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- Statistics show nine out of 10 startups end up failing — one of the top reasons being lack of cash. So it is no wonder when a company goes bankrupt, its founder or founders may, too.
- In Silicon Valley, it seems failure is a rite of passage. Medium blog posts by founders detailing why a company is folding and how it is best for the "community" have become all too common.
- Many failed CEOs of one startup may go on to found bigger and better companies — but some don’t.
- Here are seven tech executives who lost millions, along with the companies they helped build.
- Visit Business Insider’s homepage for more stories.
Capitalism can be an ugly beast.
According to statistics, nine out of 10 startups are guaranteed to fail — and most of the time it’s because a company simply spent all of its money. This means that not only do companies lose millions of dollars, but so do their founders. When companies go broke, the bank accounts and net worths of CEOs typically also take a drastic hit.
Silicon Valley isn’t a place where entrepreneurs are down for long. Failure is seen almost as a rite of passage in some cases — but in others, failure can mean years-long court battles and the possibility of bankruptcy or criminal charges for misleading shareholders.
The most prominent, widely covered, and dramatized downfall may be that of founder and former CEO of Theranos Elizabeth Holmes, who faces criminal fraud charges alleging she misled not only investors, but policy makers about the capability of her company’s blood-testing technologies.
Another example, but with a happier ending, is Napster — the popular, early-aughts music-sharing software, brought down in part by a lawsuit facilitated by metal band Metallica. Though Napster didn’t survive, founders Sean Parker and Shawn Fanning recovered — Parker became the first president of Facebook and Fanning has since invested in a variety of startups himself.
Failure in the tech industry cannot be thwarted — the risk of losing everything seems to be part of the game.
Here’s the tech execs who lost millions and the companies they built.
By now, Elizabeth Holmes, founder and former CEO of blood-testing company Theranos, is a household name. Holmes was able to secure nearly $1 billion in funding, notably from investors like Rupert Murdoch and US Education Secretary Betsy DeVos, before questions about the technology and fraud charges against Holmes caused Theranos to shut down.
Reuters/Stephen Lam
Theranos was founded in 2003 when Holmes was 19 and attending Stanford University. By 2015, Theranos had a $9 billion valuation.
But a year later, Wall Street Journal reporter John Carreyrou published a story detailing how the company was operating at a limited capacity and had been generating false and unreliable results for patients. By the end of 2017, Theranos was drowning — the company had no money and its board members were leaving.
Last September, Theranos laid off its workforce and Holmes faced charges of wire fraud. The company shut down just days later for good. Holmes, who Forbes once estimated had a net worth of $4.5 billion, now has an estimated net worth of $0.
Source: Business Insider, The Wall Street Journal, Business Insider, Forbes
Antoine Balaresque and Henry Bradlow founded drone startup Lily Robotics in 2013. By 2015, Lily Robotics had over $15 million in funding and nearly $35 million in pre-sales thanks to a viral video showing the "drone" in action. But just two years later, Lily Robotics shut down, filed for bankruptcy, and was raided by federal agents. The much-sought-after drone? It reportedly never existed.
Lily Next-Gen/YouTube
Lily Robotics pitched itself as a free-following, video-capturing, autonomous drone company. The company captured the gaze of investors like the Winklevoss twins (who famously sued Mark Zuckerberg over Facebook) and firms like Spark Capital (known for funding Twitter and Slack).
Cofounder Balaresque wrote in an email obtained by San Francisco District Attorney that the famed footage of a Lily drone following skiers and kayakers while they trekked through mountains and rivers was shot using a GoPro mounted on a $2,000 DJI Inspire drone. And according to bankruptcy paperwork, Lily was burning through roughly $1 million a month, while customers anxiously awaited their drones. The company filed for bankruptcy, and said in 2017 it plans to refund customers, but it’s not clear if anyone has received a refund yet.
Business Insider tried contacting Balaresque and Bradlow, but they did not respond to requests for comment. According to LinkedIn, Bradlow is now a product manager at e-scooter company Lime.
Sources: Wired, Venture Beat, Forbes, Business Insider, Vox/Recode
In its heyday, circa 2011, Sidecar was considered a ride-share pioneer, beating even Uber and Lyft to launch. With just a little over $35 million in funding, though, Sidecar cofounder and former CEO Sunil Paul said the company just could not compete with Uber, which raised over $6.6 billion.
Brian Ach/Getty Images for TechCrunch
Sidecar eventually shut down operations in 2015, yet was able to sell its assets to General Motors the following year.
"Our vision is to reinvent transportation and we’ve achieved that with ridesharing and deliveries. It is, however, a bittersweet victory," Paul wrote in 2015. He largely blamed Uber’s "aggressive" tactics and "anti-competitive behavior" for Sidecar’s defeat, even going as far to file a lawsuit against the company last year.
Paul did not immediately respond to request for comment made by Business Insider, but according to his LinkedIn profile, he is now the founder of Spring Ventures, a venture capital firm.
See the rest of the story at Business Insider
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Source: Business Insider – mgebel@businessinsider.com (Meira Gebel)