Being a unicorn is every startupper’s dream. It’s a goal that is hard to accomplish and even more challenging to maintain: many major corporations have failed to withstand the pressure and made costly mistakes. Today, we’ll take a look at some of these brands who, despite having plenty of potentials, suddenly went out of business. Why did this happen? Read on and draw valuable conclusions for your own venture.
Failed unicorns: what can they teach us?
According to Startup Genome’s “Global Startup Ecosystem Report 2019,” 11 out of 12 startups fail. Failora found that a lack of product-market fit and marketing problems were among the reasons for failure.
Crises don’t just affect the average company. It turns out that even those with the most potential can struggle: phenomenal giants can become small and insignificant.
We are going to examine some of them today. What has caused them to no longer be desirable in the market?
- WeWork: a bright spark that went up in smoke
WeWork Inc. provides coworking spaces, including physical and virtual shared spaces. The brand’s modern and purpose-built offices have appeared year after year in cities like London and New York. In 2016, it was valued at $10 billion and the company raised $1.7 billion in private equity in just a few months. More investors came in, including SoftBank Group Corp.
Buoyed by success, WeWork filed for an initial public offering (IPO) in 2019. With this move, the company hoped to earn as much as $3.5 billion to help fund its sudden growth. However, when the brand filed the paperwork needed to go public, serious losses came to light. And then things started to get complicated.
The COVID-19 pandemic, which changed the nature of work overnight was a key reason for this unexpected drop in value. Our homes became our offices and we started using offices on a limited basis. There was suddenly less of a demand for WeWork’s solutions. A pandemic and then a failed IPO led to a valuation drop of 89%. It could be described as a fiasco.
The brand, under the leadership of charismatic CEO Adam Neumann, lost too much momentum. It only took 4 years for WeWork to have 828 offices spread across 120 cities by 2020. Rapidly expanding to other continents, buying up other companies, adding more investors – all before breaking even.
This giant’s failure has become an inspiration for filmmakers. A documentary has already appeared on Apple TV+: called “WeCrashed” it stars Jared Leto and documents the rise and fall of this unicorn.
- Evernote: lessons not learned from competitors and customer needs
A lack of innovation, failure to learn from the competition, missed opportunities despite the timing being perfect… These factors can all lead to a company becoming a forgotten innovation, despite having once been used on a large scale. Which unicorn are we talking about? Evernote, of course. This is the company that came up with the idea of creating notes for mobile devices.
Founded in 2007, this startup was estimated to be worth around a billion dollars after just 5 years. Nowadays, however, Evernote is no longer a unicorn.
“Ingenious” solutions that proved to be useless
Badly conceived ideas marked a turning point for the brand. In 2011, the startup’s founders reached out to users with their Food and Hello services. The first was designed for recording culinary memories and recipes, while the latter was intended for saving contacts.
In theory, it was supposed to work, but how was it in practice? Customers weren’t encouraged to use Evernote Food in any way. Furthermore, other key platforms of the time, including Flickr, had already tapped into food pictures. As for Evernote Hello, it’s lack of NFC or e-card support made it a hassle to use as a contact management tool: all names, numbers and other data had to be entered manually.
Users were merciless. For them, Evernote Food and Evernote Hello were just useless applications which took up storage space and didn’t do any good. Even though these innovations weakened Evernote’s position, the company continued to grow and it even secured venture funding of almost $100 million in 2012.
The pressure was on, as it needed to release a profitable product. The company therefore decided to launch a wide range of gadgets under the Evernote brand in 2013. These were to be sold through its new Evernote Market shop. However, this idea almost ruined the brand’s potential for growth.
It quickly became apparent that tablet stylus pens or backpacks with the green elephant logo were not catching on with customers. Once again, Evernote had misread its customers’ needs, offering them something they simply didn’t need. Users expected Evernote to provide them with a smooth-working, flawless and intuitive note-taking service, which would serve them in their private and professional lives; yet Evernote’s creators had clearly forgotten about this purpose.
A bad reputation and bad fortune
Instead of focusing on developing its core service, Evernote neglected it in favour of solutions that weren’t very profitable. By then, the app already had several shortcomings, which were widely criticised on social media and on blogs. Evernote soon gained a reputation among its user base as a bug-filled and unstable product.
Evernote – which had been developed as a native app – had also ignored one of the major trends in consumer technology, namely the migration of products and services to the cloud. .
Having abandoned the idea of creating corporate merchandise, the developers presented their users with the Work Chat tool in 2014 – too little too late, we should add. Evernote had once again failed to learn any lessons about identifying competition. At the time, applications such as Slack and Google’s G Suite were already gaining traction and more solutions designed for remote collaboration were looming on the horizon. They were much better, more reliable, and more responsive. These new competitors made the company’s lack of direction as clear as day.
- GoPro: a stubborn unicorn
GoPro is one of those brands that, in a short time span, became the leader of a segment it had itself created. The company, priced at more than 1 billion dollars in 2014, unfortunately had to come down from its high horse, just as quickly as it had mounted it.
The startup was based on a simple idea: American customers love outdoor activities – be it swimming, cliff jumping, scuba diving or sailing – and want to capture their adventures. However, high-quality cameras are rather bulky accessories for professionals, while the more compact ones take low-quality images and have weak bodies. The solution? GoPro came up with the idea of providing them with a product that combines compactness, accessibility, quality of design and the possibility to be used underwater.
The GoPro 35mm Hero, an iconic product of the 21st century was thus born. It was reasonably priced, at around $20. Not only did the camera appeal to its target audience, but it also dominated the market in its category.
A star that lost its sparkle
Today, because other similar products have since appeared on the market and videos and photos are increasingly taken with high quality smartphone cameras (which provides users the possibility of instant sharing on social media), GoPro is no longer as interesting a product as it was at first. On top of that, there is a new high-power player in the photography market: the drone.
What led to the fall of this unicorn?
- A change in pricing policy.
GoPro was constantly increasing its camera prices, because new functions had to be fitted into ever smaller cases without compromising on durability. Besides these new camera features, GoPro started to grow its range with accessories: without these add-ons the purchase of the “base product” often didn’t make much sense. Therefore, GoPro’s initial distinguishing feature – its low price – soon ceased to be a thing. The brand’s target audience changed and it forgot about its previously loyal customers, such as students who could no longer afford the company’s new products. Unfulfilled promises – of which there were quite a few – also made their mark on the brand’s reputation.
- Misunderstanding the market.
Besides failing to invest in innovation, GoPro failed to understand the ecosystem it belonged to. It naively believed that smartphones would not replace miniature cameras. This was a huge mistake and a short-sighted approach. Its unique features, i.e. being handy and robust, no longer appealed to consumers.
- Lack of communication with consumers.
There can be a difference between the ideal customer coveted by a brand and the one generating the most substantial and measurable profits for the company. In GoPro’s case, the latter group included amateur athletes, adventurers, students and holiday makers. However, its brand communications mainly featured professional athletes, divers and lovers of extreme activities. The company no longer listened to the voice of ordinary people. As a result, these people began to think that GoPro was probably not the right option for them.
- Hipmunk: the travel chipmunk
Hipmunk, a startup with a friendly chipmunk logo, was in business for about a decade until 2020. This online service gathered travel information on one simple platform. The company declared bankruptcy on 23 January 2020, mainly due to poor management, but also because of marketing difficulties.
Founded by Steve Huffman, co-founder of Reddit, Hipmunk was a travel meta-search engine. It showed a lot of promise in its early days, as Hipmunk was one of the few sites to offer a comprehensive approach to sorting search results. Not only did it categorise search results by price, but also by a range of relevant variables, such as the number of connecting flights and the punctuality of a particular flight. It also took into account airline and online travel agency prices. The concept seemed to work well.
In 2016, SAP Concur, which specialises in business travel, acquired Hipmunk. The company wanted to leverage Hipmunk’s technology to improve its business travel division. Thus, the consumer brand became a business brand and was no longer appealing to individual users.
Others were hot on its heels
Increasing competition from flight search engines was another reason for the brand’s demise. In addition, since all bookings had to be made directly with the airline, Hipmunk users were expected to work directly with the provider’s customer service department when problems arose.
In comparison to competitors like Google Flights (a brand that was implementing tools which enabled users to search up to seven departure and arrival airports) or Skycanner (which allowed them to search for lesser-known airlines and CO2 emission references), Hipmunk’s offering was not that comprehensive. Customers didn’t want to use a service with fewer benefits than other brands.
Failure to cope with change
What lessons can we learn from Hipmunk? For one, it shows us just how important it is to monitor results. At first, individual customers praised the tool and were happy to use it. It was also easy to determine whether visitors were completing a transaction via Hipmunk or moving on to other sites. Hipmunk evidently slept through the changes taking place in the online travel market, changes which were particularly significant during that decade.
What does the downfall of unicorns teach us?
There are some interesting lessons to be learned from failed unicorns.
First of all, we’ve seen just how crucial it is to have a proper grasp of the market, from knowing your customers’ needs and adapting to satisfy them, to being aware of your competitors and reacting to their actions. Understanding the market is a major ingredient for success or, on the contrary, failure.
Of course, the product is also relevant (if it’s second-rate, consumers will notice) but the product itself never operates in a vacuum. It’s worth keeping an ear to the ground and responding to feedback. If not, dissatisfied customers will be quick to name and shame the brand.
In addition, make sure you are targeting the right people with your offer, scale-up carefully, and be aware of your strengths and weaknesses. What is worth communicating on? What doesn’t necessarily need communicating? Which areas of activity should you focus on in relation to the existing target group, and which had you better skip?
Strategic decisions on a marketing and management level can have a huge impact on what makes or breaks’ a startup, especially those aspiring to achieve great results.