Considering the conditions shaping today’s harsh economic environment, it would not surprise anyone that there were tech casualties in 2022. The most common reason startups fail is that they run out of money, and there are many reasons a startup might not have enough money to keep going.
Funding dropped dramatically in 2022, leaving a lot of private companies prone to collapse. Global funding hit $74.5B in Q3’22 — less than half of quarterly funding at the end of 2021. In Africa, venture funding dropped by 54% in Q3 2022.
As 2022 nears its end, we analyse the most significant tech casualties of 2022 and why they flopped while hoping that they serve as lessons for the ones that survived the year.
While we understand that several startups fail, these have been selected because of the significant amount of funding raised, the strength of the founders, and the impact of the failure on the larger tech ecosystem.
While this list was compiled in no particular order, CNN+ has to be the most epic fail of 2022.
CNN is almost synonymous with News production, and the streaming industry has enjoyed success since Netflix launched. Nearly 80% of U.S. consumers use subscription video-on-demand services (SVOD), and the market is projected to reach over $932 billion by 2028.
So when CNN announced the launch of an SVOD in March 2022 to combat the decline in traditional cable viewership, very few people could have predicted that it would shut down a few weeks later. Millions of dollars were spent on hiring employees and promoting a nationwide marketing campaign as the company projected to score two million subscribers by the end of the year.
Then, reality sets in.
CNN+ had barely 150K subscribers after two weeks. While this figure may not seem bad as the two million target subscribers could still be achieved at that rate, competing platforms like Disney+ got ten million subscribers on the day it launched in 2019.
Chirs Licht was then appointed as CNN’s new CEO, and one of his first decisions was to cancel CNN+, claiming that consumers now want “simplicity and an all-in-one service” rather than “standalone offerings.”
But, the casualty had nothing to do with a lack of funds.
CNN+ flopped for different reasons, including the saturation of the streaming market, poor business decisions, and the inability to deliver on promises. CNN developed a service that no one would want or use and that didn’t align with the business initiatives of the new leadership taking the helm.
When CNN+ was launched, it was reported that Netflix had lost 200000 subscribers in the first quarter of 2022. This indicates a thread.
A survey found that more than 20% of U.S. consumers think they are subscribed to too many streaming services – four or five, on average. In the same vein, another survey by Mohu revealed that 57% of consumers plan to cut some of their paid streaming subscriptions, and most will drop three out of five.
CNN+ did not offer content that potential subscribers could not get anywhere else. Since the major offering was news content, users could still follow on Television, YouTube, and other news platforms.
Due to a network agreement with cable systems, it did not provide a live feed of breaking news stories.
Final, the executive board of CNN was changing the guard and the incoming CEO, Chris Licht, was not a part of the decision-makers for the CNN+ project, so it was easy for him to scrap the project.
2. Google Stadia
This writer believes that there is no bigger tech company than Google, so it is painful that one of their products is on this list.
When Stadia was launched in November 2019, many gamers believed it meant they could play AAA (top quality) )games without needing expensive consoles like Playstation Five and Xbox.
Using Google’s cloud servers, Stadia allows gamers to play its games on any screen, from a phone to a web browser, as long as you have a controller in hand and a USB cable. It was supposed to herald the gaming industry’s future, making games more accessible by removing the need for expensive consoles and PCs.
While the streaming service worked great, it introduced a host of problems that traditional gaming systems do not have. Google announced in September via a blog post that Stadia would shut down and refunds would be made to customers who made purchases.
“While Stadia’s approach to streaming games for consumers was built on a strong technology foundation, it hasn’t gained the traction with users that we expected so we’ve made the difficult decision to begin winding down our Stadia streaming service”– Stadia’s general manager Phil Harrison said
“We will be refunding all Stadia hardware purchases made through the Google Store, and all game and add-on content purchases made through the Stadia store. Players will continue to have access to their games library and play through January 18, 2023 so they can complete their final play sessions. We expect to have the majority of refunds completed by mid-January 2023.”
Stadia failed to satisfy the target audience, unlike competitors
Google Stadia failed because the target audience was not satisfied with the products because of the technical issues, a lack of unique offerings (games, in this case), and its competitors got ahead.
Most countries lack the infrastructure to make a service like Stadia feasible. It takes a fast internet connection to run AAA titles with good playability. This meant that gamers could not enjoy the features on the go. Games like Assassins Creed, FIFA and other AAA games were available on Xbox and PlayStation.
Less than a year after Stadia launched, Microsoft introduced a game-streaming functionality into Xbox Game Pass, allowing Xbox users to now stream titles to their phones, tablets, web browsers and consoles, with full cross-save functionality. Nvidia GeForce Now also launched about the same time and offered gamers the ability to take their PC libraries with them on the go.
3. FTX and the crypto market crash
The cryptocurrency market is volatile, and crypto sceptics felt vindicated in 2022. There were several incidents of market instability, fraudulent activities, bankruptcies, crashes, and a general market downturn. 2022 may go down in history as the longest Crypto winter.
The first major shock to the cryptocurrency market of 2022 came when Terra Luna/USD crashed, wiping nearly all of its value. Many crypto enthusiasts had hyped the coin as an emerging asset class, but its plunge took many other digital assets with it, leading to widespread market instability.
As if the LUNA crash was not enough, FTX, one of the biggest digital currencies and derivatives exchanges, declared bankruptcy after allegations of fraud were levelled against founder and CEO Sam Bankman-Fried. The exchange faced a sudden liquidity crisis and could no longer provide the services it was known for, leading investors and customers to lose a lot of money.
This led to a sell-off of assets and a massive decrease in trading volumes.
Read also: Do Kwon blames SBF for Terra’s downfall
BlockFi and Three Arrows Capital (3AC) also faced bankruptcy due to their mismanagement of funds. BlockFi shut down after it realized that the obligations to customers who had lent their money through the platform could not be met.
Similarly, one of the most popular lending platforms for crypto, Celsius, shut down unexpectedly, leaving customers without their funds and questioning their safety.
On the other hand, 3AC made several large bets on specific cryptocurrencies, which crashed, leaving them with huge losses they could not recover from.
Additionally, the NFT market that dominated the headlines in 2021 for largely positive reasons crashed in 2022. Crypto enthusiasts and investors spent massively to purchase artwork and collectables in digital form.
When the NFT market crashed, the value of NFTs reduced across the board, wiping out millions of dollars of investments.
Betrayal of trust and misappropriation of funds set Crypto back in 2022
The major problem that the Crypto industry faced in 2022 was the misappropriation of funds by influential players in the space.
Do Kwoon of Terra and Sam Bankman-Fried of FTX betray the trust of their investors, customers, and other crypto enthusiasts? Their activities raised more doubts over a nascent market and have increased the clamour for more regulations in the space.
4. Safeboda, Kune, WeFarm and other victims of challenging market conditions
In Africa, several startups reduced staff wages, let them go completely, or closed shop permanently. While these organisations provided varied explanations for their decisions, the primary reason was a lack of funds.
Notify Logistics, a start-up company running a rent-a-shelf model in Kenya announced its closing in September due to an inability to break even from high operating costs. Similarly, Kune, a food tech startup delivering ready-to-eat meals at affordable prices in Kenya, which raised $1 million in venture capital (VC) money, closed in June.
Kune’s CEO, Robin Reecht explained that a stifled economy and inflated food prices are some of the circumstances that contributed to the company’s closure via a LinkedIn post.
“With the current economic downturn and investment markets tightening up, we were unable to raise our next round. Coupled with rising food costs deteriorating our margins, we just couldn’t keep going,” he said.
Agritech company, WeFarm, which raised $11 million in July 2021, closed down one of its services, the WeFarm shop, barely a year after setting it up. WeFarm shop is an app that the company developed to help farmers acquire agricultural products online and share reviews and advice.
In a statement to CIO Africa, WeFarm’s Director of Growth, Sofie Mala, confirmed that the WeFarm shop was forced to close down after current market conditions had made it difficult for the business to scale.
Only two weeks ago, SafeBoda, the Ugandan bike-hailing startup that set up shop in Ibadan in 2020, released a statement that it would cease operation in Nigeria. because the bike-hailing economy in Nigeria is not yet “economically viable.” The statement says, “the industry in its current state is not economically viable and unfortunately requires significant investment at this challenging time in the global economic landscape.”
Similarly, South Africa’s home cleaning startup, SweepSouth, which raised $11M pre-seed funding, announced that it would shut down its Nigeria operations from November 25 2022, as it cannot sustainably operate due to economic pressures.
5. Tech layoffs surpassed Great Recession levels in 2022
Perhaps the biggest casualties of the tech space in 2022 are the jobs lost during the year.
2022 has been the worst year for the tech sector, and early 2023 can even be grimmer, according to a report from CNBC TV-18.
According to a report by global outplacement & career transitioning firm Challenger, Gray & Christmas. 965 tech companies have laid off more than 150,000 employees this year globally, surpassing the Great Recession levels of 2008-2009.
Meta alone fired 11000 employees during the year, while Twitter let 3400 employees go after Elon Musk took over as CEO in a bid to increase company income. Amazon, Alphabet, Shopify, Lyft, Snap, Stripe, Kraken, Netflix, Cisco, Microsoft, and Coinbase are other US tech firms that fired employees during the year.
In India, more than 17,000 tech employees have also been let go. In November, Quidax, the Nigerian crypto exchange, announced that it was laying off 25% of its workforce, blaming it on the impacts of the economic downturn, while Nigerian digital bank Kuda laid off 23 staff in September.
ChipperCash, Softcom, Nestcoin, LazerPay, 54Gene, SWVL, and Sendy are other African tech firms that reduced the number of the workforce.
Layoff as a strategy
There is a global economic downturn, and the US, home to several big tech firms, is facing a recession. Some other firms, such as Nestcoin, had invested in the FTX cryptocurrency exchange and its downfall led to a loss of funds.
Analysts believe that many tech companies had over-hired during COVID-19 when tech revenue soared, and the layoffs of 2022 are part of the strategy employed to maintain viability in 2023 and beyond.
Tech enthusiasts expect better advancement, optimization, and sustainability in the tech space in 2023. However, the casualties of 2022 have made customers wary of trusting tech companies due to the mismanagement and failures of the year.
Thankfully, developers, project managers, executives, and policymakers can fix and prevent these failures. Executives should learn from the mistakes of 2022 and ensure that transparency reigns in their organisations, corporate governance is enforced, and funds are managed appropriately.
Also, business decisions should be made with careful planning. Products to be released should be close to perfection and meet the needs of society. Automation, training, and regular testing should be prioritised for products with excessively complex systems. Regulations that favour the tech ecosystem should be enforced so that it can continue to flourish.
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