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2024’s Biggest Startup Crashes

From failed social media apps, to the "Uber of Weed".

Author

Nicolás Cerdeira
December 26, 2024

Hey — It’s Nico.

Welcome to the last Failory edition of 2024. This time, with a quite different format, since I thought it was a good time to do a recap of all the failed startups of the year.

This issue takes 5 minutes to read. These are the 5 most important things:

Let’s get into it.

This Week In Startups

🔗 Resources

A deep dive on OpenAI’s o3 Model.

A useful playbook for growing your startup with content.

The founder GTM Handbook.

What to pay early employees, based on data.

📰 News

Pavel Durov says Telegram is now profitable.

💸 Fundraising

Databricks has raised $10B as it approaches an IPO.

Cloud AI Startup Vultr Raises $333M.

Chromafora, an environmental technology company, has secured €22.5 million.

Fail(St)ory

A 2024 Fail(St)ory Recap

This week, I’m doing something a little different. Instead of diving into a new failure, I thought it’d be fun to take a look back at 2024’s most notable startup crashes. If you’ve been following along, some of these names will feel familiar. 

These were companies with bold ideas, big funding, and sometimes even decent execution—but things didn’t go as planned. Each one tells a story, and with it comes a lesson (or two) for the rest of us. 

Let’s break it down.

What was Moxion Power: A startup offering mobile energy storage solutions to replace polluting generators with cleaner, quieter alternatives. Their eco-friendly systems targeted industries like construction, events, and film production.

Why did Moxion Power fail:

  • High production costs made their products uncompetitive in markets without strong regulations.

  • Overambitious expansion, including plans for a massive factory, strained finances.

  • Rapid cash burn outpaced revenue, leading to insolvency when funding fell through.

What can we learn from Moxion Power: 

  • Innovation alone isn’t enough for a startup's success.

  • Startups must adapt their ambitions to market realities and financial constraints.

  • Pacing growth is crucial, particularly in emerging industries.

  • Market adoption or regulatory support may lag behind visionary goals.

What was Tally: A fintech startup that acted as a personal financial coach, automating credit card payments and offering guidance to help users manage and eliminate debt. It also provided credit lines to pay off high-interest debts.

Why did Tally fail:

  • A pivot to a business-focused model failed to gain traction, leaving the company without a clear direction.

  • Customer complaints about missed payments and rising interest rates damaged its reputation and eroded trust.

  • Despite raising $172 million, Tally couldn’t secure the additional funding it needed.

What can we learn from Tally: 

  • A failed pivot can be worse than no pivot, especially if it alienates the core audience.

  • Neglecting user experience during a transition can lead to a loss of trust. Lost trust is nearly impossible to recover.

  • Major strategic shifts should always prioritize staying true to customers' needs.

  • Tally’s story highlights the risks of losing focus on the user experience during pivotal changes.

What was SciFi Foods: A startup specializing in hybrid meat products, combining 90% soy protein with 10% cultivated beef to create eco-friendly and cost-effective alternatives to traditional meat.

Why did SciFi Foods fail:

  • Operating in a nascent industry required them to develop technology and production processes internally, increasing complexity and costs.

  • Navigating uncertain regulatory environments, including bans and stringent approval processes, hindered their ability to bring products to market.

  • A significant decline in investment within the alternative protein sector limited access to necessary funding for growth and operations.

What can we learn from SciFi Foods: 

  • Pioneering a new industry requires both innovation and resilience to overcome regulatory hurdles and market volatility.

  • Building infrastructure and securing approvals in an emerging field are significant challenges.

  • Strategic planning and adaptability are essential when entering uncharted markets.

4) Eaze

What was Eaze: A cannabis delivery startup, often dubbed the "Uber of Weed," that connected users with licensed dispensaries through a mobile app, facilitating quick and convenient cannabis deliveries.

Why did Eaze fail:

  • Legal and regulatory challenges, including a 2021 bank fraud scandal where a former CEO pleaded guilty to misleading banks about cannabis transactions, undermined the company's operations and reputation.

  • Intense competition in the cannabis delivery market eroded Eaze's market share, making it difficult to maintain a competitive edge.

  • Despite raising $255 million in venture capital, Eaze struggled to achieve profitability, with high operational costs and regulatory compliance expenses outweighing revenues.

What can we learn from Eaze:

  • Operating in heavily regulated industries demands meticulous compliance and adherence to ethical business practices.

  • Legal missteps can significantly harm a company's reputation and long-term viability, as illustrated by Eaze's downfall.

What was Ghost Autonomy: Founded in 2017, Ghost Autonomy aimed to develop an affordable and versatile autonomous driving system for car manufacturers, with a focus on creating safer and more accessible technology for everyday vehicles.

Why did Ghost Autonomy fail:

  • Despite raising $220 million, the company struggled to secure further funding, leaving it unable to sustain operations.

  • The autonomous vehicle industry has cooled significantly since its peak in 2021, reducing interest and investment.

  • Ghost’s vision of cost-effective, mass-market autonomy proved difficult to achieve, given the technological and financial hurdles.

What can we learn from Ghost Autonomy:

  • Market trends can shift faster than anticipated.

  • Building in sectors with volatile funding and immature technology is inherently risky.

What was Northvolt: A Swedish battery manufacturer aiming to reduce Europe’s reliance on Asian suppliers by producing sustainable batteries for electric vehicles (EVs). The company raised over $13.8 billion and became a key player in Europe’s green energy ambitions.

Why did Northvolt fail:

  • Scaling production in the battery industry proved incredibly difficult, with repeated delays and missed deadlines.

  • Market demand softened as European automakers slowed down electrification projects, leading to reduced orders.

  • Overambitious expansion, including massive gigafactories, stretched financial and operational resources too thin.

What can we learn from Northvolt:

  • Significant funding and a strong market vision do not guarantee success without stabilizing operations during expansion.

  • Rapid expansion in emerging industries carries risks, especially when relying too heavily on projected demand.

  • A more measured approach can help navigate market shifts and maintain long-term stability.

What was Synapse: Synapse was a Banking as a Service (BaaS) startup founded in 2014. They partnered with traditional banks to provide fintech companies with the infrastructure to offer banking services like loans, cards, and accounts. They also managed compliance and identity verification processes, enabling over 100 fintech clients to serve approximately 10 million end customers.

Why did Synapse fail:

  • Rapid growth led to lapses in compliance standards, as the company prioritized speed over regulatory adherence.

  • Regulators were skeptical of BaaS models, preferring banks to directly oversee critical functions like risk management and customer operations.

  • The termination of a key partnership with Evolve Bank & Trust and the banking startup Mercury in October 2023 resulted in the loss of significant business.

What can we learn from Synapse:

  • Rigorous compliance and transparent relationships with regulatory bodies are critical in the fintech space.

  • Business models heavily reliant on intermediary partnerships are inherently fragile.

  • Establishing robust compliance frameworks is essential for sustainability in the BaaS sector.

What was The Messenger: Launched in May 2023, The Messenger aimed to become a major news platform, rapidly expanding from a small team to over 300 employees within months.

Why did The Messenger fail:

  • The business model relied heavily on monetizing a broad audience through low-paying programmatic ads, which became less effective due to the decline of third-party tracking cookies and changes in social media traffic dynamics.

  • Significant funds were wasted on unnecessary expenses like multi-city offices costing over $8 million.

  • The company scaled too quickly, burning $38 million in eight months while generating only $3 million in revenue.

What can we learn from The Messenger:

  • Relying heavily on generic audiences and low-value ads is no longer a viable strategy.

  • Disciplined spending is essential, particularly in industries where monetization methods are shifting rapidly.

What was Artifact: Launched in February 2023 by Instagram co-founders Kevin Systrom and Mike Krieger, Artifact was an AI-driven news app aiming to become the "TikTok for news." It offered personalized news curation and discovery, leveraging artificial intelligence to tailor content to individual user preferences.

Why did Artifact fail:

  • Despite an initial surge of 100,000 downloads in its launch month, user engagement declined over time, with only 12,000 new installs by October 2023.

  • The app underwent multiple feature expansions, shifting focus from news consumption to include link sharing, text content, and place recommendations, which diluted its core value proposition.

  • The founders concluded that the market opportunity wasn't substantial enough to justify continued investment. In other words, there was a lack of demand.

What can we learn from Artifact:

  • Maintaining a clear and focused value proposition is essential for success.

  • Expanding features without a cohesive strategy can confuse users and dilute the core offering.

  • Accurately assessing market demand and potential is critical for sustainable growth.

  • It’s hard to build a B2C app, particularly in competitive spaces like news.

10) Lilium

What was Lilium: Lilium was a German startup founded in 2015 that aimed to revolutionize transportation with its all-electric vertical takeoff and landing (eVTOL) aircraft. It envisioned a future of regional air mobility, reducing travel times with sustainable, innovative air-taxi solutions.

Why did Lilium fail:

  • Developing entirely new aircraft technology proved more complex and expensive than anticipated, leading to delays and technical setbacks.

  • The company’s business model relied on ambitious timelines for regulatory approval and market readiness, which proved overly optimistic.

  • Despite raising over $1 billion, financial mismanagement and unsustainable burn rates led to cash shortages.

What can we learn from Lilium:

  • Pioneering technology often leads to unforeseen setbacks that strain resources.

  • A futuristic solution requires a market that’s ready and willing to adopt it. Being too early to market can be just as risky as lagging behind competitors.

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That's all of this edition.

Cheers,

Nico