It’s time to defeat the zombie startups
Image: Wikimedia Commons

It’s time to defeat the zombie startups

Source Code

Good morning! Your business might wither and die, but whatever you do, don’t let it become a zombie. I’m Owen Thomas, and I really hate watching zombie movies.

Also, we're off this weekend for the Presidents' Day holiday, but will be back in your inbox on Tuesday morning. Have a great long weekend!

Beware the zombies

You’ve heard the maxim that nine out of 10 startups fail. That has big implications for everyone involved, including a heavy dose of survivorship bias: the fallacy that those companies that do succeed had something unique going for them besides, say, luck. And the financial structure of venture capital makes it easy — even necessary — to ditch the losers and look for the next winner.

There are dogs, stars and zombies, as investor Sean Wise once put it. The zombies are the dangerous ones, because they haven’t failed quite hard enough for everyone involved to work up the energy to shut them down. The illusion of life ties up capital and talent that could be doing something else.

Zombies live on because no one’s watching; only the most egregious startup blow-ups get any press. Layoffs, bankruptcy filings and a spectacular waste of money are guaranteed to get attention.

Celebrity backing and splashy corporate partnerships are often touted as a key to success. But that didn't help these firms, which might call that whole playbook into question.

  • Startup kingmaker Sequoia funded ImageShack in 2008. Its Yfrog service soon got integrated into Twitter's mobile app as a default photo-sharing option.
  • Thanks to founder Joe Einhorn's relentless networking, Jack Dorsey joined The Fancy's board. Will Smith and Ashton Kutcher invested. Apple reportedly took an interest in the startup after Einhorn and Tim Cook met at Sun Valley.
  • Kutcher also backed Zaarly, followed by Kleiner Perkins, which invested $14 million. Meg Whitman joined the board.

Once you lose momentum, it's almost impossible to gain it back. Then the slow fade begins.

  • ImageShack's Yfrog made headlines when it became the vehicle for a lewd crotch shot shared on then-Rep. Anthony Weiner's Twitter account in 2011. But it couldn't capitalize on that moment of infamy: Twitter soon replaced third-party pic-sharing services with a built-in photo tool. A successor company, Nventify, markets an image-compression service called Imagizer, and shares an office address with ImageShack. A PR rep for Nventify did not respond to an emailed request for comment. Sequoia didn’t respond when asked what happened to its investment.
  • The Fancy laid employees off in 2014, and its revenues faded away after that. A turnaround CEO, Greg Spillane, tried to cut spending and revive the brand in 2019. It didn't work. A crowdfunding campaign raised under half a million dollars. Spillane, who didn’t respond to a LinkedIn message, no longer appears to be affiliated with The Fancy. He’s now CEO of a blockchain tools company.
  • Zaarly nearly gave up the ghost “after 10 years of grinding,” founder Bo Fishback told customers in April 2021. But then Airtasker, an Australian services marketplace, bought what was left of it for $2.6 million. Lockdowns slowed sales last year, Airtasker CEO Tim Fung recently told Australian news site Stockhead, but he added that business was “accelerating” since then.

Is it worth it to revive a zombie? Should you keep it on life support? Once investors, employees and customers sour on a company, there’s often little left to salvage. In an industry filled with neophiliacs, it’s easier to launch something new than it is to resuscitate a damaged brand. VCs can just write off the investment. The lesson from zombies may be simple, but valuable: Fail faster and harder.


— Owen Thomas (email | twitter)

A MESSAGE FROM ESRI

The global nature of business makes tracking your company's operations trickier than ever before. Overseeing supply chains and an international, dispersed workforce is tough. Maintaining visibility over all aspects of your operations is even tougher. The changing norms of business make location services no longer a "nice to have" but a "need to have" — and at the forefront of the geospatial intelligence revolution is Esri.

Learn more

People are talking

If you’re procrastinating, Superhuman’s Rahul Vohra says to sit with that discomfort:

  • “Visualize what it would be like to go make a coffee and visualize what it would be like to actually get to Inbox Zero. The guilty pleasure of procrastination will actually seem less attractive.”

Tony Xu thinks DoorDash will stay strong even as COVID-19 precautions taper off:

  • “After all, we eat three times a day. That’s over 100 shopping occasions a month.”

Andrew Yang is starting a Web3 lobbying firm with some ... big ideas:

  • "I've come to realize that the most profound opportunity to fight poverty lies in Web3 technologies."

The rollout of Google’s privacy change gives Meta time to prepare, one employee said:

  • “This is a much more well-rounded set of proposals that seems to be intended to actually address problems and find good solutions to them.”

Pat Gelsinger thinks bitcoin is a “climate crisis”:

  • “A single ledger in bitcoin consumes enough energy to power your house for almost a day … That’s not OK.”

Making moves

Eun Young Choi will lead the National Cryptocurrency Enforcement Team, a newly formed government team that will handle crypto-related crimes.

Zoom joined the Digital Trust & Safety Partnership, which aims to create best practices in consumer safety and trust.

Sequoia Capital has a crypto fund. The VC firm is putting $500 million toward an effort to buy and earn money from crypto.

Today is the day Amazon Prime’s $20 price increase goes into effect.

Donald Trump is dropping his own NFT art on Monday. The artwork will be revealed only after purchase.

Anthony Tuffile is Gradient AI’s new CRO. He previously held a sales leadership role at Acxiom.

In other news

Spotify’s deal with Joe Rogan is double what people thought. Rogan’s contract is worth upwards of $200 million and covers exclusivity on his podcasts for 3.5 years, according to The New York Times.

The NHTSA is looking into Tesla’s “phantom braking,” which causes cars to brake unexpectedly. Complaints include reports of vehicles braking while driving at highway speeds.

China is is curbing fees for food delivery. Authorities told Meituan and others to lower the fees they charge to restaurants, which makes an already slim-margin business even tougher.

Activision’s Bobby Kotick has a secret company for political donations. He reportedly used the company Norgate LLC to contribute half a million dollars to Republican campaigns during the 2020 election cycle.

Elon Musk is accusing the SEC of using a 2018 court agreement to harass him and Tesla. The suit also alleges the SEC has failed to pay out $40 million in collected fines to Tesla shareholders in a timely manner.

YouTube might disable the share button on misinformation videos, among several other potential changes to stop the spread of false information on the platform.

Ford has a better EV than Tesla, according to Consumer Reports. Ford’s Mustang Mach-E is the “Top Pick” for EVs this year, knocking the Tesla Model 3 off the list.

Never enough Olympics

The closing ceremonies are Sunday, but that doesn’t mean the Olympics have to be over.

There’s the official Olympics TikTok account, which features highlights, moments with the athletes and behind-the-scenes action. U.S. snowboarder Tessa Maud answers comments from fans, like how many restaurants are in Olympics Village. Figure skater Adam Rippon walks through his day doing media in Beijing, and Australian snowboarder Scotty James gives a tiny tour of his tiny room. And if you run out of content, the Summer Games are only a couple years away.

A MESSAGE FROM ESRI

The global nature of business makes tracking your company's operations trickier than ever before. Overseeing supply chains and an international, dispersed workforce is tough. Maintaining visibility over all aspects of your operations is even tougher. The changing norms of business make location services no longer a "nice to have" but a "need to have" — and at the forefront of the geospatial intelligence revolution is Esri.

Learn more

Thoughts, questions, tips? Send them to sourcecode@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you Tuesday.

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