Scary Startup Stories (and How to Avoid Them)

Halloween is spooky and all, but if you ask a startup founder their biggest nightmare, they’d likely say it’s the unraveling of their startup.

We’re serving up some of the scariest startup stories from some of the most notable startups around — and as a treat, we’re helping you avoid making them yourself.

No one needed their product.

Remember Juicero, the “Keurig for juice”? If not, don’t feel too bad. The product failed so badly that its website no longer exists. But if you aren’t familiar, get this: the company’s main product was a $700 “juicer” that squeezed plastic packets of juice into a cup. That’s right. Juicero expected consumers to purchase a machine that requires WiFi to open and squeeze juice packets that can be opened with one’s bare hands, despite the company begging people not to. The whole point of a revolutionary product is to solve a real problem — but the wild ride didn’t stop there; the company’s CEO couldn’t explain to journalists what the product’s perks were, outside of a slightly better-tasting juice. It’s no wonder why the company gave up on itself 16 months after launch. Moral of the story? Make sure you’re serving a real need.

Wrong person in the leadership seat.

Andrew Mason’s story is a roller coaster. When he founded Groupon in 2008, it was largely because Mason’s friend, tech billionaire Eric Lefkofsky, offered him a million dollars to drop out of college and start a website called The Point. When The Point failed, the duo came up with an idea for a “group buying” website that would offer members exclusive deals. Mason scoured for quirky group deals and purchased the domain getyourgroupon.com before eventually simplifying the name to Groupon. The concept gathered more traction than Mason and Lefkofsky expected, and before they knew it, the company was valued at several billion dollars. The company went public in 2011 . . . and soon after, the press began “exposing” Groupon’s poor accounting methods and disastrous financial decisions. CNBC named Mason the “worst CEO of the year” in 2014. The company suffered an $81 million loss in Q4 alone. Mason was fired.

While some are “natural born” leaders and others gain their footing over time, Mason appears to be of neither sort. In general, it’s best to know what you’re getting into before starting a company, even if someone else is providing the funding.

Questionable professional (and personal) choices.

Miki Agrawal, former CEO of THINX underwear, readily admits that she failed to hire “an HR person” as her company doubled in size. While this is a forgivable blunder to many, her excuse for forgetting to set up an HR system later on is laughable: she writes in a Medium post that she “didn’t put HR practices in place because [she] was on the road speaking, doing press, brand partnerships, editing all of the creative and shouting from the rooftops about THINX so [they could] keep going.” The CEO of a progressive and potentially revolutionary company forgot to hire a single HR person. To make matters worse, Agrawal was later accused of sexual harassment by a former employee, who reported that Agrawal made inappropriate comments about employees and touched their bodies without their consent. The “how to” on this one is pretty simple: protect your employees with a decent HR system, and keep your hands off of them.

Empty promises and blatant lies.

At first, the vision behind Theranos seemed pretty neat. Elizabeth Holmes, who was once considered the youngest female self-made billionaire, founded the company with the goal of running blood tests with as little as 1/1000th of the amount of blood needed in a traditional lab. However, as Theranos gained traction, the company’s leadership learned that their special machine wasn’t as effective as they’d expected. Theranos began running blood tests on traditional equipment while continuing to promise patients they were using revolutionary technology. Theranos also alleged that the Department of Defense was using its technology (when it wasn’t) and that the FDA didn’t need to approve its practices and equipment (when it did). Yikes.

Everybody makes mistakes, especially when navigating the tricky landscape of Startups. It’s the bigger, more preventable blunders that really make or break an otherwise game-changing idea. Do you have a scary startup story of your own? What “tricks” have you narrowly avoided since founding your business?