Startups Gone Wrong: Cautionary Tales For Entrepreneurs

Whenever someone is venturing into the uncertain world of entrepreneurship, they hope, obviously, that their business does well. They want their new endeavor to lift them, and their investors, to new heights. For a select few, their story ends happily, with their business taking off and becoming a household name, i.e. Apple, Google, Twitter. Last month we wrote about entrepreneurs who didn’t achieve the fame of a Google but nevertheless overcame various hurdles to run successful enterprises. However, for most entrepreneurs this just isn’t the case. In fact, according to a report from Bloomberg, eight out of ten start-ups fail within the first two years.

MaxPlay

The video game industry is extremely popular, which means that it is a breeding ground for profits. The global gaming market is expected to be worth $99 billion this year. And that’s up eight percent after last year. Naturally, it would make sense for entrepreneurs to explore this market.

Founded in 2015 as an incubator project through Technicolor Ventures, MaxPlay looked to tap into the video game industry by creating a new type of cloud-based engine that video games could be developed around. Although its purpose was quite visionary (it allowed more than one video game developer to work on the same file from different locations simultaneously) it has since remained stagnant. The company had raised as much as $17 million in funding (anyone who has tried to raise capital knows this is not easy), but was ultimately forced to lay off almost its entire staff, which wasn’t terribly large to begin with, after a deal between the company and an investor fell through.

MaxPlay now focuses its efforts on licensing its technology. Although it had a good run, the company was competing against industry giants Epic Games and Unity Technologies, and wasn’t able to generate sufficient interest.

Skully

Marvel’s Iron Man movies have proven extremely popular worldwide, giving millions the hope that someday they too may be able to have a suit that grants the power of mach 5 flight and a fancy helmet display. Skully wanted to make that latter part a reality. With their advanced HUD (heads up display) motorcycle helmets, Skully stood to make a huge profit. The company, which was funded by an Indiegogo campaign, managed to generate quite a bit of interest and raised more than $2 million to develop the helmets.

Unfortunately, the company became shrouded in various controversies. It has been suggested that company co-founder Marcus Weller, ruined a deal between Skully and Chinese company LeSports and that the two co-founders, who are also brothers, were being forced out of the company by investors.

The most prevalent story, however, alleges that the Weller brothers were stealing money from the company for use on their own personal expenses. Former executive assistant to Marcus, Isabelle Faithhauer is suing the brothers for using the company as their own personal “piggy bank” and even called the company a sham.

Amidst dwindling funds and a staff distracted by inner battles rather than focused on production, Skully was forced to close this past summer.

With approximately 80 companies being started every hour, there is no shortage of entrepreneurs trying to make their mark on this world. Unfortunately, not all of them will succeed. Some will have to change their vision like MaxPlay and others such as Skully will succumb. If you are interested in exploring some of the reasons other startups have faltered, take a look at CBInsights’ article of the 178 failed startups. Researching where others have gone wrong can allow one to avoid the same mistakes in the future.