Some of these companies seemed to be approaching a steep cliff, even as they ascended skyward. Others leveled out long descents and just kind of hung in there. But the bottom line is that the rise and fall of risk-taking, innovative companies is rarely as simple as the boom-and-bust press cycle would have you believe. The struggle, the near-death experiences, and the lessons learned along the way are the stuff that made these companies and their chiefs worth watching in 2013 and in 2014. Here are some hints about the ongoing struggles to watch.
"As 23andMe scales, its business model will shift," Elizabeth Murphy wrote in the November 2013 issue of Fast Company. But no one realized just how big a shift was coming. Least of all founder Anne Wojcicki, who on November 25 was ordered by the U.S. Food and Drug Administration to cease marketing its DNA testing kit. In a public letter, the FDA's Alberto Gutierrez posed concerning scenarios involving unneeded medical procedures and false-positive results from 23andMe's Personal Genome Service (PGS). He wrote: "[The] FDA is concerned about the public health consequences of inaccurate results from the PGS device; the main purpose of compliance with FDA’s regulatory requirements is to ensure that the tests work." He went on to spell out how the company's direct-to-consumer business model could lead its customers to “self-manage,” raising “serious concerns…if test results are not adequately understood by patients or if incorrect test results are reported.” For example, the FDA said, if the “risk assessment for breast or ovarian cancer reports a false positive, it could lead a patient to undergo prophylactic surgery, chemoprevention, intensive screening, or other morbidity-inducing actions, while a false negative could result in a failure to recognize an actual risk that may exist.”
On December 5, Wojcicki vowed to cooperate with the FDA and expressed regret but also stood behind the company's mission.
Wojcicki has a vision for changing health care as we know it. But she needs spit. Her goal was to sign up a million customers by the end of 2013--she got half way there before the regulatory troubles, not to mention brand new doubts about the accuracy of test results that came at the very end of the year. Back in the fall for our November story, Wojcicki said, "I want 25 million people. Once you get 25 million people, there's just a huge power of what types of discoveries you can make. Big data is going to make us all healthier. What kind of diet should certain people be on? Are there things people are doing that make them really high-risk for cancer? There's a whole group of people who are 100-plus and have no disease. Why?" Toward the end of 2013, 23andMe was betting on an impressive fourth quarter. It might be impressive enough if it survives this period's turmoil.
In just two years, Fab grew its network of makers to more than 20,000, ranging from prestigious design brands such as Vitra and Kartell to artisanal hipsters in Portland, Oregon. "Fab seems to have a very expansive definition of design, and that's really good because there are so many people who want to narrow it," Murray Moss, founder of Moss, the pace-setting but recently shuttered design store in New York's SoHo neighborhood told Fast Company's Danielle Sacks for a feature in the October 2013 issue. Lots of designers like him were rooting for Fab to win. And co-founder and CEO Jason Goldberg harnessed his salesmanship and storytelling prowess to go on a fundraising tear. But then, as Sacks wrote, "Goldberg’s narrative tap dance is beginning feel more like the tech world’s version of a Jerry Lewis telethon." In Q3, according to Dow Jones VentureSource, Fab raised more money than any other tech startup. This spring, during the height of his fundraising, Goldberg told Sacks that Fab’s Series D would close by the end of the summer, netting at somewhere between $200 to $300 million. But after the $150 million Tencent round was announced in June, Goldberg only made piecemeal public announcements about tiny fundraising rounds--$5 million, and then $10 million--pocket change compared with Fab’s typical investments.
By mid-November, Fab was in a spiral. More than 80 employees, including top-level execs, were laid off amid a corporate restructuring. The axed employees joined outgoing COO Beth Ferreira, who was reportedly fired in November, and Cofounder and Chief Design Officer Bradford Shellhammer, who announced he would step back from day-to-day operations at the company.
Goldberg sent an internal memo to a select group of Fab executives who would be tasked with "refounding" the company as it seeks profitability in 2014: "We will recast Fab as the brand that is famous for the exclusive designs we make and bring to market."
In July, the social gaming company snagged former Xbox chief Don Mattrick as its new CEO. Things were looking up. But as Joshua Rivera writes over at Co.Labs, the one-time king of social gaming with the then-ubiquitous FarmVille has been steadily losing ground for almost two years. In April, Zynga would be beaten at its own game by King, makers of the wildly popular Candy Crush Saga. Layoffs and management shake-ups would soon follow. Unfortunately for Zynga, the social gaming landscape is now a much more crowded place, and while the next year may see it push out a major new release, it’s going to have to try a lot harder to get anyone’s attention.
As Co.Labs writes: After BlackBerry 10, the mobile OS that was supposed to revitalize BlackBerry in an iOS and Android world, completely flopped, the company’s hope of recapturing much of the smartphone market share seemed to sink with it. But the former mobile king isn’t quite dead in the water just yet. Right before the year’s end, the company struck a new five-year deal with manufacturer Foxconn to develop a new smartphone and boost its presence in Far East markets. There is also a small but potentially viable interest in BlackBerry from smaller businesses and cross-platform app development that could help buoy the floundering company.
BlackBerry reported $1.2 billion in revenues in Q3, down from $1.6 billion in the previous quarter. But, due to continuing operations, it reported an operating loss of $4.4 billion.
BlackBerry will stick around in 2014, as Co.Labs writes, but in quieter corners of the smartphone market.
Founder and former CEO Andrew Mason was nearly eaten alive by the market and commentators after he took Groupon public in June 2011, wrote Elizabeth Spiers in Fast Company's May 2013 issue. At that point, when Spiers met Mason, Groupon's stock was down 72% from its IPO price of $20 a share--and much of the blame was directed at Mason. He was fired shortly thereafter. Spiers picked up with incoming CEO Eric Lefkofsky.
The stock was continued its downward dive--more 80% since its November 2011 IPO, and the market didn’t react well to Mason and CFO Jason Child’s Feb. 27 explanation of what had happened, which was in keeping with its ongoing reaction to the company’s post-IPO performance.
Lefkofsky is now responsible for taking a large public company that has expanded well beyond its original model of daily deal emails and makes it one cohesive entity. As Spiers reported her story, many of the Groupon executives with whom she spoke didn't really understand what the company was anymore. For consumers, daily deals had expanded into Groupon Goods, a direct retail business with curated products selected for the user; Groupon Now, a real-time deal generation platform that allowed users to search for things they wanted and find relevant offers; and new offerings like Groupon Getaways, which featured travel discounts. For merchants, Groupon was developing payment and point of sale systems that make it easier for them to understand the economics of their businesses and generate demand for their products, including a suite of products, informally called “merchant OS.”
After his ousting, Mason went on to make a "business rock" album. Groupon began to turn itself around. The stock price quadrupled toward the end of 2013. It was far from the IPO glory days, but the company was decidedly undead.
"After 4 billion check-ins, plus 35 million users and partnerships with brands such as American Express, Foursquare can't seem to fulfill its promise," wrote Austin Carr for his feature on Crowley in the September 2013 issue of Fast Company. Foursquare reportedly pulled in $2 million of revenue in 2012, Carr wrote, and user growth had slowed. Plus, cofounder Naveen Selvadurai abruptly left the company in March 2012. Crowley, once the darling of the SXSW Interactive festival spent much of 2013's SXSW dogged by rumors that Foursquare was bleeding cash and struggling to raise additional funds.
But by the end of this year, Foursquare had turned a corner. It raised $35 million in Series D funding, breathing new life into the location-based service. "With non-apologies to the doomsday predictions of PrivCo and others, Foursquare is VERY much alive and well," tweeted Foursquare spokesperson Brendan Lewis. The sense had been that it would have trouble raising another round, let alone at a higher valuation. Critics had grown increasingly skeptical of its user growth and its potential to monetize. But with a "fresh $35 [million] in the bank," as CEO Dennis Crowley said, along with several new ad products and 45 million users, the narrative has shifted toward Foursquare bouncing back.
Myspace was up against impossible odds. Typically, only one out of five distressed companies recover, turnaround specialist Matthew English, managing director of Arch + Beam, told Chuck Salter for his April 2013 story on Chris and Tim Vanderhook's efforts to revive the music-driven social media company. They were operating in a newly crowded music landscape, for one. "They're not competing directly with anybody, but they're competing indirectly with everybody," English said. The new Myspace aimed to be a central portal for creative types--mainly musicians, but also photographers and videographers--to better manage their business: promoting their work with fans, gathering data about their audience, and, eventually, selling tickets and merchandise. For fans, Myspace was supposed to re-emerge as a one-stop bazaar, with free streaming channels (think Pandora) and on-demand albums (Spotify); photo galleries (Pinterest, Tumblr); music videos (YouTube, Vevo); and articles (Billboard, Pitchfork). Next, fans will earn rewards for listening and sharing playlists and win discounts on tickets and merchandise through a loyalty program.
It looked great, was fun to use, and seemed to be off and running. But then came layoffs of entire departments. A spokesperson told Valleywag: "We're implementing changes at Myspace to support continued innovation and growth by streamlining operations to achieve profitability. We appreciate our team's contributions to Myspace over the years, and are offering outplacement services and severance packages to assist impacted employees."
Once an unstoppable cult of selling, Lululemon Athletica Inc. pulled a hammy when Chip Wilson, who founded upscale yoga apparel retailer, infuriated customers with boneheaded comments about the size and shape of the women who buy the company's pants. A teary apology wouldn't be enough. Turns out Wilson had made all kinds of offensive comments during his reign. He announced he would resign as chairman in 2014, the company said. And Laurent Potdevin, president of Santa Monica shoe company Toms and a former CEO of Burton Snowboards, would take over from Lululemon Chief Executive Christine Day in January. Potdevin also would become a Lululemon board member.
Analysts saw hope in the shakeup. But a full bounce-back was, at best, a stretch.
Who else teetered on the edge of failure in 2013 or learned a lesson from a near-death experience to propel them into 2014? Tell us in the comments.