Biggest Y Combinator failed startups | Hacker News Reader

Biggest Y Combinator failed startups

failory.com

67 pointsmooreds39 comments

Regarding Homejoy, this article [0] that didn't get much traction at the time but lays out the best theory about their failure.

I was working at its competitor Handy then and it was clear that the dealsite method of customer acquisition was non sustainable. At the time Groupon was super popular. It worked like this: a service provider eg Homejoy would sell a coupon through Groupon for $50 for a "regular" $100 service, $25 would go to Groupon and $25 to Homejoy, Homejoy would also pay $45 to $60 to the cleaner. This made sense for some business like a spa that after getting the customer in the door might upsell a $100 massage (and get 100% of that). It did not work with Homejoy because customers who got a deep discount on a cleaning did not retain and did not get upsold to. Since Homejoy had to pay the cleaner, they would loose $20+ on each such "acquired" customer. LTV was negative.

On top of this, Homejoy needed to raise funds and for that you need to show customer growth. If you spent $1000 to acquire 50 customers one month and none of them retained, you need to spend $1200 to acquire 60 customers the next month, or you won't have growth to show investors. Homejoy needed to spend more and more each month or it wouldn't get its next funding round; which it didn't. I don't know but I believe that Homejoy collapsed at its largest size with the peak number of monthly customers.

Other cited reasons for Homejoy's failure like worker classification lawsuits and worker retention are unlikely to have been the real reasons behind its collapse. Handy would have had the same issues and yet they are still going 7 years later as part of Angie's List with little noise.

[0] https://www.forbes.com/sites/ellenhuet/2015/07/23/what-reall...

I think a major problem is the cleaners are very easy to go direct. All that work to recruit cleaners, acquire customers, and then they hand out a business card and the middleman is cut out.

If you get a cleaner you like, your best bet is to get their contact info and book directly with them. It will be cheaper than going through the platform, you will get exactly the cleaner you want and you will get a better service.

This disintermediation was a worry, but I don't think this happened frequently enough the justify the fear. It was hard to discern how much this was happening from the data; anecdotally it was rare.

The best quote I read on HN (and am paraphrasing now) is that a lot of these venture capital backed startups are in the business of selling dollar bills for 90 cents.

The joke that long predates me is, "yeah, but we'll make it up in volume" - it's hardly a new innovation of VC.

The major innovation of VC is high amounts of capital being made available for business experiments. Before VC it was a small time entrepreneurs scraping to make something that could sustain itself, or new business models funded by existing large corporations that could siphon off some money for experiments. VC enabled big money on truly crazy ideas.

VC will continue to exist but entrepreneurs will be far more focused on earning revenue ASAP. You can’t rely on easy money continuing for each round based on your name and connections.

I'd like Failory more if it was less of a blog and more of a database. I'd love to be able to find previous attempts at a given startup idea, learn what it did differently, why it failed, and perhaps reach out to the founders for some retrospective advice for any one else attempting it. AFAICT Failory only lists 120 startups and they aren't searchable by category (best bet is to use a search engine with site:failory.com). That said I'm glad to learn about this site and I'll definitely do some reading.

Not technically a startup, but you gotta include Arc in any YC-associated failure Valhalla.

This story is flagged for no apparent reason. I'm used to be able to vouch, but don't have the option in this case. What's up with that?

> I'm used to be able to vouch, but don't have the option in this case. What's up with that?

Huh weird, I’m pretty sure I can still vouch comments. Maybe there are different levels of vouching or the threshold differs for [flagged] vs [dead]. I feel like I vouched for a [dead] post recently.

Users flagged it. We can only guess why users flag things, and in this case I don't have much of a guess. (Of many flags, only one came from a YC founder, so it wasn't that.)

I've turned off the flags now, in keeping with the rule that we moderate HN less when YC or YC startups are part of a story: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu....

p.s. Vouching only works when a story is [dead]

> p.s. Vouching only works when a story is [dead]

Why is this? Why can we only fix wrongful flags ourselves when they totally kill a post, rather than when they only bury it?

I'm guessing cos we'd then end up with warring vouching/dead flags on posts.

I am still using the first generation Boosted Boards V1 that I got from the Kickstarter campaign in 2014. I only use it during the summer though. Battery is still working well, with around 70% of original capacity. Its a shame the company went under, they had a killer product with excellent quality.

There is a lot of people who have claimed their space and you can get boards for ~$400 now, I have two meepo boards which have been great

My V2 got stolen and I continually morn the loss. It was such a fun way to get everywhere.

Calling these the “biggest” failures is an interesting viewpoint.

These were all companies with some P/M fit that just didn’t cross the threshold for whatever reason (barring the one fraud).

That’s especially true when the list of YC startups that never even reached P/M fit is probably in the hundreds by now.

What is P/M fit?

"Product-market fit."

they simply succeeded in a different direction!

It seems to mean "companies that failed after raising the most money" rather than "companies whose failures were the most extreme".

Sure, which I would argue is the failure of YC follow-on investors.

Don't forget DreamWorld!

https://news.ycombinator.com/item?id=26898266

https://news.ycombinator.com/item?id=27319457

That's not exactly a "big" failure. It looks like only YC invested, which makes it a <$1M failure.

Nothing like the ones listed, or Theranos or Juicero.

While not a big failure money-wise, I'd still consider it significant that they completely bypassed YC's strict due-dilligence checks. Theranos and Juicero are obvious frauds in retrospect, however, a game aiming to everything being developed by two people with no prior experience should have never been given the greenlight.

Did I miss a big story - Was Juicero fraud in any way or just an absurd idea with poor and expensive execution?

They're pushing forward, despite the criticism.

They've expanded to a team of 8 [1], are posting substantial weekly updates [2], and are currently hiring half a dozen new roles [3].

Their initial claims might have been over the top, but it looks like they're building a playable game now.

[1] https://www.ycombinator.com/companies/dreamworld

[2] https://www.playdreamworld.com/blogs/weekly-release-notes

[3] https://www.ycombinator.com/companies/dreamworld/jobs

Good for them. That doesn't detract from the fact that they lied and manipulated people to gain funding and support.

There's "overambitious" and then there's "unethical bordering on fraud". DreamWorld was the latter.

Weird that it lists justin.tv in it's 'cemetery' https://www.failory.com/cemetery/justin-tv

Will Reddit count when it dies on July 1st?

I am only partially joking here as I believe what the CEO is doing is an absolute failure in how to run a company. He doesn't understand where the value of his business is.

Even if you believe that 3rd party apps are costing you too much you can approach this differently. Start with lower fees, give people time to adjust. Then there is the whole question of banning NFSW content but only in the API. Makes no sense at all.

“ uBiome was essentially trying to growth-hack their way to a higher revenue number without at the same time providing additional value to their clients (and at the expense of medical insurers).”

This seems more like fraud or theft as currently described by the article?

Things are getting tough now. It is harder to mobilize money and they do expect a quick return on investment. This might not be a realistic expectations when dealing with startups.

I'm really reminded of Peter Thiel's talk about competition is for losers when I read this list. Thiel makes the salient point that most of a companies value is generated 10-15 years after it's founding or even IPO. This basically means, a sureshot to startup success is a company that will survive and thrive even after 10-15 years. One deficiency is I never feel any of the YCombinator companies will survive and thrive after 10-15 years. To do so, you need a strong monopoly that is unassailable unless your competitor gets very lucky or has extremely deep pockets and competence. You need an edge, that makes it hard for competitors to compete. The prevailing wisdom is that this edge can be generated through network effects, and there is some truth to it but I feel even the posterboy example of Network Effects, i.e. Meta, is losing it's network effect. A real edge is generated by a product so superior to the competition, that the competition almost never catches up or gives up midway due to running out of money. Some of the largest tech companies have multiple such products and a culture of releasing such products. On the top of my head:

1. Microsoft Office has no real competitor (Google Suite came close but they gave up midway, LibreOffice is unpolished relatively). Surprisingly Microsoft released VSCode which also has no real competitor anymore (As a long term vim enthusiast, I switched to VSCode with VIM bindings). This is ignoring Windows which is not as big of a monopoly anymore but I reckon would endure another few decades.

2. Early Google released a suite of products that got no real competitors. Think Google Maps, Google Chrome, only recently have they been facing competition in these categories through companies with deeper pockets. Search is still firmly Google's monopoly (though these days I feel it's losing it's edge)

3. Amazon Customer Service is bar none. AWS is amazing, I still use it over Azure. Amazon recently though has not had any major products, I can think of that are dominant.

4. And of course, the king of building monopolies in products is Apple, IPhones, IPads, even Macbook Pros are a monopoly to a certain class of laptop users (hip working professional, non gamers). Everything Apple touches, it tries to monopolize from Airpods, to Safari to Maps and so. Consequently it is the worlds most valuable and profitable company.

I've never started a business, this is a lot of armchair theorizing but the next set of enduring monopolies in my opinion are Nvidia (Customers keep asking but can't get a CUDA competitor), Tesla (Again Analysts keep talking competition, but Tesla's moat seems deeper than people realize), OpenAI, SpaceX (though it's market is likely smaller than Elon thinks), Boston Dynamics? (It's market may never get big enough). A few companies I think will lose their monopoly status is Meta, Netflix, Snapchat, TikTok, maybe Google.

I figure VSCode is intended to extend their reach outside the .NET ecosystem where it's not a "VS is bundled with the tools" malformed market, and stuff like JetBrains products and Eclipse still exist.

I've been against this site for a long time[1]. Yes, there's a lot to be learned from failed startups. And yes, failures such as Theranos (or in this case, uBiome) deserve a very bright spotlight on them.

But this site just feels like it's picking on people. They never have any real insight; they just call out founders by name and use fast-paced sounding words to cover up that there's not much information to be gleaned. Startups usually don't work out, and as long as no fraud happens, that's just the way it works.

(If you're looking for a good version of this, where people on the inside are interviewed about what's going wrong, I highly recommend this episode of Startup: https://gimletmedia.com/shows/startup/awhmbo)

[1] https://news.ycombinator.com/item?id=24733189

> But this site just feels like it's picking on people. They never have any real insight; they just call out founders by name

Sorry, when you ask for tens of millions of other people's dollars and use that experience to self-promote (and possibly raise for a new venture down the road), you don't get to try to bury your failure. If your name is in the press release about raising the money, it's totally reasonable for it to be in the press release about how you lost it all.

Encouraging people to benefit from their successes and hide their failures is how we get clowns like Emad Mostaque[1] who fail upward at the expense of more qualified and ethical people.

1. https://www.forbes.com/sites/kenrickcai/2023/06/04/stable-di...

I'm all for accountability, but no investor is going to source information from Failory. They do no investigation and offer no unique insight; it's just clickbait blog spam. The same exact article gets posted ever few months here.

VCs expect a majority of their investments to fail. On a long enough timeline, all companies eventually will fail. A company not working out isn't necessarily a disqualifying event, and your comment confused generic failure and intentional fraud.

But this site just feels like it's picking on people.

I'm not sure that's fair, considering how light-touch all the criticisms are. For example, it takes a pretty even hand to lay out what uBiome did without calling them a bunch of exploitative fraudster assholes whose entire company strategy relied on purposefully hanging yet another albatross around the neck of the already-beleaguered American healthcare industry.

I don't see a definition of failure being mentioned. In my world, success isn't getting acquired. That's just short-term success for the founders and early investors. But putting such value on short-term success is... well, short-sighted.

Long-term success is about developing a concept into something valuable (ie. a product). Its about attracting customers, and retaining them. Its about profit, and retaining profit. You don't need to get acquired for such.

I agree that cherry picking examples without in-depth analysis isn't worthwhile. If you want to learn from other's mistakes, you need to go in-depth instead of shallow. Also, there's nothing wrong with failing itself. It can be important to note such, the why. For example, its important to note the founder of Discord previously had a startup where data gathering was part of the profit model. Because that tells us something about where his moral values lie. And that is where mentioning Theranos or uBiome is worthwhile. I don't know about uBiome, but with regards to Theranos it took too long for the fraud to be exposed. Many people got hurt. Mostly financially, but also via fraudulent results, and at least one employer committed suicide.

I don't know anything about uBiome but that they got raided by FBI is noteworthy. I know another startup who've acted fraudulently, deleting evidence via FDE in their remote office in Brussels: Uber. Yes, these events are important to note if your subject is failed startups. Although as mentioned fail should be clearly defined.

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