people had gaps in their day--waiting in line, commuting, taking a break--when they wanted entertainment but did not have time for a full episode of television. Quibi would fill these gaps with premium content (scripted shows, documentaries, news) delivered in episodes of ten minutes or less, produced by major Hollywood talent, and formatted specifically for mobile viewing with a proprietary "turnstile" feature that allowed seamless switching between portrait and landscape orientation.
Why Quibi Failed Despite $1.75 Billion in Funding
Wrong product-market fit. Quibi's fundamental assumption was wrong. The market for short-form video entertainment during idle moments was already served--by YouTube, TikTok, Instagram, Twitter, and dozens of other free platforms. Quibi was asking users to pay $5-8 per month for content that competed with free content on platforms they already used. The question "Why would I pay for this when TikTok is free?" did not have a compelling answer.
Pandemic timing. Quibi launched in April 2020, weeks into the COVID-19 pandemic lockdowns. The entire product concept was built around mobile-first, on-the-go viewing during short idle moments. With most of the population at home, the use case evaporated. People at home could watch full-length shows on large screens; they did not need ten-minute mobile content.
No social features in a social-first world. Quibi launched without the ability to take screenshots, share clips, or post content to social media. In an era when entertainment content spreads through social sharing, Quibi's content existed in a sealed box that users could not share, discuss, or promote. This was reportedly a deliberate choice to protect content rights, but it eliminated the primary mechanism by which new entertainment platforms build audiences.
Expensive celebrity content users did not want. Quibi invested heavily in celebrity-driven content--Chrissy Teigen food shows, Liam Hemsworth action series, Steven Spielberg horror projects. The content was competently produced but failed to generate cultural conversation or viewer attachment. The short-form format made it difficult to develop the character depth and narrative complexity that drives audience loyalty to premium content.
Step-by-step trajectory:
- Founders identified a gap in the market (short-form premium mobile video)
- Raised $1.75 billion before product launch based on founder reputation
- Invested heavily in content production before validating consumer demand
- Launched into a pandemic that eliminated the core use case
- Product lacked features (sharing, screenshots) users expected
- Shut down six months after launch, returned remaining capital to investors
WeWork: The $47 Billion Coworking Mirage
The Vision
Adam Neumann co-founded WeWork in 2010 as a coworking space company that leased office buildings, renovated them, and subleased individual desks and offices to freelancers, startups, and small companies. The core service was real: flexible office space with short-term leases, professional amenities, and community atmosphere.
What Caused WeWork's Collapse
Unsustainable unit economics disguised as a tech company. WeWork's business model was straightforward: sign long-term leases on buildings, renovate them, and rent out space on short-term leases at a markup. This is a real estate arbitrage business--a legitimate business model, but one with well-understood economics and modest margins.
Neumann convinced investors--most importantly SoftBank and its $100 billion Vision Fund--that WeWork was not a real estate company but a technology company that happened to operate in physical space. This reframing was critical because technology companies receive valuations based on growth potential and network effects, while real estate companies receive valuations based on assets and cash flow. By presenting WeWork as a tech company, Neumann achieved a peak valuation of $47 billion--vastly exceeding the company's value as a real estate business.
Founder conflicts of interest. Neumann's personal financial entanglements with the company were extraordinary. He had personally purchased buildings and then leased them to WeWork. He had trademarked the word "We" and charged WeWork $5.9 million for the trademark rights. He had taken hundreds of millions in personal loans secured by his WeWork shares.
Business model exposed during IPO scrutiny. When WeWork filed its S-1 prospectus for an initial public offering in August 2019, the document revealed the full extent of the company's financial situation: losses of $1.9 billion in 2018 alone, a complex corporate structure with dual-class shares giving Neumann outsized control, and governance practices that raised serious concerns.
The public markets, which apply more rigorous scrutiny than private venture capital, rejected the valuation entirely. The IPO was withdrawn, Neumann was removed as CEO, and SoftBank wrote down billions in losses.
Step-by-step trajectory:
- Founded a legitimate coworking business with real demand
- Reframed real estate business as technology company to achieve higher valuation
- Raised billions at inflated valuations from investors who accepted the framing
- Expanded rapidly, signing long-term leases faster than the business could support
- Founder's conflicts of interest and governance problems accumulated
- IPO scrutiny exposed financial reality, collapsing the valuation
Juicero: The $120 Million Connected Juicer
The Vision
Juicero, founded by Doug Evans in 2013, was a connected juicing system: a $700 WiFi-enabled press (later reduced to $400) that squeezed proprietary juice packs into a glass. The packs, sold on a subscription basis, contained pre-chopped organic fruits and vegetables.
Why Juicero Failed
Overengineered solution to a non-problem. The Juicero press was an impressive piece of engineering--it generated four tons of force and contained custom electronics, sensors, and connectivity. But in April 2017, Bloomberg reporters demonstrated that the proprietary juice packs could be squeezed by hand, producing similar results without the $400 machine. The video went viral.
The hand-squeezing revelation exposed the fundamental problem: Juicero had built an expensive, complex machine to perform a task that did not require a machine. The value proposition collapsed. If the packs could be squeezed by hand, the machine was unnecessary. If the machine was unnecessary, the engineering sophistication was wasted. If the engineering was wasted, the $120 million in funding was wasted.
Raised too much too early. Juicero raised $120 million from investors including Kleiner Perkins and Google Ventures before the fundamental value proposition had been validated. The funding enabled Evans to build an overengineered product without the market discipline that constrained capital would have imposed.
Step-by-step trajectory:
- Founder envisioned premium connected juicing system
- Raised $120 million from prestigious investors
- Spent years engineering complex, expensive hardware
- Launched at $700 price point (later $400) with subscription juice packs
- Journalists demonstrated packs could be hand-squeezed
- Value proposition collapsed, company shut down within months
Webvan: The Grocery Delivery Pioneer That Built Too Fast
The Vision
Webvan, founded in 1996, aimed to revolutionize grocery shopping through online ordering and home delivery. The concept was sound--online grocery delivery became a massive market two decades later--but the execution was fatally flawed.
What Was Webvan's Mistake
Built expensive infrastructure before proving the model. Webvan's strategy was to build enormous automated distribution centers--facilities costing approximately $35 million each--equipped with custom conveyor systems, automated storage, and proprietary technology. The company planned to build twenty-six of these facilities across the United States.
Before proving that the basic unit economics of online grocery delivery worked--that the revenue from customer orders exceeded the cost of acquiring, storing, picking, packing, and delivering groceries--Webvan committed billions to infrastructure expansion. By the time it became clear that the unit economics were not working, the company had committed to leases, construction contracts, and technology investments that could not be reversed.
Expanded too fast without unit economics. Webvan expanded from its initial San Francisco market to eight additional cities before demonstrating profitability in any single market. Each new city required a massive distribution center and significant customer acquisition spending. The company was burning capital at an unsustainable rate.
Couldn't achieve unit economics before running out of money. Webvan's fundamental problem was that the cost of delivering groceries to individual homes exceeded the revenue those deliveries generated, after accounting for the cost of goods, labor, delivery, and infrastructure. The company needed to achieve a delivery density (orders per delivery route per day) that would bring costs below revenue, but customer adoption was too slow to achieve this density before the money ran out.
| Startup | Funding | Core Error | Time to Failure |
|---|---|---|---|
| Quibi | $1.75B | Wrong product-market fit, no sharing | 6 months |
| WeWork | $12B+ | Real estate disguised as tech, governance | IPO collapse in 2019 |
| Juicero | $120M | Overengineered unnecessary product | ~4 years |
| Webvan | $800M+ | Infrastructure before unit economics | ~3 years |
| Color | $41M | No clear value proposition | ~2 years |
Color: The $41 Million App That Nobody Understood
The Vision
Color, launched in 2012, was a photo-sharing app that received $41 million in funding before it had a single user. The investment--at the time one of the largest pre-launch funding rounds in Silicon Valley history--was based on the reputation of its founder, Bill Nguyen, a serial entrepreneur who had previously sold a company to Apple.
Why Color Failed Despite $41 Million
Launched without a clear value proposition. Color's core concept was photo sharing based on proximity: people at the same physical location would automatically see each other's photos. The idea was that at events (concerts, parties, sporting events), strangers would share a visual experience through their phones.
The problem was that this concept was confusing to users. Why would you want to see photos from strangers near you? How was this better than existing photo-sharing services? The value proposition was never articulated in a way that resonated with users. The app launched to poor reviews and minimal adoption.
Complex product nobody understood. The proximity-based sharing concept required explaining: it was not immediately intuitive like Instagram (share photos with friends) or Snapchat (send disappearing messages). Products that require explanation to understand face a fundamental adoption barrier: most users will not invest the time to understand a complex product when simpler alternatives exist.
Raised too much too early creating pressure for a moonshot. The $41 million pre-launch funding created expectations that a modest, useful product could not satisfy. The investors expected Color to become a major platform, which pushed the company toward an ambitious, complex vision rather than a focused, useful product. The funding created pressure for a home run when a base hit might have been achievable.
What Patterns Emerge in Startup Failures?
Examining these and other startup failures reveals recurring patterns:
No Product-Market Fit
The most common cause of startup failure is building a product that does not solve a problem people are willing to pay to solve. Quibi built premium short-form content for a market that preferred free short-form content. Juicero built an expensive machine for a task that did not require a machine. Color built a photo-sharing app with a concept nobody wanted.
CB Insights analyzed 101 startup post-mortems and found that "no market need" was the most frequently cited reason for failure, mentioned in 42 percent of cases. The finding is counterintuitive because it implies that the most common startup failure is not running out of money, getting outcompeted, or having the wrong team--but simply building something nobody wants.
Running Out of Money
The second most common pattern is exhausting capital before achieving sustainability. Webvan burned through $800 million building infrastructure before proving unit economics. Color spent $41 million without achieving meaningful user adoption. In each case, the company made large, irreversible financial commitments based on assumptions that proved wrong.
Getting Outcompeted
Some startups fail not because their product is bad but because a competitor offers a better product, a better price, or better execution. Google+ failed in part because Facebook already occupied the social networking space and users had no compelling reason to switch. Quibi competed not just against other streaming services but against free short-form content on YouTube and TikTok.
Poor Timing
Timing is one of the most underappreciated factors in startup success and failure. Webvan's concept (online grocery delivery) was right, but two decades too early--the infrastructure, logistics, and consumer behavior were not yet ready. Quibi launched during a pandemic that eliminated its use case. Bill Gross's analysis of startup success factors found that timing was the single most important factor, more important than the team, the idea, the business model, or the funding.
Can Funding Cause Startup Failure?
One of the most counterintuitive lessons from startup failures is that too much money too early can be more dangerous than too little money. This seems paradoxical: surely more resources should make success more likely?
The danger of excessive early funding operates through several mechanisms:
Enabling bad decisions. When capital is abundant, bad decisions have no immediate consequences. A company with $5 million in funding that makes a bad product decision receives rapid market feedback (nobody buys the product) and must quickly correct course or die. A company with $500 million in funding can sustain a bad product decision for years, spending money on marketing, expansion, and development without the market discipline that constrained capital imposes.
Avoiding discipline. Startups with limited capital develop financial discipline by necessity: they must achieve revenue, control costs, and demonstrate value quickly. Startups with abundant capital can defer these disciplines indefinitely, creating a culture of spending that becomes difficult to reverse when the money runs low.
Creating pressure for outcomes that justify the valuation. When investors put $100 million into a startup, they expect the startup to become worth $1 billion or more. This expectation pushes the company toward ambitious, risky strategies rather than conservative, incremental approaches. A startup that could have built a sustainable $50 million business may destroy itself pursuing a $5 billion vision because that is what the valuation demands.
What Can Founders Learn from Failures?
The lessons from startup failures are not guarantees against failure--entrepreneurship is inherently uncertain, and even well-executed startups sometimes fail due to factors beyond their control. But the patterns are clear enough to provide useful guidance:
Validate assumptions early. The most expensive startup mistakes are those that could have been identified early through customer research, prototyping, and testing but were not because the founders assumed they knew what the market wanted. Quibi could have tested the short-form premium video concept with focus groups and minimum viable products before committing $1.75 billion. Juicero could have tested whether customers would pay $400 for a juicing machine before spending years engineering one.
Focus on customers, not fundraising. Startups that optimize for fundraising may achieve impressive valuations without achieving product-market fit. WeWork raised billions while losing money on every location. Color raised $41 million before having a single user. The most reliable path to sustainability is solving a real customer problem, not raising the most money.
Maintain unit economics. A business that loses money on every transaction does not become profitable by growing--it becomes unprofitable at a larger scale. Webvan's per-delivery economics did not work, and expanding to more cities multiplied the losses rather than achieving profitability.
Build great teams and listen to them. Several of these failures involved founders who suppressed internal dissent. Theranos silenced employees who raised concerns. WeWork's governance concentrated power in a single founder. Organizations that suppress internal feedback lose the ability to correct course before it is too late.
Be willing to pivot--but not too often. Startups that cling to a failing strategy die. But startups that pivot constantly never develop the focus and depth needed to succeed. The skill is knowing when to persist through temporary difficulty and when to change direction in response to genuine market signals.
The startup failure rate is high--roughly 90 percent of startups fail, according to commonly cited estimates. But within that failure rate, the distribution is not random. Startups fail for identifiable, recurring reasons that are observable in advance by founders willing to look critically at their own assumptions, their unit economics, and the genuine (rather than hoped-for) market demand for what they are building.
References and Further Reading
Whitten, S. (2020). "Quibi to Shut Down Roughly Six Months After Launch." CNBC. https://www.cnbc.com/2020/10/21/quibi-to-shut-down-roughly-six-months-after-launch.html
Brown, E. (2020). "The Inside Story of Why Quibi Failed." The Wall Street Journal. https://www.wsj.com/articles/quibi-is-closing-down-11603301946
Farrell, M. & Brown, E. (2019). "WeWork Co-Founder Has Millions in Real-Estate Loans from Companies Tied to JPMorgan." The Wall Street Journal. https://www.wsj.com/articles/wework-co-founder-has-millions-in-real-estate-loans-from-companies-tied-to-jpmorgan-11568044402
Huet, E. & Zaleski, O. (2017). "Silicon Valley's $400 Juicer May Be Feeling the Squeeze." Bloomberg. https://www.bloomberg.com/news/features/2017-04-19/silicon-valley-s-400-juicer-may-be-feeling-the-squeeze
Gross, B. (2015). "The Single Biggest Reason Why Startups Succeed." TED Talk. https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_start_ups_succeed
CB Insights. (2019). "The Top 20 Reasons Startups Fail." https://www.cbinsights.com/research/startup-failure-reasons-top/
Ries, E. (2011). The Lean Startup. Crown Business. https://theleanstartup.com/
Reeves, M., Lotan, H., Legrand, J. & Jacobides, M.G. (2019). "How Business Ecosystems Rise (and Often Fall)." MIT Sloan Management Review. https://sloanreview.mit.edu/article/how-business-ecosystems-rise-and-often-fall/
Christensen, C.M. (1997). The Innovator's Dilemma. Harvard Business Review Press. https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma
Blank, S. (2013). "Why the Lean Start-Up Changes Everything." Harvard Business Review. https://hbr.org/2013/05/why-the-lean-start-up-changes-everything
Thiel, P. (2014). Zero to One: Notes on Startups, or How to Build the Future. Crown Business. https://en.wikipedia.org/wiki/Zero_to_One