10 Failed Companies: 10 Lessons

Why They Failed and Lessons for Founders and Leaders

In the beginning of this year on January 4th, just like this one, I wrote a similar piece that the audience found valuable. The deep dive was about what successful companies like Apple, Google, Stripe, Uber, Airbnb, Shopify, etc have “One” unique value proposition that sets them apart from their competitors, and the valuable lessons they share for founders and leaders.

Today’s deep dive is inspired by that one. But instead of choosing the successful companies, I’ve picked the failed ones, went all in on to study why they failed, and the valuable lessons they share for founders, leaders, and investors.

Why am I bringing up the failed companies?

Everyone talks about successful companies. If you search on Google or YouTube, you will find countless articles and videos on how well successful companies are doing. But there are not many writers, journalists, or business people who often talk about failed companies. It’s also not the topic we often explore when we meet our co-founders, leaders, and investors.

So I said, screw it and let’s do this.

I firmly believe founders and leaders should not just learn and gain knowledge from successful companies, but also failed companies should be in their bingo cards because they too share the same lessons and learning, but differently.

As the saying goes: “A wise man can learn more from his enemies than a fool from his friends.” Of course, the following companies aren’t your enemies or competitors, but you can learn a lot from them if you just read this deep dive. And who knows? You might be making any of the same mistakes that these companies made, which doomed them to obscurity. In that case, this piece is going to be a life-changing experience for you.

Get your popcorn ready, and let’s dive in!

1. Netscape

Today we use web browsers like Chrome, Firefox, Safari, or Opera Browser. But did you know before all of these, there was a web browser, which was very popular and successful in the mid-1990s? It’s no other than Netscape.

Netscape Communication Corporation, popularly known for its web browser Netscape Navigator was founded by Marc Andreessen and Jim Clark in 1994. Marc had previously founded Mosaic, the first popular internet browser when he was studying at the University of Illinois where he worked at the National Center for Supercomputing Applications (NCSA) and earned a computer degree. But he left NCSA after graduating from college to start his own company, Netscape.

Literally in no time, Netscape became widely successful—just one year after founding the company, it went public on August 9, 1995, with its stock price more than doubling on the first day of trading, touching the company’s market cap to a remarkable $2.9 billion. At its peak in 1996, the browser held over 75% market share in the internet browsing category.

But Netscape’s success didn’t last long. The company started losing market share when Microsoft's new web browser, Internet Explorer (Now Microsoft Edge) started gaining popularity in early 1997, which was founded in August 1995. Netscape’s growth went plateau, and it started losing market share day by day because Microsoft had made Internet Explorer a default web browser for Windows devices—making it hard for people to change or uninstall the application.

And while Internet Explorer was completely free to use, Netscape was charging $39 per user to commercial entities for using the browser. On top of that, the biggest mistake Netscape made was, instead of improving and innovating the browser, the company spread itself too thin by launching new products and services like web servers, email clients, and other internet tools. As a result, by 1998, Internet Explorer had overtaken Netscape’s market share. Later AOL acquired Netscape for $4.2 billion but couldn’t make it successful.

The biggest lesson here for founders and leaders is that, being the first mover doesn’t mean you're always going to dominate and retain the largest market share. To thrive, you have to consistently improve and innovate the product, and try not to spread the company too thin when the core product is not established. This was the biggest mistake Netscape made, which plunged their growth and led them to obscurity in no time. I mean seriously, the company didn’t even last for 10 years.

Enjoy this video of co-founder, Marc Andreessen exploring Netscape office:

2. AltaVista

Netscape was a web browser, but AltaVista was a search engine. Today we use the most popular, dominant search engine, Google. But in the late 1990s, the dominant and powerful search engine was AltaVista, known for its first searchable full-text database of the web.

AltaVista was founded in 1995 by three people, Louis Monier, Michael Burrows, and Paul Flaherty who worked at Digital Equipment Corporation (DEC.) AltaVista, which meant “A view from above” was indexed 16 million documents—developing for six months before making it publicly available to everyone in December 1995. So as soon as it came out in the market, it took the internet by storm, with more than 300,000 searchers using the engine on the first day alone. And by the fall of 1996, AltaVista was receiving 19 million queries per day!

But just like Netscape, AltaVista's success also didn’t last long. The company's valuation started to decline in late 1997. And one of the prime reasons it lost the market share and valuation was, the company consistently changed its ownership multiple times. In 1998, Compaq acquired DEC (that owned AltaVista) for $9.6 billion, and later in 1999, CMGI agreed to acquire 83% of AltaVista.

On top of that, the company faced a serious rivalry with its competitor, Google. The company failed to innovate the search engine because of the consistent change in ownership, which resulted in a lack of clear vision, poor leadership style, and bad decision-making. Later, Yahoo (Which also is now a failed company lol!) acquired AltaVista in 2003, but completely shut down the product in 2013, seeing no success whatsoever.

Again the same mistake as we talked about in the Netscape part. AltaVista failed to innovate the product, which led Google to outcompete it. Moreover, while Google was pushing too hard to make the product superior and excellent, AltaVista ownership was constantly changing, which resulted in a lack of clear vision, mismanagement of finances, poor leadership, and bad decision-making. Founders and leaders, focus on what matters, do what moves the needle, and never fall for shiny objects. To make it abundantly clear, don’t change the company ownership consistently.

Wanna see how AltaVista looked in 1996? Here you go:

AltaVista in 1996

3. Napster

We all know and use Spotify, but did you know Napster? It was a peer-to-peer music-sharing platform founded in 1999—way before Spotify—by two music-passionate college students who were in their teenage years, Shawn Fanning and Sean Parker. Napster was easy to use, user-friendly, and heavily designed for sharing music files, for free across the web.

It didn’t take too long for Napster to become a popular music platform and gain millions of users. At its peak, it had 80 million registered users—freely listening and sharing music with their friends and family via the app. This raises the question, if Napster was that popular and had millions of users, then why did it fail? And that’s where things get interesting.

The problem with Napster was that every piece of music you’d find on the platform was added without copywriting approval from the original artist or musician, which made it illegal. So guess what? The Recording Industry Association of America (RIAA) filed numerous copyright infringement lawsuits, and major artists like Metallica and Dr. Dre spoke out against the platform—resulting in the court ordering Napster to stop its service immediately. In response, the company tried to transition to a legitimate paid service, offering a membership package to its users for listening and sharing music files on the platform, but it didn’t work. The company later filed for bankruptcy in 2002.

Founders and leaders, disruption is good but if you don’t take care of legal compliance, you’re going to have a bad time growing the company. So if you’re building a disruptive company, or any company at all, make sure you’re not breaking any laws or regulations. See Uber, it made the same mistake early on and later paid the price.

4. MySpace

Why did Myspace fail and Facebook succeed?

It’s an interesting story. Before Facebook, Instagram, Snapchat, and Twitter, there was a popular social media platform called Myspace. The company was founded by Tom Anderson and Chris Dewolfe in 2003, hoping to connect people around the world in one place. The idea stuck, the platform gained popularity, and by the beginning of 2004, the platform had attracted more than 5 million users—making it one the most visited websites in the United States the following year. The platform also played an important role in launching the careers of numerous musicians as it became a default platform for them to showcase their work publicly, for free.

With its success, News Corporation acquired Myspace for $580 million in 2005. But this was when it faced serious competition from its new competitor, Facebook, which was founded by Mark Zuckerberg in 2004. One major drawback Myspace had was, the interface of the platform was not good at all, which often felt annoying to its users. Facebook took advantage of it and did a good job at making the platform interface user-friendly, which attracted a boatload of users.

This is how a Myspace user’s profile looked like:

The biggest mistake of Myspace that made it unsuccessful was, the company solely focused on monetization—riddled the platform with ads everywhere, which made the user experience even more annoying. But people had options, as Facebook and Twitter had arrived in the market with better service, by the fall of 2009, Myspace was no longer a top social media platform as people had better options so they were leaving the platform. Even the co-founder, Tom Anderson, who co-founded the company, already had left the platform and was instead using Facebook lol.

One of the biggest lessons Myspace teaches you is that you as founder and leader should never compromise on the user experience. And always remember, the user comes first, monetization comes second. If you prioritize monetization over users, you’ll end up with nothing. So balancing both is very, very important—you want to make the user experience insanely great as well as monetize the platform so you keep the momentum going.

5. Yahoo

What actually Yahoo was? A technology company? A social media company? A search advertisement platform? Yahoo failed because it tried to become everything for everyone. And that happened because Yahoo lacked a clear vision. When I think about Yahoo, I remember it as one of the biggest losers on the internet, for real.

Yahoo was founded by two Stanford graduates Jerry Yang and David Filo in 1994. They started the company as a hobby project, trying to organize the internet information, just like Google’s founders did. They first called it “Jerry and David’s Guide to the World Wide Web.” Since Yahoo wasn’t really competing with anyone else at that time, it gained popularity and became an internet sensation within a few years of its founding.

Around the Dot-com Bubble in the early 2000s, Yahoo was worth more than Ford, GM Motors, and Chrysler combined—driving at its peak value to $125 billion, as one of the top sales executives, Jeremy Ring recalls. The company also had many successful acquisitions, for example, Launchcast, Broadcast.com, GeoCities, and Flickr. It also introduced many amazing, breakthrough products like Yahoo Briefcase, similar to Dropbox but way before. Yahoo Music, but way before Spotify. And Yahoo Mail, way before Google’s Gmail. However, the company also missed the opportunity to acquire Google twice, Facebook once, and once rejected Microsoft’s offer.

The prime reason Yahoo failed, not because it had failed acquisition but more so because it tried to be everything for everyone—lacking a clear vision. Before making one product successful and establishing it, they introduced new products again and again. This drove confusion among the users saying “What actually Yahoo is, and who it is for?” On top of that, whatever product Yahoo would introduce, they’d be the “Second best” not the “Best” in the market, as Lyndsey Parker says who worked at Yahoo.

“We were like Eratosthenes, whose nickname was Beta because he was second best at everything he tried,” he says. “That was Yahoo. We had a few core products like mail that were best in class, but most of our products were second best.”

The lesson? Have a clear vision. Founders and leaders, don't lack the company’s vision. What do you stand for? What are you known for? What are you building? Have a clear vision of what you should be building and where your company is heading. Don’t try to be everything for everyone. Be specific and serve a group of people, especially when you are not established.

6. StumbleUpon

Before Facebook’s Newsfeed, TikTok, Twitter, and YouTube’s—For You page, there was a platform called StumbleUpon that was deeply designed with the “Discovery” Algorithm. You just open the app and hit the “Stumble” Button as many times as possible to read undiscovered content on the platform.

You may think: So StumbleUpon was like Myspace. No, it wasn’t. Myspace was for making friends, building connections, and finding a community. But StumbleUpon wasn’t built for any of those. It was a content discovery platform where anyone could read articles, blog posts, and essays on the platform, for free. The goal of StumbleUpon wasn’t to let people connect with each other but to let them stumble on interesting stuff.

StumbleUpon was founded by Garrett Camp, who later co-founded Uber, Geoff Smith, Justin LaFrance, and Eric Boyd in 2001. The platform quickly gained traction and acquired millions of users within a few years of launch. By 2010, the website had 10 million registered users, and people were hitting the “Stumble” button 1 billion times per month.

Here’s how the platform looked like:

The company’s growth started to plateau at the beginning of 2015 as it faced rivalry from Twitter and Facebook. Twitter and Facebook were established platforms and were offering many, more “Attractive” features than StumbleUpon. The Internet grew, and people's tastes started to change (just like we’re having right now!) “Why would I use StumbleUpon to read pages and websites I don’t even trust, and if there is no parasocial relationship with the creator?” People now had options to go to Twitter and Facebook, follow people, make friends, and still read the content shared. This gave a sense of connection and trust with users on the platforms, which StumbleUpon had failed from the beginning—resulting in Twitter and Facebook killing StumbleUpon’s growth.

Moreover, the company didn’t have a sustainable business model that could generate a consistent cash flow for the company to run, manage, and move StumbleUpon forward. As a result, after 16 years of running it, StumbleUpon was shut down in 2018.

The internet landscape changes very, very fast. So if you’re not adoptive, you may see the same situation as StumbleUpon did. You have to adapt with the technology and give people what they want. Because if you can’t give what they want, someone else will do, and they’ll attract all of your users. And that’s why the best companies are the ones that adapt very quickly. You can see it right now. With the AI boom, all the big tech companies, Google, Apple, Meta, and Microsoft, are trying their hands on AI because if they didn't, they’d likely be irrelevant in the next 10 years.

7. Vine

Vine was the granny of TikTok.

Vine, a short six-second video platform, was founded by Dom Hofmann, Rus Yusupov, and Colin Kroll. Twitter believed in the idea so much so that it acquired the platform in 2012 for $30 million before its official launch in January 2013. But instead of merging it inside the Twitter app, the company introduced Vine as a standalone product. The software did grow but its popularity was short-lived. Because watching and making short, six-second videos was pretty novel at the time, and since there was no friendly software or tools to edit short videos, it made it hard for people to create something attention-grabbing and unique.

Vine faced competition when Instagram and Snapchat started allowing users to post longer-form videos on the platforms. Moreover, Vine had users, but there was no monetization strategy, and the company wasn’t compensating its creators, making it hard for the creators to continually create content on the platform. However I believe, things might have worked if Twitter, instead of introducing Vine as a standalone product, would’ve integrated it on Twitter. Sadly, after 3 years of running Vine, seeing no success, Twitter shut down the product in 2016.

Here’s how the platform looked like:

What does Vine failure teach you? Before acquiring a company, make it abundantly clear how you’re going to utilize the software to help the “Parent” company grow. Have a clear monetization strategy if you introduce the acquired company as a standalone product. Plus, you also have to look at the competitors and fulfill the users’ demands accordingly.

8. Quibi

Quibi is one of the biggest startup failures of our time. Quibi, a similar platform like Netflix, but with short videos (6-10 minutes) was founded by Jeffrey Katzenberg and Meg Whitman in April 2020. Yup, just when the Covid-19 hit.

Quibi had raised $1.7 billion from prominent companies like Goldman Sachs, JP Morgan, Google, Alibaba, Hollywood Studios, etc, and also had attracted prominent figures like Jennifer Lopez and Steven Spielberg to create content for the platform before its launch. On the first day of its launch, Quibi got 300,000 downloads, ranking it 3rd on the App Store. The idea of Quibi was simple, providing short 6-10 minute videos just like Netflix to the users for $5 per month with ads, or $8 without ads, starting with a 90-day free trial.

Sadly, it didn’t work. Yes, it attracted many free seekers, but the reason it failed was because no one wanted to pay $5 or $8 per month to watch not-so-commercial 6-10 minute videos when there was YouTube, TikTok, Instagram, and Facebook for free. So even if users signed up, they stayed till the 90-day trial would end.

They built the platform for years only to shut it down within 6 months of launch. When the company shut down just 6 months after the launch, its cofounder, Jeffrey Katzenberg kept saying that “Pandemic was the reason Quibi failed.” Which couldn’t be further from the truth because Netflix, Amazon Prime, and Disney Hotstar saw a surge in users’ subscriptions, not a decline when the pandemic hit.

Do enough market research before raising an absurd amount of capital or doing something you’ve no idea would work. Don’t make the mistake that Quibi’s founders made. Imagine how much capital it would’ve saved if just Quibi’s co-founders had asked 100 random people if they wanted something, but they didn’t because they were already billionaires.

9. WeWork

WeWork or WeCrashed? Apple Studio has created an Apple TV series called WeCrashed because of the WeWork failure. This is the story of WeCrashed, oh sorry, WeWork—The company that was once valued at $47 billion now worths nothing.

WeWork was founded by Adam Neumann and Miguel McKelvey in 2010—aiming to revolutionize the co-working space and offices by offering a flexible, community-oriented work environment for startups, freelancers, and businesses. The company was backed by some of the world’s biggest investment firms like Softbank, JP Morgan, Goldman Sachs, Benchmark, etc.

But interestingly, WeWork mostly grew by its marketing hype. Actually, the company had had no predictable income since its founding, which got exposed when WeWork decided to go public in 2019. When investors and other business people got their eye on WeWork’s finances, they noticed that the company couldn’t be worth $47 billion while losing $2 billion in 2018 alone. The company was worth no more than $10 billion, which got right when it “Did” went public in 2021 valued at $11 billion. Softbank, one of the major backers of the company, had already taken a step back from the company in 2019 because of all of this. Later WeWork filed for a Chapter 11 bankruptcy in 2023.

The problem with WeWork's business model was that the company was making long-term property contracts with landlords around the globe, while it was just renting them for a short period of time to startups, freelancers, and businesses—often causing the properties to be not in service. This means that even if the space was not in service, the company had to pay the same amount of money to the landlords. This was the biggest loophole in the business, which never made the actual number possible that WeWork claimed. Moreover, the leaders of the company and its co-founders mismanaged the finances, overexpanded too quickly, and were hit by Covid 19, which shattered the business.

Founders and leaders should never chase rapid expansion, but instead prioritize sustainable growth so that they make sure they have enough free cash flow to keep the momentum going. Also, founders and leaders should have a strong understanding of the business model. Do the math first, does the business model make sense? If not, you should change it before it's too late.

10. Clubhouse

One of the guys who predicted the Clubhouse growth way, way earlier was Shaan Puri, a prominent individual in the tech industry. And luckily, writing about Clubhouse today, I still remember his magical thread about Clubhouse, which he wrote in 2021.

Link to Thread

Clubhouse was founded by Paul Davison and Rohan Seth in 2020—trying to build a different audio platform. The Clubhouse’s idea was fascinating though—Instagram, Facebook, Twitter, YouTube, and Snapchat were either text-based, video-based, or graphic-based platforms. So Clubhouse focused on building an audio-based platform, where people could join audio chat, participate in conversations, and make friends along the way.

And guess what? It worked. The timing was perfect because everyone was free at their homes doing no “Work” in Covid. The company had also attracted many famous influencers that helped the company grow initially, and all thanks to its invite-only feature that drove the Clubhouse’s users from 0 to 100 million users in less than 1 year, valuing the company at $4 billion.

But as I’ve written about this previously, the Blue Ocean Strategy doesn’t work for too long. The same thing happened here and it faced deep competition from Facebook Live and Twitter Space features that offered a better, lucrative audio chat place—dragging the Clubhouse’s users to Twitter and Facebook. Moreover, Clubhouse didn’t have a sustainable monetization model that’d generate money for the company, nor was the company incentivizing the creators, which made it hard for the creators to stick around the platform.

New users stopped coming, the growth became stagnant, and what was once valued at $4 billion is now worth less than $50 million (the actual numbers aren't publicly available.) As Shaan Puri wrote in his thread that the biggest issue for Clubhouse was “Content.”

But saying Clubhouse was crushed by its competitors, Facebook and Twitter would be a wrong lesson for founders and leaders because let’s admit that no platform is successful just because of its audio feature. Naval Ravikant is also building a similar platform called Airchat and it’s been a few years since the company hasn’t seen any significant growth or public talk. Rumor is that they are shutting down the company, though there is no trusted reference for this.

The lesson for founders and leaders here would be that even if you’re the creator of a new market, you have to keep improving the product, otherwise, the competitors will come, make better products than yours, and steal the users. Consistently innovating the product is what matters to drive results and growth in the long run. And that’s why I also believe that founders and leaders should not waste too much time finding a Blue Ocean market. Because the reality is, you have to compete at some point or another no matter who created the niche.

Thanks for reading, catch you on the next one.