The Real Reasons Quibi Failed : startups

This post is based on a YouTube video I did on Quibi. If you prefer to see it as a video instead it is available here.

This is a look at the real reasons Quibi failed. From a Startup’s perspective, how could they raise almost 2 billion and then shut down less than a year after they launched? This is one of the biggest startup failures of all time.

Quibi raised 1.75 billion and looking at my list of biggest startup failures of ALL time Quibi is the second largest startup failure of all time.

What is Quibi?

Quibi is short for quick bites. It means they do short-form content – 10 minutes or less for your mobile device and they may just be key it is mobile ONLY – no tv or any other device. On October 21st Quibi announced that they were shutting down after only 6 months.

Here is what Quibi said in a Medium post about why they failed:

Likely for one of two reasons: because the idea itself wasn’t strong enough to justify a standalone streaming service or because of our timing.

I don’t agree, so here are is why I think Quibi failed.

#1 Big Company People Playing Startup Founders

Let’s take a look at the two founders. Meg Whitman and Jeffrey Katzenberg. They are not exactly the traditional hungry startup founders that want to change the world.

Meg has an incredible career behind her. There is no doubt that she played a big role in making eBay really big. Later she was also the CEO of Hewlett Packard. She also made an unsuccessful run for Governor in California and famously ended up spending so much money that she paid $43 per vote that she got.

Jeffrey Katzenberg was a long term and very successful TV and Movie executive in Hollywood. Jeffrey did actually co-found Dreamworks, but Meg Whitman didn’t found eBay or HP.

These are big company people playing Startup. They are billionaires with very little at stake. I’m sure they invested a lot in Quibi and would argue they were the biggest losers in all of this, but really Meg Whitman how much is your lifestyle going to change with your net worth going from $5.1 billion to $5 billion. Probably not a lot.

I challenge you to please find one company that was started by billionaires and then later ended up really changing the world? Revolutionized some technology? Changing how we do something? I don’t know any? Let me know in the comments, I could be wrong.

#2 Horrible Timing

Quibi launched on April 6th 2020 just as we world was hit by a pandemic that left everyone at home. Yes, the coronavirus pandemic did play a role. It is not great when you launch a product for on-the-go viewing when people were largely stuck at home. Nobody is on-the-go.

The Pandemic hit a lot of companies in a very unfair way, but it also accelerated things for many companies. It accelerated some companies into profitability and others to shut down faster than they otherwise would. So yes it did contribute to the death of Quibi, but if this was a great product done in the right way Quibi would have survived the pandemic.

#3 No product-market fit

This is the obvious one no product-market fit and yes this was a major contributor. There is a lot to say about the product and it has been analyzed by others. Was the content any good? Why did the product fail? Here is a good article from the Verge that mostly is about the product.

I only want to look at one product decision that I think we can learn a lot from. A product decision that led to a lot of bad things down the line and probably killed the product.

Whenever we launch a new feature we always ask ourselves.

  • How much does it cost to build it?

  • How much will it cost to maintain it?

  • Ultimately are those costs worth it for the user?

The feature I’m talking about is turnstyle. What they claimed was the killer feature for Quibi. The feature is that you can watch a video in landscape and in portrait mode. Sounds cool, but how much does this cost to build, maintain and is it ultimately worth it?

This is where the trouble starts – the cost of this feature is infinitely high.

They had to spend hundreds of million making content before then launch. Everything made from scratch. On top of that, it is more cumbersome to make the content imagine the complexity while you’re recording and in the editing room.

It also means you can’t buy any less expensive older content. You need to pay others to build everything specifically for this platform. It is expensive and you never stop paying. Any content you make for all eternity is going to cost more than whatever Netflix or HBO make, that is a big problem.

So is it really worth it? Hell No! There is no chance this gimmick is worth it.

To make matters worse it also leads to another thing. It means the the killer feature turnstyle is only available on mobile and they decided the entire platform would ONLY be available on mobile. Let me repeat not mobile first, but mobile only. That was a horrible decision in my world.

Young people today do spend an insane amount of time on their mobile phones, but they also watch Game of Thrones on their laptop or even on good old television screens, it is a bad idea to take that away from them.

#4 Too much funding in the wrong order

Startups are built and funded in a specific way. You start small and as you get bigger, as you get more resources. You get to and prove certain milestones and you get more funding. Let me show you how traditional funding of a Startup works:

Typical Startup:


You see this is all wrong, you can’t do this in the wrong order, you can’t just skip steps, it isn’t healthy. You will build the wrong product and scale too early. You just end up making poor product decisions if you have too much money too early. Turnstyle is a good example of that.

#5 No MVP straight to full product launch

This is a tricky one, can you actually do a product like this one with a minimum viable product and then move from there. Some people would argue no, I say yes you can.

First, the problem with the approach Quibi picked is that you just burn through too much money before the product is ready. You spend hundreds of millions on content and marketing before the product is even ready. You do marketing for a product that doesn’t have a product-market fit, that is money wasted. This leads to the investors getting frustrated and ultimately getting impatient and backing out. The pandemic shortened that period down even further.

So how could you do an MVP here? Instead of raising almost 2 billion, you raise 50 million. Do a lot less content and keep testing. See if it works, do people engage, is it really worth it. You absolutely can’t skip these steps.

You keep testing until you get it right and there is obviously a chance it won’t work, that is fine too. The good thing is now you lost $50 million not 1.7 billion.

#6 Arrogance

In the 1950’s, the age of the Ad men or Mad Men big companies designed products and put big marketing budgets behind them. Then they would sell. People would buy what was advertised. That was the philosophy back then you just build a product, put lots of money behind the advertising and it takes off!

That is not how we build products in 2020.

This entire Quibi case just reeks of arrogance – we know what you want arrogance. We are smart and rich, we know what you want.

We have:

Even Spielberg is making content for Quibi.

Meg and Jeffrey, nobody knows what the people want, it takes time and patience to figure that out. All the money in the world doesn’t guarantee success, you need amazing founders with everything at stake willing to invest blood sweat, and tears. That is how you build a startup in 2020.

Thank you for reading this, please give me a comment below if you agree or disagree.

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