The business world is full of stories of startup failures, from ill-fated fintech ventures to mismanaged medtechs (Silicon Valley’s Theranos probably rings a bell…). In fact, it’s believed that 9 out of 10 startups fail, a stat that nearly all startup founders and VCs know painfully well (although this figure is understandably difficult to quantify and measure). But why is it that so many small businesses collapse within their first year? And how do failure rates of Beauhurst-tracked companies compare to the wider startup ecosystem?
Lack of product-market fit is one of the most common reasons behind failed startups, with many new businesses spending years designing and developing the perfect product, only to discover nobody wants or needs it. But there are a broad range of factors that impact the likelihood of startup success. Other common causes of business failure include lack of funds or investor interest, and pricey legal challenges. And with fewer resources under their belt than established companies, many early-stage startups have also been less able to withstand the shock of the COVID-19 pandemic.
At least for companies that have hit one of our high-growth tracking triggers, the odds are far better—amongst the most ambitious businesses in the UK, just 23% of those founded in 2011 are now classed as ‘Dead’ on the Beauhurst platform, and 25% for those founded in 2015. Companies categorised as Dead have announced they’re ceasing all activities, or have parent companies that have formally dissolved.
Another signal that a firm has shut down is if it’s been stuck at the ‘Zombie’ stage of evolution for a considerable amount of time. Zombie companies are those that have been neglected for a prolonged period or are in a troubled financial state—we highlight these businesses that look in distress, so you can find them before they fail.
Since the start of 2021, 513 high-growth UK companies have gone under. This article spotlights 9 of these businesses, looking at how they came to be and the challenges they faced in building a successful startup. Failure is often a part of future success, and there are lessons to be learnt from each of their journeys. We hope to see many of the entrepreneurs behind these companies pursuing new ventures soon (several have already started), as future phoenix founders in the making.
9 startup failures in the UK’s high-growth ecosystem in 2021
Bristol-based Friska operated a chain of “feel good food” restaurants across the UK. Founded in 2009, the company secured two equity and debt fundraisings, amounting to £4.25m. With the arrival of COVID-19 and the ensuing government measures, Friska was forced to temporarily close its physical premises in April 2020. It reopened at various times throughout the year, began offering takeaway options, and took part in the Eat Out To Help Out scheme. But like most of the leisure and entertainment industry last year, it faced severe (and ultimately crippling) challenges as a result of the pandemic.
In November 2020, the company entered into a voluntary arrangement (CVA), which saw its Manchester and Birmingham locations shut down. Friska was later acquired in July 2021, enabling its co-founders Ed Brown and Griff Holland to retain two of their Bristol sites under a new name. Building on their experience of entrepreneurship so far, the pair now run Vela Venture Yard, a new project exploring ideas in hospitality, tech, IoT, and consultancy, according to Brown’s LinkedIn. The entrepreneurs are using this opportunity to create new brands, including Vend, a platform for autonomous cafes.
Ralph & Russo
Luxury clothing brand Ralph & Russo was founded in London in 2006. By the start of this year, the company had secured more than £50m in equity fundraisings and achieved 20% scaleup status. It was founded by Australian entrepreneurs Tamara Ralph, the brand’s Creative Director, and Michael Russo, its CEO.
Despite continuing to offer online ordering and delivery services, the company was forced to close its storefronts several times during the pandemic, in line with national restrictions. In March 2021, Ralph & Russo announced that it had entered administration, in order to restructure the business and find enough money to continue operating in the future. In July, it was acquired out of administration by Retail Ecommerce Ventures, joining their existing portfolio of e-commerce ventures.
DJS (UK) was a Software-as-a-Service (SaaS) company that owned and operated high-cost, short-term lender PiggyBank and lead management system Leadtree Global, among other fintech services. Based in Bournemouth, DJS (UK) secured £15k worth of equity investment back in 2016 and, in April 2019, was named on Fast Track’s Profit Track 100—which ranks private companies with the fastest-growing profits over the past three years.
That same year, however, PiggyBank was forced to cease trading in July 2019, following concerns raised by the FCA about its affordability checks, and the collapse of several other payday lenders. DJS (UK) went into administration in December 2019, with the firm eventually being dissolved in September 2021. Its founder, Dan Ware, remains co-founder and CEO of Big Golden Pineapple. A holding group for professional services businesses, it is now the parent company of Leadtree, alongside several other ventures, including Wheelie Good Finance and Pineapple Recruitment.
Founded in 2013, EventsTag designed a range of tools to encourage fans to share content to social media at events. Prior to 2021, the London-based tech startup had raised £2.15m in equity investment, across five funding rounds, including three with private equity and venture capital firm Mercia. It also attended the Wayra London accelerator programme, for businesses in the IoT (Internet of Things), 5G, data democratisation or customer experience sectors. In 2018, it acquired event management software startup Excelerated Applications.
The company also secured a £35.8k Innovate UK grant in June 2020, to develop an online visitor experience with navigable 3D displays, for brands that were sponsoring or hosting virtual events amidst COVID-19 social distancing restrictions. But in January 2021, EventsTag went into liquidation, before being acquired by Inurface Media, a digital signage provider. Following the acquisition in March, EventsTag was merged with its co-founders’ second brand We Are Interact, to form Xi, retaining its original team members and in-house digital experience tech platform.
Igloo Energy was a smart energy supplier, based in Southampton. Founded in 2016, its business model focused on helping customers to reduce their energy consumption, cutting costs and emissions through smart meter data and connected home technologies. By the end of 2020, the firm had secured four rounds of equity funding, worth a combined £24.4m, alongside a £82.1k grant from Innovate UK in July 2018. The grant was awarded to help Igloo Energy develop its prototype for a self-learning data platform to support its operations.
Just two years after being named on the Startups 100 list of the UK’s most impressive early-stage businesses, Igloo Energy ceased trading in September 2021. One of several small gas and electric suppliers to go bust this autumn, amidst the ongoing energy crisis. Ofgem has appointed E.ON Next as the new supplier for Igloo’s customers, whilst Igloo Works (the company’s heat pump installation arm) has continued operating.
As previously noted, Igloo was not the only energy company to go under this year. Founded in 2018, GOTO Energy provided environmentally-friendly energy tariffs to the UK market. Still relatively new to the green energy scene, the Dover-based startup raised a £3m equity funding round in February 2019. By 2021, it was supplying roughly 22k households with gas and electricity.
Earlier this month, however, it was announced that GOTO Energy had fallen into administration and ceased trading—the 12th energy supplier to do so in the UK since the start of September. Ofgem has appointed Shell Energy as the new supplier for GOTO’s customers.
Based in Moray, in the Scottish Highlands, Wooha Brewing was a producer of natural, vegan-friendly ales and lagers. Founded in 2014, the fast-growth beer company went on to secure £1.38m in equity investment during its lifetime, across four funding rounds (two of which were raised via crowdfunding platform Crowdcube). Wooha’s latest equity fundraising was completed in February 2020, with the intention of building out its sales team, funding promotional activity, and supporting the company’s international growth. But the best-laid plans do often go awry, and that was certainly the case when the pandemic hit and bars up and down the country shut up shop.
Despite partnering with Wetherspoons, Ocado, and Amazon Prime, and securing trade deals across numerous international markets, in March 2021, Wooha entered administration. The company cited cash flow problems as the reason behind this decision, arising from the combined challenges of COVID-19 and Brexit. It was acquired by North Coast Brewing in June, which hopes to recommence operations in the near future. Wooha’s founder, Heather McDonald, is currently an Executive Manager at Highland BlindCraft, a social enterprise in Inverness that employs people with disabilities to make beds and mattresses.
London-based Senzer developed respiratory devices, designed to safely and effectively deliver cannabinoid pharmaceuticals to patients. In March 2020, it secured a £2.39m equity investment in an unannounced deal, at a post-money valuation of £17.2m. This followed on from its £840k Innovate UK grant in 2019, awarded to help Senzer develop its respiratory delivery system for treating side effects of chemotherapy.
In February 2021, Senzer announced that it had entered administration, eventually ceasing operations in July. What caused this sudden closure? Amidst mounting pressure from its creditors and the challenge of gaining regulatory approval for its products proving especially difficult, the medtech startup struggled to secure backing for its proposed IPO on the Alternative Investment Market (AIM).
Great British Prawns
Headquartered in Edinburgh, aquaculture company Great British Prawns was a wholesale supplier to restaurants across the UK. It was founded in 2010 and specialised in producing tropical prawns at its farm near Stirling, using responsible farming techniques. Between 2015 and 2020, Great British Prawns secured £5.48m in equity fundraisings, across four rounds—the latest of which it secured in January 2020.
In May 2021, however, the company became another victim of the hospitality shutdown during the pandemic. With the majority of its employees already furloughed under the Government’s Coronavirus Job Retention Scheme, Great British Prawns entered administration. Co-founder Dougie Allen remains an active proponent of sustainable aquaculture, currently a Director at Great British Aquatech (the R&D arm of Great British Prawns that is now its own company) which is developing innovative solutions in land-based aquaculture through academic and industry partnerships. Fellow co-founder James McEuen is a NED at Bradshaw Taylor, backing numerous outdoor and lifestyle brands.
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