While there were plenty of big startup success stories in 2018, the year also saw its fair share of failures. In no particular order, here are four of the most notable companies that suffered crushing--and in some cases, fatal--blows this year.
In September, The Wall Street Journal reported that blood-testing startup Theranos, once valued at more than $9 billion, would shut down for good. The move came after federal prosecutors filed criminal charges against founder Elizabeth Holmes and the company's No. 2 executive, alleging that they defrauded investors out of nearly $1 billion and also defrauded doctors and patients.
Holmes, whom Inc. profiled in 2015, aimed to revolutionize the blood-testing business. The Stanford University dropout claimed that she had invented a device that could run multiple laboratory tests with just a drop or two of blood pricked from a finger. Her startup began to unravel under Journal investigative reporter John Carreyrou's scrutiny of Theranos's practices in October 2015. It turned out that the device was used for only a fraction of the tests and the company was actually performing most of them with commercial analyzers. In March, the U.S. Securities and Exchange Commission sued Holmes and her company for defrauding investors out of $700 million.
It has been a roller coaster of a year for subscription service MoviePass. While it has been around since 2011, MoviePass, founded by Netflix co-founder Mitch Lowe, really took off in August 2017 when the company announced a too-good-to-be-true deal: For $9.95 a month, members could see a movie a day in theaters, 365 days a year--a move that helped MoviePass rack up three million subscribers by the following June. The big question was how it was going to be a sustainable business model. "It's about the data," Ted Farnsworth, chief executive of Helios and Matheson Analytics--which owns a majority stake in MoviePass--told Marketplace. Paying full price for users' tickets, the company intended to eventually sell consumers' data, but theater chains and major studios and distributors weren't interested.
Then, in July, SEC filings revealed that Helios and Matheson had borrowed $5 million to pay MoviePass's merchants and fulfillment processors and was burning through $21.7 million a month to continue operations. In August, MoviePass limited subscribers to three movies a month. Three months later, two MoviePass board members resigned.
In another attempt to stay afloat, MoviePass recently announced it will be offering three new tiers of its subscription service starting in January. One thing is for sure--there won't be anymore unlimited movie passes.
What if you could digitally immortalize your brain? Nectome, founded by MIT grad Ryan McIntyre, aimed to preserve the human brain so that in the far future, scientists would be able to scan it and turn it into a computer simulation, reported MIT Technology Review's Antonio Regalado. To preserve the brain, the startup proposed using an embalming technique that would include "cryonics," which have been proven effective for preserving the brain's synapses.
While there's no evidence that memories can be found in dead tissues, the idea was to retrieve the data present in the "brain's anatomical layout and molecular details" that could be the basis for re-creating that person's consciousness, according to Tech Review.
The catch: For the procedure to begin, the brain must be fresh. The company said it planned to pump embalming chemicals into the necks of people with terminal illnesses while they were still alive, writes Regalado, and euthanize them. The company had consulted with lawyers familiar with California's two-year-old End of Life Option Act, which allows doctor-assisted suicide for terminal patients.
Nectome had raised $150,000 from Y Combinator and won a grant of $960,000 from the U.S. National Institute of Mental Health. It even had a waiting list of 25 people who put in a $10,000 deposit--including Y Combinator's Sam Altman.
But, in April, after MIT Media Lab had cut its ties with Nectome, LiveScience reported that McIntyre had no plans of euthanizing people for their brains the near future. "We have not nor do we plan to administer embalming fluids on a living animal or human," he wrote to LiveScience.
Sometimes less is truly more. Founded in 2015, Raden was a New York-based startup that developed a smart travel suitcase with a host of features--weight sensor, phone charger, location awareness, and Bluetooth-enabled connection--aimed at making travel seamless. The company raised $30 million in funding to make its suitcases. Then, in December 2017, major airlines announced a ban on "smart luggages" that feature non-removable lithium-ion batteries. By this May, Raden had completely shut down operations, citing the tough regulatory environment for its products.