Here at Beauhurst, much of our time is spent researching and writing startup success stories. From impressive exit events and massive capital investments, to the UK’s unicorns and top female entrepreneurs, we’ve covered it all. But not all businesses will go on to reach such heights. Now and again, we revisit some of the companies that didn’t get so lucky, the so-called ‘startup failures’, and explore the reasons why these startups fail.
Earlier in the year, we rounded up 2019’s most notable startup failures. But since then, with the arrival of COVID-19, the UK and its high-growth ecosystem has experienced a period of extraordinary change. Several more ambitious companies have gone under during this time, many as a direct result of the pandemic. And in September, the number of startups filing for administration in the UK was at its highest level for ten years.
While this failure rate may seem alarming, startups are known to be high-risk ventures. Many new businesses fail within their first year. According to post-mortems, common reasons why startups fail are a lack of funding and investor interest (not enough money), poor management, cash flow problems, mispricing, or simply weak product-market fit. In 2020, ongoing restrictions and the subsequent economic uncertainty arising from national lockdown measures were added to this list. Compared to more established businesses, early-stage companies have fewer resources with which to withstand a crisis, making it especially challenging to navigate the ‘new normal’ of COVID-19. Many startup founders were forced to adapt or overhaul their business models in response to the pandemic.
As expected, the sectors most significantly impacted at the start of lockdown were those relying on customer footfall, such as retail or leisure and entertainment. Whereas tech startups, especially fintechs backed by VCs, have been comparatively better at surviving the pandemic. Below we discuss four high-potential companies that have been forced to shut down since the start of lockdown—family activities app Hoop, fan network CrowdScores, apartment rental company Cuckooz, and ski chalet operator Snowchateaux. These failed startups were operating across a range of sectors and at various stages of evolution, yet all fell victim to COVID-19.
2015 – 2020
Stage of evolution: Venture
Number of employees: 25-49
Sector: Leisure and entertainment
First launched in 2016, Hoop was a successful startup, created by a group of parents who wanted to take the hassle out of finding activities to do with their children. They developed a mobile app which connected families to events in their local area, from dance classes to creative workshops, and everything in between. The app was updated daily, with over 100,000 activities for kids aged 0-11 years old, including ratings and reviews, and online booking services.
In December 2016, Hoop secured a £2m investment from BGF Ventures, for a 30% stake in the company. In late September 2017, a further equity fundraising took Hoop from a seed-stage to venture-stage company. By the end of that year, just 12 months on from their first round of investment, Hoop had more than 25 employees. During its lifetime, Hoop raised a total of £8.4m through three investment rounds, the latest of which was in May 2018. Alongside BGF, its investors included venture capital firm Edge Investments and digital studio ustwo.
Hoop’s aim was to “help families spend less time planning and more time having fun.” Its app was used by over 1.5 million families and 15,000 organisers across the UK. It was also twice named an “App of the Year” by Apple—in 2016 and 2017. Hoop had found and met a growing need amongst modern families. As co-founder and CEO Daniel Bower stated in an interview, millennial parents “have grown up using Deliveroo, Uber and WhatsApp to organise their lives, and want to manage their family time in the same way, expecting information to be accessible at a moment’s notice.”
Despite its early success, Hoop ran into difficulties in 2020. Like much of the leisure and entertainment sector, Hoop was severely affected by the pandemic. During lockdown, the company’s activity-booking app became largely obsolete. By 8th April, the impact of COVID-19 on the company was critical. Battling to survive, Hoop introduced a feature on its app offering online activities for children, but this wasn’t enough to cover the company’s losses. After a challenging few months, Hoop announced its closure on 6th July.
Posted to its website, Hoop’s closing message read: “Like many businesses all over the world the COVID-19 pandemic has had a huge impact on Hoop. When the lockdown in the UK began the revenue Hoop generates from bookings quickly went to near zero… We’ve spent the last few months searching for ways that would allow Hoop to continue, however these attempts have ultimately proven unsuccessful.”
2012 – 2020
Stage of evolution: Venture
Number of employees: 10-24
Sector: Social network
CrowdScores was a social networking app built for football fans. The mobile app used technology designed to crowdsource live sports data. It allowed supporters watching in stadiums to input match scores in real-time, providing updates to users at home faster than conventional media sources. As well as match scores, the app gave users information on fixtures, results, league tables, lineups, and video highlights.
In January 2013, CrowdScores raised £890k from undisclosed investors for a 58% stake in the company. It went on to reach venture stage by the start of 2014, following a further £613k investment at a pre-money valuation of £2.79m. During its lifetime, the company raised a total of £5.97m through six funding rounds. Its most recent investment, in 2018, was worth more than £2m.
By 2020, CrowdScores had grown to cover more than 350 leagues and competitions, spread across 117 different countries. Meanwhile, the number of fans actively using the app had reached more than 5m worldwide. CrowdScores was a hit, having created a loyal community of football fans both contributing to and using its app. And at the start of this year, the company’s growth looked set to continue…
But then everything changed. With the suspension of football matches at the start of lockdown, and the continued ban on spectators even after games returned, the fan-based app had lost its purpose. By April 2020, CrowdScores had been severely impacted by COVID-19, with restrictions on its product as well as the loss of its key customer group and a lack of market need. In a world without spectator sports, the company’s ‘failure’ was somewhat of an inevitability. On 17th May, the company officially announced its closure.
Taking to their social media channels, CrowdScores said “goodbye, for now”. In their farewell post, its team members emphasised that: “we could not have done it without our great community”. In response to the announcement, members of this community expressed their sadness and regret to see CrowdScores go, but also gratitude for “one of the all time great apps”. As the oft-quoted line goes, “football without fans is nothing”. Only time will tell when fans will return to the stadium, and whether their beloved app will follow suit.
2016 – 2020
Stage of evolution: Seed
Number of employees: 5-9
Cuckooz was founded in 2016 by entrepreneurs Charlie Rosier and Fabienne O’Neill. The pair had set out to create high-end, design-led serviced apartments in London that “help nomads feel native”. These homes were available for medium to short-term lets, and aimed at “the next generation of travellers… who demand more than just an apartment.” Alongside the physical space, Cuckooz had several tourist-focused offerings, including a concierge service with information on the local area.
In February 2017, Cuckooz secured an initial £200k equity investment from undisclosed investors, at a pre-money valuation of £1.47m. That same year, a further fundraising in December, at a pre-money valuation of £3.99m, took total investment to £350k. By 2020, the company’s portfolio had grown to include several locations in the Capital, including Bloomsbury, Shoreditch, and Hoxton, and they just launched their new Camden apartments in October last year.
During its lifetime, Cuckooz won two Serviced Apartment Awards, for Best Marketing/Branding Campaign in 2019 and Best Operator in 2020 (just before lockdown). Striving to become the next great innovators in the hospitality sector, the founding team at Cuckooz sought to create entirely new experiences for their guests. In 2018, they launched The Zed Rooms in Shoreditch, designed to aid REM sleep and address the so-called ‘first night effect’ of staying somewhere unfamiliar—from temperature-regulating pillows to a room specifically designed to mimic the comfort and security of a mother’s womb.
Unfortunately for businesses like Cuckooz, in March this year, the global tourism and hospitality industry shut down almost overnight. Despite their success in previous years, the company was not well placed to survive the pandemic. On 1st June, Cuckooz announced that it had ceased trading. At the time, co-founder Rosier was quoted as saying: “As a small business, with limited cash reserves, riding out the COVID-19 storm was sadly not an option for us… We are so grateful for the support of the industry and hopeful that we will return again soon.”
It’s not all doom and gloom though, as Rosier and O’Neill’s second startup Cuckooz Nest, founded in 2017, has managed to withstand the shock of COVID-19. Continuing with their space-as-a-service business model, Cuckooz Nest operates London’s first hybrid workspace and daycare. The co-working space, located in Farringdon, allows parents to be close to their children without compromising their careers. The idea to diversify into family-focused, office space came to Rosier when she wanted to return to work after the birth of her first child. Cuckooz Nest secured funding from Seedrs in May 2019 and, having reopened their doors in June, is currently facing a low impact from COVID-19.
2006 – 2020
Stage of evolution: Growth
Number of employees: 50-99
Sector: Travel services, tour operators
Snowchateaux, previously known as Chalet Retreats, was a successful ski tour operator. It ran catered chalets across a range of ski resorts in the French Alps, including Tignes, Les Arcs, and Morzine. Snowchateaux’s offering included a team of hosts, chefs, and drivers that would look after guests during their stays.
In 2013, while still based in Cardiff and operating under their original name, the company was included on the Fast Growth 50 list (in 12th place, at 223% growth between 2010 and 2012). Sponsored by Barclays, Fast Growth 50 identifies and ranks the fastest-growing firms in Wales. In the years that followed, Snowchateaux continued to grow, changing its name and relocating its head office to London in 2015. Meanwhile, in late 2017, the company went on to secure a £700k equity investment, for a 70% stake in the company.
During its lifetime, Snowchateaux expanded its portfolio to 22 winter chalets and a hotel in Switzerland open all year round. But the company came to a standstill in 2020, when French mountain resorts were forced to shut down due to COVID in mid-March, a week before the UK government announced lockdown measures. Tens of thousands of Brits were left stranded, having just landed for their holidays, with many requesting full refunds on their trips.
Snowchateaux had been critically impacted by the pandemic. Unable to weather the (snow) storm, the company announced that it was permanently closing in July, after 16 years in operation.
For more on this topic, see our roundup of the biggest startup failures in the UK since 2010, plus seven other businesses that have shut up shop due to COVID-19, including cold brew coffee company Sandows, fintech Liquidity Chain, and proptech platform Habiplace.
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