The startup sector in the tech world is filled with ideas that were once deemed crazy and predicted to fail. While some of these companies have achieved remarkable success and become leaders in their fields, there is another side to the story that includes companies that have turned into glaring failures.
The reasons behind the downfall of these companies vary, ranging from outright fraud to failures in delivering on their promises. Here are a few examples of companies that failed to achieve what they set out to do.
FTX Cryptocurrency Exchange
FTX emerged as one of the leading names in the cryptocurrency market, competing strongly with China’s Binance. Founded in 2019, the company established its headquarters in the U.S., making it appealing to American users wary of Chinese applications.
As the Bitcoin crisis began at the end of 2021, the value of cryptocurrencies plummeted. FTX had invested most of its capital in its own digital currency, FTT, leading to significant financial losses.
Compounding these losses, documents revealed mismanagement and embezzlement by founder Sam Bankman-Fried, amounting to $8 billion, prompting the U.S. government to arrest him. He was later convicted and sentenced to 25 years in prison. Despite attempts to rebuild its reputation, FTX struggled to regain investor trust, ultimately declaring bankruptcy.
Escobar’s Gold Phone
In 2020, a Colombian startup named “Escobar Inc.” launched a foldable phone that captured global attention due to its unique name and claimed gold coating. However, tests revealed that the phone was not actually gold-plated but merely a Samsung Galaxy Z Fold 2 covered with a shiny layer resembling gold.
Founder Olof Gustafsson falsely claimed a familial connection to drug lord Pablo Escobar, but failed to provide any proof. He was later arrested in Spain for fraud, as he did not deliver the phones customers had fully paid for, leaving his victims struggling to recover their money.
Humane AI Pin
During the AI revolution, Humane emerged, claiming to have developed a new technology that could replace smartphones with small devices capable of performing all smartphone functions through voice commands.
After a heavy marketing campaign that made established phone companies nervous, the devices were released, only to disappoint. Reviewers found that the devices did not perform half the functions promised, leading to disillusionment among users.
Founded in 2017 by two former Apple executives, the company managed to secure over $230 million in funding. Currently, Humane is seeking a buyer without success, despite negotiations with various tech firms.
Galaxy Note 7 Explosion
In 2016, Samsung captured global attention with its powerful Galaxy Note 7, boasting a large battery and numerous features. Unfortunately, reports of the phones exploding began to surface, leading airlines to ban the device on flights.
Despite Samsung’s efforts to rectify the issues, the explosions persisted, resulting in the phone’s complete recall. The company suffered losses exceeding $14 billion that year, though it eventually regained its position as a leading Android manufacturer.
Volkswagen Emission Scandal
In 2015, Volkswagen faced a significant scandal in the U.S. for cheating on emissions tests. The company had installed software that detected when emissions tests were taking place, altering engine performance to pass.
Volkswagen admitted to the wrongdoing and initiated a massive recall to fix the affected vehicles to comply with emission standards worldwide.
Conclusion
These examples illustrate the reality of startups in the tech sector, where innovative ideas can quickly devolve into major failures due to mismanagement, lack of transparency, or exploitation of consumer trust.
