Startup Failures: Lessons Learned from Real Stories
In the fast-paced world of startups, success is never a guarantee. While some startups become overnight sensations, many fall short of their expectations and eventually fail. However, some of these failures happen due to the wrong decisions of their founders. From fraudulent activities to mismanagement of funds, these actions can lead to the downfall of even the most promising ventures.
In this blog post, we explore some examples of startups that could have become reputable brands if not for the misguided actions of their founders. We also examine the motivations behind why some young entrepreneurs engage in fraudulent activity and the consequences that can result from such actions.
High-Profile Startup Fails
There have been several high-profile cases of startups failing due to the illegal actions of their owners. Some of these companies became household names, but for all the wrong reasons. Here are some examples:
Theranos was a blood-testing startup that claimed to be able to perform hundreds of tests using just a few drops of blood. However, the company’s founder, Elizabeth Holmes, was charged with fraud in 2018 after discovering that the technology did not work as advertised.
Zenefits was a software startup that provided companies an easy way to manage employee benefits. However, the company’s founder, Parker Conrad, was forced to resign in 2016 after it was revealed that Zenefits employees were selling insurance without proper licenses.
Clinkle was a mobile payments startup that raised over $30 million in funding before ultimately failing. The company’s founder, Lucas Duplan, was accused of mismanaging the company’s funds and spending money on lavish parties and personal expenses.
Juicero made headlines for its high-tech juicing machine that could squeeze juice from specially designed packets of fruits and vegetables. However, the company’s founder, Doug Evans, was accused of falsely claiming the machine’s capabilities and overstating the company’s financial prospects.
Under 30s Who Got It Wrong
Unfortunately, Charlie Jarvice, the founder of a student financial aid startup called Frank, has been charged with accounts of wire and bank fraud by the Justice Department. Allegedly she inflated the number of customers her company had to sell it to JPMorgan Chase for $175 million. Consequently, Jarvice’s actions can carry a 30-year sentence. Javice denies all allegations against her.
Charlie Jarvice is not alone; there are many young entrepreneurs failing to keep it real including:
– Martin “Pharma Bro” Shkreli
– Ivan Pavlich – Hypernet
– Obinwanne Okke – Invictus Group
Shkreli was convicted of securities fraud. While not aware of each other’s activities and thus unrelated, the promise of making a fortune through cryptocurrency proved too tempting for both Pavlich, a scientist from New Zealand, and Okke, a business entrepreneur from Nigeria. Unfortunately, their pursuit of cryptocurrency riches ultimately led to the downfall of their careers.
Why Young Startup Founders Flounder
What prompts successful young entrepreneurs to engage in illegal activity like bank fraud? It’s important to note that engaging in fraudulent activity is not a characteristic of successful young entrepreneurs. However, in cases where a young entrepreneur engages in bank fraud, a variety of factors could prompt such behavior, including ego, greed, desperation, and more.
1. Financial pressure:
Starting a new business can be expensive, and entrepreneurs may feel pressure to meet financial obligations such as loan payments or investor expectations. If an entrepreneur feels unable to meet these financial obligations, they may resort to fraud to cover their expenses or maintain their lifestyle.
Entrepreneurs are often seen as risk-takers, which can sometimes lead to overconfidence. Entrepreneurs may engage in fraud because they are convinced their business will eventually succeed enough to cover losses. Plus, an inflated ego can disorient your grip on reality, and as such, you may truly believe you can get away with doing stuff that is borderline okay or plainly illegal.
Suppose entrepreneurs struggle to keep their businesses afloat or face bankruptcy. In that case, they may feel desperate and be more willing to engage in fraudulent activity as a last resort to keep their business going.
Unfortunately, some people are simply motivated by greed and will engage in fraudulent activity to enrich themselves at the expense of others.
5. Lack of ethics or moral compass:
Finally, it’s possible that some young entrepreneurs may not have a strong ethical or moral compass and may engage in a fraudulent activity simply because they don’t see anything wrong with it or because they believe the ends justify the means.
It’s important to note that these factors are not excuses for fraudulent behavior. Engaging in such activity can have serious consequences, both legally and professionally. As such, it’s important for young entrepreneurs to prioritize ethical behavior and seek out support and resources when facing financial or business challenges.
Fake It Until You Make It
Is the expression: “fake it till you make it” responsible for young entrepreneurs fabricating their business’s success? While this can be a useful mindset for individuals lacking self-assurance, engaging in unethical or illegal behavior is not a license. Some young entrepreneurs may be tempted to fabricate their business’s success, particularly if they believe doing so will attract investors or customers. However, such behavior is not only unethical but also unsustainable. Eventually, the truth will come to light, and the consequences could be severe, including legal action, damaged reputation, and loss of customers.
Therefore, it is important for entrepreneurs to focus on building their businesses ethically and sustainably. This means being honest about their strengths and weaknesses, seeking advice and mentorship when needed, and being transparent with investors, customers, and other stakeholders. By doing so, they can build a solid foundation for their business’s success and avoid the pitfalls of dishonesty and deception.
In conclusion, startup failures aren’t uncommon. The stories shared in this blog post demonstrate the importance of maintaining ethical behavior and having a strong moral compass as a founder. Engaging in fraudulent activity can have serious consequences, both legally and professionally. As such, young entrepreneurs must prioritize ethical behavior and seek out support and resources when facing financial or business challenges.
We hope this blog post has been helpful in providing insights and lessons learned from real startup failures. By learning from the mistakes of others, young entrepreneurs can make more informed decisions and avoid repeating these costly errors.