Remembering failed startups of 2022
We’ve been covering failed startups for five years but this year is unlike any other year in our ten-year history. The past 12 months were unprecedented for tech companies, especially for tech startups. To put things in perspective, the tech industry lost $7.4 trillion of its market value as of November of this year. Compared to the previous year, the technology landscape took a nosedive, and not one of the 15 most valuable U.S. tech companies generated positive returns.
The situation is even worse for tech startups. 2022 saw a series of interest hikes from the Federal Reserve, which caused the cost of borrowing to go up as the Fed rate went from near zero percent in January to a little over 4% today. Startups struggled to raise funding as investors and venture capital firms pulled back due to a perfect storm of global macro trends including recession, inflation, crypto collapses and scandals, wars, and other geopolitical risks.
Funding, the lifeblood of startups, dropped dramatically in 2022, leaving tech startup companies strapped for cash and more prone to collapse. Q3’22 venture funding dropped by a whopping 53% from the same time last year as venture and growth investors scaled back their investment in tech startups. That’s not all. Global funding during the same period also dropped to just $74.5 billion.
As we reported back in the past, a staggering 90% of startups fail. One of the major reasons startups failed is due to a lack of market-product fit. The other reason is that most startups just ran out of money to fund their project. So, it’s no surprise that more startups failed this year than the previous years.
Just like we’ve done in the past, we want to take a look at some of the startups that didn’t make it through the year. We also want to remember these startups, the founders, and the hard work they put in over the years. We plan to update this list as we received additional information from our readers. Please free to share other failed startups with us.
As we look at this list, we also want to remember that failure is part of a startup journey. Yes, most startups will fail but the failure also provides a stepping stone for founders to apply lessons learned and pivot to other ventures which may potentially work in the future. The secret is to never stop learning and never stop trying. Thomas Edison said it best about many of his failed experiments:
“I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.”
So as 2022 draws to a close and look forward to 2023, let’s take a moment to remember ten of the top startups we lost in 2022. From Airlift to Udayy, here are some of the failed startups of 2022.
Airlift, once Pakistan’s second-largest startup, shut down in July as the global downturn claimed another casualty. The startup blamed the shutdown on the global recession and the downturn in capital markets. In a statement, the startup said: “This has been an extremely taxing decision that impacts a large set of stakeholders and an emerging technology ecosystem.”
Founded in 2019, Airlift started out as a mass transit startup but had to halt its operations in March due to Covid-19. In 2020, the startup decided to diversify into last-mile delivery with the launch of a 30-minute grocery delivery platform called Airlift Express. Through the platform, Airlift delivers essentials to households in 30 minutes across Lahore, Karachi, Islamabad, and other areas, according to the company’s statement on LinkedIn.
Argo Ai, a Ford-backed self-driving startup shut down last month after raising $1 billion. The company also laid off 78 employees. Late last year, we covered Argo AI after the Ford and Volkswagen-backed autonomous vehicle startup partnered with retail giant Walmart to launch an autonomous vehicle delivery service in Miami, Austin, and Washington, D.C.
At the time, Argo AI founder and CEO Bryan Salesky said the partnership would bolster the company’s focus on the testing and development of self-driving technology, especially in urban areas where customer demand is high. Argo AI suddenly ceased operations and shut down and parts of the company were absorbed into its two major backers: Ford and Volkswagen.
In a statement, the company said: “In coordination with our shareholders, the decision has been made that Argo AI will not continue on its mission as a company. Many of the employees will receive an opportunity to continue work on automated driving technology with either Ford or Volkswagen, while employment for others will, unfortunately, come to an end.”
Bitfront, a California-based crypto exchange startup, shut down in November after investors withdrew their coins from the exchange. Bitfront was backed by Japanese social media firm Line Corp. The startup said it would cease operations in a few months after its efforts to overcome challenges in the rapidly evolving industry failed.
In a statement on its website, the company said: “However, despite our efforts … we have regretfully determined that we need to shut down Bitfront in order to continue growing the LINE blockchain ecosystem and LINK token economy.” The startup also said the shutdown is unrelated to the ongoing issues among certain crypto exchanges that have been accused of “misconduct.”
Bolt Mobility, a Miami, Florida-based electric scooter tech startup that focused on revolutionizing transportation, ceased operation on August 1st, 2022. We last covered two years ago after it closed a Series A funding round bringing total investment to $30 million at a $100 million valuation. The funding round was led by Rokk3r Fuel ExO, a Miami-based global venture capital firm geared toward early-stage companies propelled by exponential technologies.
Bolt was created in 2018 by Kamyar Kaviani and Sarah Haynes to fill the gaps in micro-mobility. The startup has conducted extensive research within urban areas and is prepared to revolutionize transportation. Bolt Mobility provided personal e-scooters at strategic locations in urban areas that allow for point-to-point travel. Bolt Mobility’s technology is sought after by forward-looking cities seeking to alleviate traffic congestion, helping municipalities transition infrastructure to a greener, more-efficient model.
Below is what Morning Brew said about the aftermath of the startup’s rapid shutdown:
“If you think clogging the toilet at a party and Irish-exiting is bad, listen to this: City officials across the country are figuring out what to do with hundreds of dead e-scooters and bikes left behind by micromobility startup Bolt after it abruptly shut down. And the company’s ghosting anyone who tries to call or email… …Some officials were aware that Bolt was in the process of powering down, but were caught off guard when the company skipped protocol to do so seemingly overnight.”
FTX is a crypto exchange startup founded by the disgraced MIT graduate Sam Bankman-Fried (SBF). FTX filed for bankruptcy on November 11 after swindling billions of dollars in customers’ funds. Sam Bankman-Fried, who was once called the King of Crypto, also filed for bankruptcy and resigned as the CEO after he reported that the company faces a liquidity shortfall of up to $8 billion.
FTX co-founder Gary Wang and Alameda Research CEO Caroline Ellison pleaded guilty to fraud and cut a deal with federal prosecutors for $250,000 bail. Ellison, 28, and Wang, 29, both pleaded guilty to fraud charges stemming from their leadership positions at FTX and Alameda, respectively. The pair signed their deals in the Manhattan U.S. Attorney’s Office on Monday.
Bankman-Fried founded FTX in 2019 with his co-founder Gary Wang. The Bahamas-based crypto exchange FTX offered derivatives products like futures and options as well as spot trading. Once an unknown startup, FTX became a key player in the crypto space, rivaling the likes of Coinbase and Binance.
Haus, a DTC startup that sold alcohol directly to consumers, shut down in August after running out of cash. The Sonoma County producer of low-alcohol aperitifs shut down after a series of cash woes. The founders had reached an agreement with investors to raise $10 million in fresh funds, but the lead investor pulled out of the deal. Efforts to find buyers for the startup also failed. Once hailed as the next big thing.
Before the shutdown, the three-year-old startup was popular with younger consumers. In a Twitter post, CEO Helena Price Hambrecht said: “Here’s a Haus update that’s not fun to share. Our lead investor recently declined to move forward with our Series A that we were in the process of closing. Without them, we do not have the cash to support continued operations at this time.”
Kittyhawk, a flying car startup backed by Google co-founder Larry Page, “flew off the runway” and shut down its operations. Back in September when we covered the story, the 4-year-old startup announced it was closing down, dealing a major setback to the long-elusive dream of developing compact flying cars. We also covered Kittyhawk when the unmanned aircraft systems startup backed by billionaire Google co-founder Larry Page raised $5 million from Boeing HorizonX Ventures and other investors to bring fast and compact flying cars to the masses.
“We have made the decision to wind down Kittyhawk. We’re still working on the details of what’s next.,” the company wrote in a Twitter post.
Founded in 2010 as Zee.Aero, the company unveiled a demonstration video of its flying car in 2017. Then in 2018, it finally unveiled a single-seat prototype called the Flyer that could hold one person and fly up to 20 miles.
In 2020, Kittyhawk pivoted away from its Flyer program and shifted its focus to its electric aircraft called Heaviside, according to multiple reports. A year earlier, Kittyhawk also formed its Wisk venture with Boeing. The airplane giant invested $US450 million in the partnership. Just this week, Boeing and Wisk presented their vision for a world where eVTOLs can co-exist with larger commercial aircraft.
“Kitty Hawk’s decision to cease operations does not change Boeing’s commitment to Wisk. We are proud to be a founding member of Wisk Aero and are excited to see the work they are doing to drive innovation and sustainability through the future of electric air travel. We do not expect Kitty Hawk’s announcement to affect Wisk’s operations or other activities in any way.”
LendUp was founded as an online direct lender that offered payday loans, installment loans, and credit cards to consumers with low credit scores. Since its inception a decade ago, the payday loan platform had been plagued with lawsuits and fines from regulators. LendUp was later forced to halt its loan origination and the collection of some outstanding loans as the result of a lawsuit from the Consumer Financial Protection Bureau (CFPB). The startup later shut down early this year.
Announcing the shuttering, CFPB director Rohit Chopra said: “LendUp was backed by some of the biggest names in venture capital. We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers.” The CFPB stated that the company had violated a 2016 consent order, engaged in misleading marketing practices, and failed to provide adverse-action notices to consumers in a timely manner.
“LendUp was backed by some of the biggest names in venture capital,” Chopra said in a statement. “We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers.
While LendUp did agree to the terms established in the settlement agreement, it neither confirmed nor denied the CFPB’s allegations. Founded in 2011 by Jacob Rosenberg and Sasha Orloff, LendUp’s mission was to provide anyone with a path to better financial health. The company offered technology, credit products, and educational experiences for the 56% of the US population who are shut out of mainstream banking because of poor credit or volatile incomes.
“Why We’re Shutting Down Neufund: With a heavy heart, we have to announce the closure of Neufund. This step was especially hard due to the fact that our model actually worked,” the Berlin, Germany-based developer of a blockchain platform for investing and fundraising announced on January 1o of this year.
Before its shutdown, Neufund processed about $22.6 million via its Ethereum-based platform and registered 11K investors across 123 countries. However, despite its seeming success, Neufund’s fundraising model was ultimately unable to withstand the pressures of a complex regulatory environment.
In a blog post, Neufund added: “Our aim since the beginning always was to make investing and fundraising more inclusive. Our hard-working team combined with you, our incredible community, went down the right path. However, the existing environment of the regulatory system seems not to be equipped yet to support innovative fintech companies.”
Protonn, a startup that was building a business-in-a-box solution for independent professionals, shut down in the first weeks of 2022, despite having raised $9 million in seed funding 6 months earlier. Protonn reportedly was unable to find product-market fit, and its founders were not able to rework the company’s business model in order to adapt. The startup also blamed its downfall on the pandemic as it exacerbated existing complications surrounding market alignment.
Here’s how the Economic Times summed up Protonn’s failure: “‘Covid-19 didn’t help the startup either, but there was a point when a pivot became necessary but founders weren’t on the same page on that,’ a person aware of the matter said, adding that the company has returned the full capital to investors.”
Reali, a real estate and fintech startup that aimed to replace realtor commissions with flat fees, shut down in September due to what the company described as “disastrous market conditions as well as an unfavorable capital-raising environment.”
Reali was founded in 2015 by Ami Avrahami and Haller to provide flat fees to home buyers instead of the conventional home-buying commission structure charged by realtors. Reali’s mission was to create a one-stop shop to make homeownership simple, affordable, and stress-free. Before its shutdown, Reali raised a total of $292.4 million in funding over 7 rounds. Its latest funding was on Aug 18, 2021, from a Debt Financing round.
Below is how Mortgage Professional America summed it up:
“Real estate startup Reali has joined the list of companies shutting down amid the inflation-driven housing recession. The San Francisco-based fintech company said it will cease operating and start laying off most of its workforce on September 9. Earlier this year, Reali announced plans to expand outside California and into other states by the end of 2022. However, things went south due to ‘challenging real estate and financial market conditions’ and an ‘unfavorable capital-raising environment,’ Reali cited.”
India-based eCommerce tech startup ShopX filed for bankruptcy in August after cash woes. The startup was burning through a lot of cash money failed to generate enough cash flow and ran into funding problems. Since its founding in 2016, ShopX raised about $48 million through 2020 to help local kirana store owners build their digital presence through the establishment of e-commerce operations.
However, As ShopX grew its operations, it took out a number of loans from Singapore-based Fung Investment, which ironically ended up leading to its future failure. As CB Insights pointed out, “The company’s faulty business model prevented it from generating the cash flow and funding required to pay off the interest on those loans, forcing it to file for insolvency and bankruptcy.”
According to Your Story:
“‘ShopX has been instrumental in co-creating the e-B2B industry. Over time, it has become unviable to operate at scale given the low margin profile of the industry, and hence, the decision to shut down operations. We have focused on an orderly and ethical windup, respecting all company obligations,’ the company spokesperson told Entrackr.”
The above startups are just a few of the startups that shuttered in 2022. Others include:
- Ahead (a mental health platform)
- B3i Services
- Bank North
- Friday (a Workplace communication startup)
- Local Motors
- Quillion Tech
- SuperLearn ( Indian edtech startup)
- Volt Bank