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Legal Challenges Failures

19 Failed Startups with Legal Challenges

Startups are hard and becoming a successful one is even harder, so here is a list of 19 failed startups with legal challenges that you can learn from.

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Countless startups around the world are being launched every week.

Many fail because they did not learn from the success of other companies who've managed to rise above.

We just published this list of 19 startups that failed due to legal challenges, along with analyses on why they shut down and interviews with their founders.


19 Failed Startups with Legal Challenges

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99dresses

99dresses

99dresses was a fashion app that offered trades of second-hand designer dresses between users. It operated for a year but had to shut it down in 2014.

Details of the startup:

  • Founders:

    Nikki Durkin

  • Country:

    Australia

  • Industry:

    e-Commerce

  • Started in:

    2010

  • Closed in:

    2014

  • Nº of employees:

    1-10

  • Funding Amount:

    < $1M

  • Specific cause of failure:

    Multiple Reasons

You can read more about their failure here.

Auctionata

Auctionata

Auctionata was an online auction platform for art and luxury. Their issues originated from unethical behavior, lack of transparency, and lies by the CEO.

Details of the startup:

  • Founders:

    Alexander Gilkes, Alexander Zacke, Georg Untersalmberger, Susanne Zacke

  • Country:

    Germany

  • Industry:

    e-Commerce

  • Started in:

    2012

  • Closed in:

    2017

  • Nº of employees:

    250-500

  • Funding Amount:

    > $50M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

CircleBack Lending

CircleBack Lending

CircleBack Lending was a loan marketplace. Due to problems with profitability and issues with the industry, the startup was forced to cease its operations.

Details of the startup:

  • Founders:

    Manoj Ramnani & Patrick Questembert

  • Country:

    United States

  • Industry:

    Finances

  • Started in:

    2012

  • Closed in:

    2016

  • Nº of employees:

    10-50

  • Funding Amount:

    $10M-$50M

  • Specific cause of failure:

    Bad Business Model

You can read more about their failure here.

Formspring

Formspring

Formspring was an anonymous Q&A forum that grew to 1 million users in 2 months. This brought lots of cyberbullying on the site. They shut down after 4 years.

Details of the startup:

  • Founders:

    Ade Olonoh, John Wechsler

  • Country:

    United States

  • Industry:

    Social Media

  • Started in:

    2009

  • Closed in:

    2013

  • Nº of employees:

    10-50

  • Funding Amount:

    $10M-$50M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Grooveshark

Grooveshark

Grooveshark was a streaming music platform. Its major weakness was that it illegally streamed music. They were sued multiples times and had to shut down.

Details of the startup:

  • Founders:

    Andres Barreto, Josh Greenberg, Sam Tarantino

  • Country:

    United States

  • Industry:

    Music

  • Started in:

    2006

  • Closed in:

    2015

  • Nº of employees:

    50-100

  • Funding Amount:

    $1M-$10M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

HiGear

HiGear

HiGear was a peer-to-peer online company that listed luxury cars for rent. A criminal gang stole four cars worth $400k. They opted to shut down operations.

Details of the startup:

  • Founders:

    Ali Moiz, Murtaza Hussain

  • Country:

    United States

  • Industry:

    Transportation

  • Started in:

    2011

  • Closed in:

    2011

  • Nº of employees:

    1-10

  • Funding Amount:

    $1M-$10M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Koinex

Koinex

Koinex was a cryptocurrency exchange platform. India's laws got harsh against cryptocurrencies and the obstacles and little profits led to its shut down.

Details of the startup:

  • Founders:

    Aditya Naik, Rahul Raj, Rakesh Yadav

  • Country:

    India

  • Industry:

    Finances

  • Started in:

    2017

  • Closed in:

    2019

  • Nº of employees:

    50-100

  • Funding Amount:

    No Data

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Leap Transit

Leap Transit

Leap Transit was a private bus service based in San Francisco. They didn't comply with the SF regulations, which made them halt their operations.

Details of the startup:

  • Founders:

    Kyle Kirchhoff

  • Country:

    United States

  • Industry:

    Transportation

  • Started in:

    2013

  • Closed in:

    2015

  • Nº of employees:

    50-100

  • Funding Amount:

    $1M-$10M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Radar Radio

Radar Radio

Radar Radio was an online radio station that was the breeding ground for the most talented musicians. It struggled with a debt of £3.6M and they shut down.

Details of the startup:

  • Founders:

    Ollie Ashley

  • Country:

    United Kingdom

  • Industry:

    Entertainment

  • Started in:

    2008

  • Closed in:

    2018

  • Nº of employees:

    10-50

  • Funding Amount:

    $0

  • Specific cause of failure:

    Mismanagement of Funds

You can read more about their failure here.

Secret

Secret

Secret was an app that allowed users to post content anonymously. Active users rapidly declined after 18 months from its launch and cyberbullying emerged.

Details of the startup:

  • Founders:

    Chrys Bader-Wechseler, David Byttow

  • Country:

    United States

  • Industry:

    Social Media

  • Started in:

    2013

  • Closed in:

    2015

  • Nº of employees:

    10-50

  • Funding Amount:

    $10M-$50M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Shuddle

Shuddle

Shuddle was the go-to service for parents that needed someone to drive their kids to school. Parents found it disappointing, so they had to shut down.

Details of the startup:

  • Founders:

    Nick Allen, Rodrigo Prudencio

  • Country:

    United States

  • Industry:

    Transportation

  • Started in:

    2014

  • Closed in:

    2016

  • Nº of employees:

    10-50

  • Funding Amount:

    $10M-$50M

  • Specific cause of failure:

    Lack of Funds

You can read more about their failure here.

Theranos

Theranos

Theranos was a way to predict diseases with small blood samples. They raised $1.4B but legal investigations pointed out it was a fraud and shut down.

Details of the startup:

  • Founders:

    Elizabeth Holmes

  • Country:

    United States

  • Industry:

    Health

  • Started in:

    2003

  • Closed in:

    2018

  • Nº of employees:

    10-50

  • Funding Amount:

    > $50M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Yik Yak

Yik Yak

What was Yik Yak? Why was it shut down? Are there any alternatives nowadays? Find the answers to these questions and more in this article.

Details of the startup:

  • Founders:

    Brooks Buffington, Tyler Droll, Will Jamieson

  • Country:

    United States

  • Industry:

    Social Media

  • Started in:

    2013

  • Closed in:

    2017

  • Nº of employees:

    10-50

  • Funding Amount:

    > $50M

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Autto.in

Autto.in

Autto.in was an on-demand doorstep car service provider, created by Deepak in 2017. Soon after launching, a co-founder joined him and they started marketing the startup, spending a lot of money in customer acquisition. As money burnt, they decided to reach investors, who put them pressure in growing fast. After some months, they decided to shut down.

Details of the startup:

  • Founder:

    Deepak Murthy

  • Country:

    India

  • Industry:

    Transportation

  • Started in:

    2017

  • Closed in:

    2017

  • Funding Amount:

    < $100K

  • Specific cause of failure:

    Lack of Funds

You can read more about their failure here.

Chowdy

Chowdy

Steve and his housemate were always complaining food was expensive in Toronto. So, they came with a solution: hire a chef for themselves and 20 friends. This simple idea quickly escalated into a business, that, within a few months, was making +$110,000 per month. But, as it went up fast, it also came down rapidly. The business was involved in some legal problems, which forced the founders to shut it down. Read Steve’s failure story and learn from his mistakes!

Details of the startup:

  • Founder:

    Steven Long

  • Country:

    Canada

  • Industry:

    Food & Beverage

  • Started in:

    2014

  • Closed in:

    2016

  • Funding Amount:

    $0

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Mishra Motors

Mishra Motors

Mishra Motors was to be the premier electric sports bike in India. Time and capital were the causes of its collapse.

Details of the startup:

  • Founder:

    Naveen Mishra

  • Country:

    India

  • Industry:

    Transportation

  • Started in:

    2014

  • Closed in:

    2016

  • Funding Amount:

    $0

  • Specific cause of failure:

    Lack of Funds

You can read more about their failure here.

Reality Hunt

Reality Hunt

Toby founded two projects that gave him lots of valuable lessons for his current Startup Mill projects. They were RealityHunt and "I Voted Remain". He learned to build a simple landing page before committing to building it and to build processes that simplify your way of working.

Details of the startup:

  • Founder:

    Toby Allen

  • Country:

    Belgium

  • Industry:

    Software & Hardware

  • Started in:

    2016

  • Closed in:

    2017

  • Funding Amount:

    $0

  • Specific cause of failure:

    No Market Need

You can read more about their failure here.

Sport Draftr

Sport Draftr

Will created Sport Draftr, a Daily Fantasy Sports site in the UK, offering leagues in the English Premier League, and UEFA Champions League. The product was loved, looked great, and it worked well, but due to a lack of knowledge in the gambling industry and changes in legislation, they were forced to close the company.

Details of the startup:

  • Founder:

    Will Laurenson

  • Country:

    United Kingdom

  • Industry:

    Entertainment

  • Started in:

    2015

  • Closed in:

    2017

  • Funding Amount:

    $0

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

Zor Technology

Zor Technology

When he was 16 years old, Mat wanted to help his family improve the standards of living. So, he started a business which imported consumer electronics and re-sold them at almost x10 the original price. Through affiliates, he was able to put his business on the track to 6 figures in the first year. However, one day he received a call from a law firm which forced him to shut down the startup.

Details of the startup:

  • Founder:

    Mathew Carpenter

  • Country:

    Australia

  • Industry:

    Software & Hardware

  • Started in:

    2008

  • Closed in:

    2009

  • Funding Amount:

    $0

  • Specific cause of failure:

    Legal Challenges

You can read more about their failure here.

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