Boston tech is enjoying a practically supernatural amount of momentum right now—nice acquisitions, big IPOs, good vibes in general. At least some in the local startup community, however, are no doubt haunted by recent startup failures.
That's OK: Because Halloween might just be the day to spend a moment communing with the spirits of startups lost to us.
To help with that, here is my roundup of five well-funded, once-promising tech companies from the area that ultimately called it quits over the past year—and what we can learn from what happened.
1. Lilliputian Systems. For more than a decade, and with more than $150 million in funding, this MIT spinout developed a portable electronics charger that used butane fuel cells to produce power. But Lilliputian's product just never made it to the mass market, and the company filed for bankruptcy. Scott Kirsner surmised the device may have been developed too early; I'd presume that it was probably too expensive, at $300 (plus the ongoing cost of the fuel cells). Or, you could always just blame MIT.
2. Springpad. The personal organization and productivity site/app shut down in June. Despite having millions of users, both investment dollars and revenue fell short for the startup. "Unfortunately, we were not able to secure additional funding or scale to become a self-sustaining business," Springpad said in a blog post (now removed). The experience points, among other things, to the difficulty of generating a significant amount of revenue from a free, consumer-facing app; it's something that not even the $22 billion baby that is WhatsApp has figured out yet. A number of Springpad employees went on to join Google, including co-founder Jeff Chow, now a Google product manager.
3. Irrational Games. Maybe the biggest WTF shut-down on this list. Polygon put it this way:
Irrational Games, the developer that created the BioShock series along with a number of other critically beloved video games, was viewed, by a number of sources close to the studio, as closure-proof: It had pedigree, talent and — to the outside world — creative carte blanche from its parent companies, 2K Games and Take-Two Interactive.
So what happened? Again via Polygon: "the closure was the combined result of unfettered creative freedom, lower-than-expected sales, the butting of heads between [president Ken] Levine and his employees and the unrealistic expectations of big-budget game development." The dissolution, however, led to a number of games startups launched by Irrational's talent, including two with Kickstarters for their games right now: The Flame in the Flood and The Black Glove.
4. BuysideFX. The company developed a product to help foreign exchange asset managers get more out of their time, attracting investors including Google Ventures along the way. The startup halted operations in recent months. Funding was not the issue in this case, founder Ty Danco tells me. "I was perfectly able to self-finance the company," he wrote via email. "We had offers of financing from some of the existing shareholders but chose not to pursue it." He continued:
There were lots of issues--technical debt, long marketing cycles, but in the end everything comes down to people. That's where I have to write this carefully, but as the CEO, it comes down to my shortcomings.
It was a story of snatching defeat from the jaws of victory. We knowingly chose to put all eggs in one massive basket — then we dropped the basket. ... In retrospect, of course, there were some bad decisions, but it was a case of broken corporate culture that sealed the deal.
But Danco, who's been a frequent angel backer of Boston startups in the past, now plans to focus his efforts on that pursuit once again. "A few years ago, I pretty much dropped out of everything but running my startup, BuysideFX," Danco blogged recently. "That’s now over ... and now I’m itching to get back to investing in early-stage companies."
5. FashionPlaytes. The "me-commerce" startup, which let your pre-teen daughter design and order her own clothing online, shut down in May without explanation. One obvious possibility for a cause: An inability to get the business to scale successfully—something that e-commerce companies routinely struggle with, never mind those with the added complexity of customization. Some of the team and technology from FashionPlaytes are now forming the basis for a new question-and-answer app, called Crashmob, as Dennis Keohane reported in September.
For more startup post-mortems, check out CB Insights' report on the topic.
Image modified from Creative Commons photo by Jo Naylor — Attribution 2.0 Generic (CC BY 2.0).
