Businesses That Collapsed After Receiving Millions

Business mis-management happens. They happened yesterday. They happened today. They will happen again in the future.

There are companies that are well-positioned for growth. They are the blue-eyed boy of the industry. Investors flock to them because they exhibited tremendous potential for growth.

But why do they still fail although they have received a lot of money in funding?

Company: Essential Products
Select VC Investors: Redpoint Ventures, Playground Global, Tencent Holdings
Total Disclosed Funding: US$330M

Essential is shutting down less than 3 years after the startup unveiled its first smartphone. The company’s only complete product. The Essential Phone, sold poorly and received mixed reviews. A follow-up phone was canceled and a number of other promised devices like a smart home assistant and operating system never materialized.

Company: Anki
Select VC Investors: Andreesen Horowitz, Index Ventures, Two Sigma Ventures
Total Disclosed Funding: US$205M

Anki was a robotics and artificial intelligence startup that put robotics technology in products for children. Anki programmed physical objects to be intelligent and adaptable in the physical world. It went bankrupt in April 2019 and shut down the following month. Anki ran out of money and could no longer build the business to achieve its vision.

Why do you think such businesses collapse although it has received a lot of money in funding? What could be the reason that the money run out before the business kicks in?

From the desk of,
Cynthia Chiam

Get Ready Before You Take On Investors

100 entrepreneurs went into a room to pitch for funding. 80 of them walked out rejected. That means only 20 applications were being considered. Out of these 20, there would be another selection to choose between 1 to 3 companies that deserved funding.

Here are a couple of things that investors will consider before putting their money with the entrepreneurs:-

  1. The legal structure of the company – is this a sole proprietor or a limited partnership or a private limited company?
  2. The “Guys Running the Show” – who are they and what makes them qualified and capable to run the show?
  3. The “Startup Capital” for business – how much have the founders invested to launch this business for take off?

These are the BASICS to pass the Screening Test. If you don’t have a ready vehicle that can accommodate many people, different people at different stages of the business, investors will not want to spend another minute telling you what you should do.

They EXPECT that you already know.

From the desk of,
Cynthia Chiam