25 Incredible Stories Of Business Failures

Lehman Brothers

On September 15, 2008, the company filed for Chapter 11 bankruptcy proceedings following an exodus of clients, share price depreciation, and devaluation of assets. With $613 billion in debt, it was the largest such filing in United States history and is generally accepted to have precipitated the Global Financial Crisis (GFC).

American Apparel

The company filed for bankruptcy in October 2015 and then again in November 2016. Almost 2,500 employees were terminated in January 2017 as the company began shutting its factories and over 100 stores worldwide. 

Toy “R” Us

The company filed for bankruptcy in September 2017 after almost 70 years in operation, with stores closing in the United States, United Kingdom, and Australia the following year. Stores in Canada, Europe, and Asia were also sold to third parties. While many casual observers may attribute the failure of Toys “R” Us to competitors such as Amazon, several causes contributed to its failure.

RadioShack

Founded in 1921 by brothers Theodore and Milton Deutschmann. RadioShack was an industry leader in the tech world of the late 1970s and early 1980s. The company failed to capitalize on the PC and portable device revolutions that followed. This forced bankruptcy proceedings in 2015 where the RadioShack brand was sold off to various entities around the world.

Forever 21

Forever 21 is a North American fast fashion retailer founded by the husband and wife team Do Won Chang and Jin Sook Chang in 1984, making $700,000 in revenue during its first year and by becoming a global player with over $4 billion in revenues and across 480 locations in the US alone by 2015. Only four years later, a 32% drop in global sales forced Forever 21 to file for bankruptcy. Several factors, such as too aggressive expansion, lack of proper online commerce strategy and lack of focus might have contributed.

Gawker

In June 2016, Gawker announced a bankruptcy filing related to a lawsuit instigated by retired professional wrestler Hulk Hogan. Two months later, Gawker Media announced its flagship blog would cease operations. After publishing a video of Hulk Hogan having sex with his best friend’s wife without permission set the company on a path to bankruptcy. Hogan sued in a Florida court and as a result, Gawker was forced to pay out $140 million in damages. Hogan lawsuit was founded in secret by billionaire Peter Thiel.

Enron

The so-called “Enron scandal” describes a series of events resulting in one of the largest bankruptcy filings in United States history. The scandal consisted of a mixture of bad culture, aggressive sales incentives, and serious accounting manipulations, resulting in one of the greatest American scandals of history.

Compaq

Compaq was an American information technology company founded by Rod Canion, Jim Harris, and Bill Murto with just $3000 in 1982. Compaq rose to prominence in the 1990s as the largest supplier of PC systems after becoming the first company to clone an IBM PC legally and successfully. The company was acquired by Hewlett Packard in 2002 for $24.2 billion. Compaq products were rebranded as part of a new range of lower-end HP computers and the Compaq brand was discontinued in 2013.

Kodak

Kodak is an American analog photography company founded in 1892 by George Eastman and Henry A. Strong. By the 2010s as the photography market had been flipped upside down by the rise of smartphones and digital photography, Kodak didn’t manage to adapt to this new market, thus losing its market leadership.

Altavista

AltaVista was a search engine created in 1995 by a group of researchers attempting to make finding files on a public network easier. Despite its obvious power, AltaVista fell into disuse like many similar (but arguably inferior) services including Infoseek, AOL Search, Excite, and Ask Jeeves. The advent of Google as market leader helped make AltaVista much less relevant, thus making it fall in disuse among consumers.

Palm

Palm, Inc. was an American manufacturer of personal digital assistants (PDAs) and other electronics. founded in 1992 by Jeff Hawkins, its popularity tended to be restricted to early adopters. Despite the company revolutionizing mobile computing, it no longer exists today. Palm’s demise was caused by poor decision-making, squandered resources, and misplaced effort. The company got stuck in the “chasm.”

Friendster

Friendster was a social networking service founded by Jonathan Abrams in 2002. Early versions of Friendster functioned in much the same way as eventual successor Facebook. As the social media market consolidated, by 2009, Friendster was purchased by Malaysian company MOL Global. That same year, MOL Global sold 18 Friendster patents to Facebook. Friendster remained relatively popular in southeast Asia for a few more years until it was shut down in 2015. 

StumbleUpon

Founded in 2001, StumbleUpon was a discovery and advertisement engine pushing content recommendations to users in the form of “stumbles”. As the competition started to increase as more businesses tried to emulate its success. Many users were lost to rivals such as PinterestReddit, and Digg after the StumbleUpon algorithm started to become outdated and made the site unresponsive. To remain financially viable, StumbleUpon terminated 30% of its workforce in 2013. The company failed to achieve further funding while other companies like Pinterest became tech unicorns.

Quibi

Quibi was an American short-form streaming platform for mobile devices, founded in 2018 by Jeffrey Katzenberg and targeted a younger demographic by delivering content in 10-minute episodes called “quick bites”. Once the coronavirus pandemic took hold, the audience Quibi was targeting was forced to stay at home and as a result, consumed content through more traditional channels. Just eight months after launch, Quibi shut down in December 2020.

Blockbuster

Blockbuster was an American home movie and video game rental service founded in 1985 by David Cook. By the 1990s the company reached its peak, with thousands of stores in the US. And yet by the 2000s Less than a decade later, Blockbuster filed for bankruptcy with almost $1 billion in debt. Today, a single store remains in Bend, Oregon. Many attribute the failure of Blockbuster to Netflix, however, the failure was a lack of adaptation of its business model to the rising of streaming as a service.

Napster

Napster was a pioneering peer-to-peer music sharing service founded by Shawn Fanning, John Fanning, and Sean Parker in 1999. The platform reached peak popularity in February 2001 with over 80 million users sharing cassette tapes, vinyl records, rare albums, bootleg recordings, and the latest hits in mp3 form. After a protracted court battle, the court ruled in favor of the RIAA which forced Napster to shut down its network late in 2001. This represented a great lesson for later players, like Apple, who took advantage of it to build a successful platform like iTunes.

Netscape

Netscape – or Netscape Communications Corporation – was a computer services company best known for its web browser. The company was founded in 1994 by Marc Andreessen and James H. Clark as one of the first and most important start-ups on the internet. The Netscape Navigator web browser was released in 1995 and it became the browser of choice for the users of the time. By November 1998, it had been acquired by AOL which tried unsuccessfully to revive the popularity of the web browser. Ten years later, Netscape was shut down entirely.

Chacha

  • ChaCha was a human-guided search engine founded in 2006. The platform provided a valuable service at a time when traditional search engine algorithms were unreliable and less developed.
  • When algorithms did become sufficiently developed, they provided answers to questions for free and much more rapidly than ChaCha could. The ChaCha business model was also unscalable, with employees overworked as the company tried to stay ahead of innovation.
  • ChaCha’s demise was also compounded by the smartphone, which provided another avenue for consumers to find information. A belated attempt to restructure and cut costs followed, but the company could not service its debt past 2016.

MapQuest

  • MapQuest is an American web mapping service and was the first route-finding service to be launched online in 1996. Despite the first-mover advantage and the acquisition by market leader AOL, MapQuest was sold off for an undisclosed sum in 2007.
  • MapQuest faced intense competitive pressure from Google and its large and consistent investment in Google Maps. For whatever reason, AOL was not willing to devote the same amount of time and money to developing MapQuest.
  • MapQuest’s list of static driving directions paled in comparison to a smartphone with global positioning technology. Both Google Maps and Apple Maps were also factory installed on smartphones, increasing their uptake.

Sports Authority

  • Sports Authority was an American sports retailer founded by a group of venture capitalists and founding executives in 1987. Increasingly burdened by debt, the company filed for bankruptcy in 2016.
  • Sports Authority experienced intense competition from big-box retailers and eCommerce giants. Its tired stores and high prices could not compete with online shopping.
  • Sports Authority also could not identify and then capitalize on trends. This was due to a combination of poor corporate leadership and insufficient investment capital.

WeWork

WeWork is a commercial real estate company providing shared workspaces for tech start-ups and other enterprise services. It was founded by Adam Neumann and Miguel McKelvey in 2010. WeWork’s business model was built on complex arrangements between the company and its landlords. There were also several conflicts of interest between Neumann and WeWork which provided the impetus for the failed IPO and significant devaluation that would follow.

Concorde

  • Concorde was a supersonic passenger airliner jointly developed and manufactured by Sud Aviation and the British Aircraft Corporation (BAC). After more than three decades in the sky, the entire fleet was retired in 2003.
  • Concorde was not a commercially viable aircraft. The presence of a sonic boom limited its routes to those occurring over the open ocean. It was also heavy on fuel which made Air France and British Airways vulnerable to price hikes.
  • Concorde’s fate was sealed by a fatal crash in 2000 and the September 11 terrorist attacks the following year. A collapse in the first-class market and consumer avoidance of air travel exposed the aircraft’s lack of commercial viability.

Xerox

Xerox is an American corporation selling print and digital document products in 160 countries around the world. The company was founded in 1906 by Joseph C. Wilson and Chester Carlson. Xerox was visited by Steve Jobs in 1979 who gained access to PARC in exchange for Xerox receiving shares in Apple. He then purchased the rights to a Xerox GUI and used it to produce the Apple Macintosh. Xerox myopic focus on its photocopier business, an organization skewed toward sales and marketing, and that might have lost the focus on product slowly lost its market leadership.

Commodore

Commodore was an American manufacturer of home computers and electronics. The company, which was founded by Jack Tramiel and Manfred Kapp, was a major player during the burgeoning PC market of the 70s, 80s, and early 90s. Commodore failed to keep pace with advancements in personal computing, which opened the door for IBM and Apple. This lack of innovation was no doubt caused by the appointment of a CEO who cut research and development funds to almost nothing.

Circuit City

Circuit City is an American consumer electronics retailer originally founded by Samuel S. Wurtzel in 1949. The company filed for bankruptcy in 2009 after being an industry leader for decades. Circuit City suffered from complacent management who also made poor decisions. Many Circuit City stores were outdated and in poor locations. Stores were also staffed with salespeople pushing high-margin products at a time when consumers were moving toward cheap, low-margin products.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"