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Notable startup failures of 2019

Hannah Skingle

Category: Uncategorized

Across the high-growth industry, we collectively spend a lot of time congratulating the startups that are winning mind boggling amounts of capital, lofty valuations and lucrative exit events, and analysing their journeys to such dizzying heights. But it’s also important to look at the flip side every so often, especially given that the vast majority of companies will never see such success. 

There are many reasons that a startup may fail, whether it is running out of money, a lack of product market fit, or poor management. The stories of massively overvalued companies spectacularly crashing back down to reality – such as the now infamous demise of Silicon Valley’s heavily venture-backed medical device startup Theranos – tend to be quite rare still. So although it’s tempting to sensationalise these startup failures, there are valuable lessons to be learnt from each one. As such, we’ve profiled four of the high-potential companies that didn’t make it through to see the turn of the decade and explored the reasons for their demise.

At Beauhurst we classify acquisitions out of administration, and acquisitions of assets, as the “acquired” company going out of business. Generally, these rescue packages only take place when companies have reached a financially unviable position under adverse conditions, and generally constitute an insignificant amount of cash. Where the acquisition terms include relaunching the old company, this is usually done via the creation of a new legal vehicle.

UK startups that failed in 2019


Spunout from the University of Cambridge in 2002, Metalysis developed a technology that it claimed produced metal and alloy powders with reduced financial and environmental costs. The technology had a number of applications across the aerospace and automotive industries, but was primarily being used to make titanium powder for 3D printing. 

The company first raised equity finance round in 2005, receiving a total of £5.1m from government funds and angel networks including Cambridge Capital Group.  Since then, Metalysis garnered a great level of investor interest, raising a further nine rounds of funding worth a combined £86.8m, the latest of which took place in March 2018. A number of funds came on board, from Draper Esprit to Chord Capital and the now defunct Woodford Investment Management fund. 

Metalysis also secured a hefty £2.35m of grant funding across four instalments, backed by Innovate UK and regional body Yorkshire Forward. Indeed, the company relocated from Cambridge to Rotherham in 2007 where it continued to scale its operations, eventually reaching industrial levels as a 20% scaleup and entering the established stage of evolution in January 2017. 

But the company still struggled despite this significant funding. Financial statements show that Metalysis had been racking up a significant operating loss, most recently reported as -£7.08m whilst turning over just £886k (March 2018). Administrators from Grant Thornton were brought in in June 2019, reporting that  “despite the directors’ best efforts and significant global interest, the business could not continue to operate without the protection of administration […] We would encourage any parties with interest to contact the administrators. With that support, I would hope that the business can continue to operate and thrive.”

A buyer was found within a matter of weeks, and metallic materials science company Power Resources Group acquired Metalysis in early July 2019. The acquisition complemented PRG’s vision, allowing them to deliver a vertically integrated and secure high technology supply chain of rare metals and super alloys.

Metalysis acquired by PRG in 2019

 Faraday Grid 

Incorporated in 2016, Faraday Grid produced devices designed to aid electrical energy conversion by increasing the energy carrying capacity of existing infrastructure and networks. The team had big goals, aiming to deliver reliable, affordable and clean energy to everyone, and prove their technology to be the ‘connective tissue that brings together the energy ecosystem.’

According to the company’s website, Faraday Grid engineers had designed an electricity distribution which allowed power to flow bi-directionally to anyone anywhere across a network, unlike existing one directional networks. ‘It autonomously and continuously adapts to variations throughout the network, creating a highly stable system capable of managing major fluctuations in supply and demand.’ The technology was still in the research and development phase when the company went into administration.

The company’s five founders, led by Australian CEO Andrew Scobie, chose to build the business from Edinburgh, citing Scotland’s world class academic heritage and access to talented engineers, mathematicians and physicists as the reason for the move. The team raised their first round of equity in August 2017, with a £1.93m capital injection from the funding vehicle of clean energy business AMP Solar Group. A further funding round worth £7.58m followed in June 2018, after which UK Power Networks announced that it would begin testing Faraday’s prototypes, hailing the tech as being a ‘revolutionary design’. 

Then, in January 2019 the company secured its third and final equity fundraise, worth £25m. This round was backed by Adam Neumann, Co-Founder and CEO of WeWork, a company now infamous for its failed IPO later in 2019. The round facilitated somewhat of a spending spree for Faraday, which launched a new innovation centre in Washington DC in March and reportedly acquired two Czech companies to form the basis of their European centre. At the time of the deal, Scobie claimed that “the demand for us on a global basis is just enormous, much more than we had anticipated at this time, so we’re running perhaps five years ahead of where we had expected to be.” But it seems he spoke too soon.

Faraday Grid

In June, filings made to Companies House showed that Scobie had been removed from his position as director, and just a month later fellow co-founder and CMO Jacqui Porch met the same fate. Not longer after, the company stumbled into zombie status as administrators were appointed in August 2019 and 51 jobs were lost. 

Administrators reported that it became clear that additional investment was needed in order to progress from research and development to commercialisation, and ‘the directors were unable to secure the necessary level of investment and, as a result, recognised that the Company did not hold sufficient funds that would enable them to honour all existing liabilities or to pay arising debts as they fell due.’ 

After the collapse of the company, anonymous sources claimed that ‘the company simply tried to go too far, too fast under Scobie’. By October, the former CEO was back in the picture, having set up a new entity called ThirdEquation to purchase the IP and assets of Faraday.


Founded in 2014, Loot developed an online bank where clients get a prepaid MasterCard and an app with money management features. The challenger bank, which had not secured a full banking licence but was operating through FCA authorised Wirecard, was aimed at students, and reportedly racked up an impressive 212,000 customers.

Led by CEO and Founder Ollie Purdue, Loot secured £13.6m of equity funding over eight rounds with participation from Global Founders Capital, Speedinvest and RBS’ own banking app Bó, among others. Bó initially invested in Loot’s July 2018 funding round, injecting £3m at a £10.6m pre-money valuation. A further £2m round was closed in January 2019 at a valuation of £17.2m, which took RBS’ stake in the company to 25%.  Bo’s CEO Mark Bailley clearly had a lot of confidence in the app, telling the FT that “Loot is a really exciting brand and one that we’re proud to be associated with. Through its innovative use of technology and intention to change the status quo, it’s quickly built a following of loyal customers, with potential for rapid future growth.” The £2m was set to fund Loot through the launch of a public beta in the first half of 2019. 

But trouble was brewing as the young startup began running out of cash. In April, Loot turned to the crowd to try and stay afloat with the preview of a crowdfunding campaign via Seedrs. The round never went ahead, however, as the startup was reportedly unable to secure the support of a lead investor. As a result, Loot fell into administration in May 2019, appointing Smith & Williamson to oversee the process. Customers were assured that any money they held on the app would be safe thanks to the company’s partnership with Wirecard.

The company officially shut up shop in August, after an attempted sale to RBS failed to go through. But there is a silver lining to this story. Confident in the talent of the team, Bó has since employed founder Oliver Purdue as its new Chief Product Officer and recruited 17 other Loot employees to the team. 

 House Network 

Led by Founder and CEO Mark Readings, House Network operated an online estate agency and also provided local agents who could conduct in-home valuations for those selling or letting properties. The company focussed its efforts on customer experience and support, whether that be a buyer or a seller, and offered services from £875.

Founded all the way back in 2003, the company was initially funded by its directors and secured its first funding round in late 2012, totalling £200k at a £1.8m pre-money valuation. In total, the company raised £7.46m over five funding rounds, with its pre-money valuation reaching a high of £14.1m pre-money in March 2016. Investors remain undisclosed, but the company’s historical cap tables show involvement from a number of small funds and individuals, as well as Equilibrium Private Equity. The PE firm sold its stake, which was diluted from 21% in 2016 to just 1.5% in 2018, before the company’s last confirmation statement filed in March 2019. Was this a warning sign that the company was facing difficulty?

In late 2017, the company began making moves towards an IPO to increase funds and market share. It began developing an online platform to purchase properties at a discounted price, which it started market testing in mid-December 2018. House Network even eyed an acquisition of an unnamed profitable business in the sector, but couldn’t secure the funds required to close the deal. As cash flow started to become a major problem, the company secured what would become its final funding round from existing shareholders, who pumped £250k into the business at an unknown valuation in order to cover staff salaries. House Network didn’t survive for much longer, appointing Hudson Weir as administrator in March. 

Proptech startup House Network went under in 2019

It seems that House Network’s customer-centric approach was not continued through its demise, with the collapse shrouded in mystery and customers somewhat left in the lurch. The company’s website at the time read “On 29th March 2019 House Network Limited trading as House Network entered administration, Universal Acquisitions Limited [UAL] acquired the trading rights of House Network on 29th March 2019 and subsequently ceased the trading activities whilst the business is restructured.” Indeed, there were optimistic reports that the company would quickly be back up and running and fully operational again, but this failed to happen, and all trading activities ceased by the end of April. 

The administrator’s report confirmed what Equilibrium’s gradual withdrawal from the company had suggested: the company was starting to face financial difficulty in 2016, despite turning a consistent profit between 2006 and 2015. ‘In 2016 the Company began to experience financial pressures due to competition from other online estate agents. The Company started offering services on credit, which adversely impacted cash flow. In addition the results of the 2016 Brexit referendum cause some stagnation in the housing market across the country.’

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