5 Promising Startups That Failed — And What We Can Learn

The tech world moves fast — a breakthrough today can be obsolete tomorrow. Many app-based startups burst onto the scene with bold ideas and significant traction, only to lose relevance or collapse under their own weight. While complete shutdown isn’t always the outcome, a sharp decline in user engagement, revenue, or reputation can be just as telling. Here are five recent examples of such startups and the lessons they offer.

1. Quibi – Big Budget, No Audience

Launched: April 2020
Shut down: December 2020

Quibi stands as one of the most notable recent failures in the app world. With nearly $2 billion in funding and Hollywood legends at the helm, Quibi banked on short-form, mobile-exclusive video content — meant to be watched in quick bursts, especially on the go.

Why it failed:

• Poor timing during the COVID-19 lockdown, when people weren’t commuting.
• No sharing features or social hooks to drive virality.
• A confusing product that felt redundant in the age of TikTok and YouTube.

Lesson: Even with money and talent, a product must resonate with how and when people actually consume content.

2. Clubhouse – From Exclusive Buzz to Background Noise

Launched: March 2020
Peak Valuation: ~$4 billion
Status: Still active, but with drastically reduced relevance

Clubhouse captivated audiences during the pandemic with its invite-only audio chatrooms. Celebrities, CEOs, and influencers hosted real-time conversations, and users tuned in by the millions. But the hype didn’t last.

Why it fell:

• Lacked strong content moderation or discoverability tools.
• The format became repetitive and time-consuming for users.
• Twitter, Discord, and Spotify quickly replicated the core features.

Lesson: Viral growth doesn’t equal lasting value. Without a sustainable content or creator strategy, even a hyped product will fade.

3. BeReal – Authenticity Without Stickiness

Launched: 2020
Status: Still operating, but growth plateaued significantly by 2024

BeReal sought to disrupt polished social media with a simple concept: once a day, at a random time, users take a photo with both front and rear cameras. For a while, Gen Z flocked to it, and it even won Apple’s “App of the Year” in 2022. But momentum didn’t last.

Why it stalled:

• The novelty wore off quickly, leading to decreased engagement.
• Once-a-day posting limited user interaction.
• Struggled to monetize or evolve the platform meaningfully.

Lesson: Simplicity can create buzz, but long-term retention requires depth and evolution in features and user experience.

4. Zenly – A Cult Social App That Lost Its Platform

Acquired by Snap: 2017
Shutdown: February 2023

Zenly, a location-sharing app popular with teens and close friend groups, built a passionate user base, particularly in Europe and Asia. But in 2022, Snap announced it would shut down Zenly to focus on internal tools — despite the app having millions of daily active users.

Why it fell:

• It wasn’t because of user failure — it was corporate strategy.
• Snap wanted to eliminate overlaps with its Snap Map feature.
• Users felt blindsided by a product they loved being discontinued without a user-centric reason.

Lesson: Ownership matters. Strategic shifts by parent companies can override even strong user loyalty. For users and founders alike, independence has value.

5. IRL – “Social Calendar” App Inflated by Fiction

Launched: 2020
Shut down: 2023

IRL (short for “In Real Life”) was designed as a social calendar and event discovery app, especially aimed at teens. It raised over $200 million and reached unicorn status. But in mid-2023, the company shut down after revelations that 95% of its supposed users were fake or bots.

Why it failed:

• Leadership was found to have misled investors and employees.
• User data was inflated, raising serious ethical and legal concerns.
• The core idea had merit, but trust was broken beyond repair.

Lesson: Transparency and integrity are not optional. Fabricating success might win short-term funding but guarantees long-term collapse.

Final Thoughts: The Thin Line Between Hype and Longevity

These app-based startups show that no matter how fresh or well-funded a product is, success in tech is never guaranteed. From timing issues to flawed business models, each case holds valuable insights:

• Retention is king: Initial virality means little without a plan to keep users engaged.
• Product-market fit must evolve: What works today won’t always work tomorrow — iterate constantly.
• Ethics and transparency matter: Misleading data can doom even a promising startup.
• Platform control can make or break apps: Acquisitions can be both a blessing and a curse.
• Novelty is not a strategy: Engagement needs depth, not just a gimmick.

In tech, every downfall tells a story — one that can guide the next generation of builders to smarter, more sustainable decisions