Scaling To The Grave

What Moxion Power teaches about the dangers of scaling too quickly.

Author

Nicolás Cerdeira
August 08, 2024

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This Week In Startups

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💸 Fundraising

Groq raises $640M to meet rising AI infrastructure demand.

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Placer.ai raises $75M for business development and new features.

YC-backed Boostly raises $5.6M to boost restaurants with automated marketing.

Fail(St)ory

Rapid Expansion, Rapid Demise

Last week, eco-friendly battery manufacturer Moxion Power announced it was shutting down and laying off its last 248 employees. Two months ago, the company had already laid off a third of its workforce.

Founded in 2020, Moxion Power aimed to revolutionize the market for temporary power solutions with its innovative, clean, mobile energy storage products. The company wanted to replace traditional, noisy, and polluting generators with their electric alternatives. 

Despite attracting substantial investment from major backers like Amazon and Microsoft and securing $110M in funding, Moxion could not obtain the additional financing required to endure the challenging clean tech industry.

What Was It: Moxion Power developed mobile energy storage solutions for various sectors, including construction, transportation, events, film production, and telecommunications. Their mission was to aid industries that require temporary energy solutions and to provide a quieter and more environmentally friendly alternative to conventional generators.

Moxion had ambitious plans to construct a massive 200,000-square-foot factory at the Port of Richmond to scale production. Unfortunately, these grand plans contributed to their eventual failure.

The Numbers:

  • 📅 Founded in 2020.

  • 💰 Raised $110M in funding over four years.

  • 🧑‍💼 At its peak, it had over 300 employees.

  • 🚀 In 2021, they went through Y Combinator.

  • 🔥 Burned through cash quickly, especially on infrastructure.

Reasons For Failure:

  • Unviable Business Model: While the idea of replacing generators with clean batteries was promising, it proved difficult to implement. The high costs of their products made it challenging to compete unless regulations heavily favored them. This meant that their business model did not work in states without established regulations.

  • Ineffective Financial Management: Despite significant funding, Moxion struggled with managing its finances effectively. They invested heavily in building a large factory and scaling operations without a reliable, in-demand product, quickly depleting their cash reserves.

  • Overambitious Expansion: Moxion attempted to scale up too quickly, focusing on building a massive factory and increasing production before ensuring strong market demand. Many of the battery units they produced were not selling well, yet they continued to expand.

  • Economic Hurdles: The cost of Moxion’s units was significantly higher than traditional diesel generators. While their products were environmentally friendly, the economic benefits for customers were insufficient.

Why It Matters:

  • Moxion Power is another example of the challenges that the CleanTech industry is facing. A month ago, I wrote about Running Tide, another CleanTech startup that had failed due to a lack of funding.

  • Sound business models and fiscal discipline are crucial. Careful management of finances and growth plans is essential for success.

  • Rapid scaling without a proven product is risky. Expanding too quickly can lead to significant financial difficulties.

Trend

A Successful Launch?

Last week, Avi Schifmann launched Friend, an AI-powered necklace that is always listening and talks to you from time to time.

The necklace is designed to act as an “imaginary friend” that understands your context, responds to what you’re doing, and reacts accordingly.

The launch managed to get many people talking, although most of the chatter was negative. So, was this a successful launch?

A Bold (and Costly) Move: When Avi Schifmann decided to launch Friend.com, he made a headline-grabbing choice by spending a whopping $1.8 million—75% of the company’s funding—on the domain name alone. 

This expenditure sparked immediate reactions, particularly on Twitter, where the decision was widely ridiculed. Many questioned whether this bold move was an indicator of genius or a sign of impending failure.

In addition to this, The AI wearables space isn’t exactly known for its success stories. Just look at the recent flop of the Humane Pin.

With that in mind, some are already predicting that Friend is headed for a similar fate. Critics have labeled the product as dystopian, sad, and ugly. 

Drama in the Developer World: As if the controversy surrounding the launch wasn’t enough, another developer, Nik Schevchenko, accused Schifmann of stealing his idea for Friend.

How did he decide to handle this? By dropping a diss track on Twitter, of course.

The ensuing back-and-forth between the two developers escalated quickly, eventually leading to Schevchenko challenging Schifmann to a fight.

While this drama might seem absurd, it undeniably added fuel to the fire, making Friend even more talked about.

A Success: So, was the launch of Friend.com a success?

Well, that depends on how you define success. In terms of media coverage and public awareness, the launch certainly hit the mark, even if it was for all the wrong reasons. 

The product’s unique concept and Schifmann’s high-profile domain purchase generated significant media coverage. The bizarre dispute over who built Friend first only added fuel to the fire. 

The viral nature of the controversy has undoubtedly put Friend on the map, but whether this translates into a sustainable business is another matter entirely.

Do you think this was a successful launch?

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Cheers,

Nico