Four bankruptcy cases in the technology industry

By Suzzanne Uhland

Image courtesy of ekkun at Flickr.com

In the last decades, the technology businesses have ruled our world in multiple ways. Giant companies like Google, Facebook, Amazon, Apple, among others, have brought to our lives different new aspects, changing our behavior and how we do things. In addition, these huge corporations, have developed incredible business models, creating billions of dollars and thousands of employees. These organizations, have become not only part of our lives but also a vital key for the world’s economy, making it more dynamic and interesting, due to their continuous innovations, products, and services.

Four bankruptcy cases in the technology industry

Some of these organizations are considered the biggest in the planet, being valued in billions of dollars, making their owners some of the richest people on earth. Moreover, the constant innovation and the multiple technological advances let persons around the world develop new disruptive products, giving birth to amazing and great businesses. However, some of these startups, have failed and being declared in bankruptcy for different reasons, showing that the creation of disruptive ideas is not always the only thing for a successful business.

Four bankruptcy cases in the technology industry

In the last years, different technology companies have been founded thanks to excellent ideas, creating new services or products, but for bad decisions or improper management, these organizations have faced bankruptcy. In this post, we will talk about some of these businesses, showing how their bankruptcy processes were and how they faced them.

Boo.comFounded in 1999 in the United Kingdom by Swedish entrepreneurs (Ernst Malmsten, Kajsa Leander, and Patrik Hedelin), Boo.com was one of the first retail fashion business on the internet, selling mainly clothing and cosmetics. For its creation, this organization received more than $135 million dollars in venture capital, but two years later, the company was

Four bankruptcy cases in the technology industry

declared in bankruptcy, due to its inability for its payment obligations. In other words, Boo.com was liquidated in 2000, due to its liquidity issues and financial agreements non-payment. Today, this bankruptcy case is considered one of the biggest failures in the internet industry.

One of the principal reasons for Boo.com bankruptcy was that the company developed its platform with very advanced conditions for the technology elements in that time. Put differently, its website was amazing and very new for those days, but most computers did not support it. Another cause for Boo.com bankruptcy was its software. For viewing its merchandising and clothing, people had to download a

Four bankruptcy cases in the technology industry

specific application, but it was incompatible on different computers. Other reasons for its failure were the highest maintenance costs, the delivery conditions, and the dot-com crash.

Flooz.comFounded in 1999 in New York city as one of the most disruptive businesses, Flooz.com faced bankruptcy three years after its creation. It was developed for establishing a virtual currency for being used in different retail stores like J. Crew, Barnes & Noble, Restoration Hardware, Starbucks and Tower Records, working as a virtual credit card. This company collected more than $40 million dollars and was sponsored by the actress Whoopi Goldberg, but it was not enough for being a successful technology business.

Four bankruptcy cases in the technology industry

Some of the reasons for Flooz.com bankruptcy were the bad management of its resources, the few businesses accepting it as a payment way and the dot-com crash. In addition, the company was syndicated for criminal activities, more specifically for money laundering from the Russian mafia, who stole legal credit cards for using the virtual currency created by Flooz.com. After all these problems and situations, the organization filed for bankruptcy.

Four bankruptcy cases in the technology industry

eToysIt was an American retail website selling mainly toys and figures. It was founded in 1997 and after some years of activity, it faced bankruptcy, being acquired by different owners until in 2009 it was purchased by Toys “R” Us. For 1999, the organization reached a market value for more than $166 million dollars, rivaling with huge retail businesses like Amazon, Walmart or Target.

Some years after its creation, the organization was unable to keep its sales budget, having losses for more than millions of dollars. For its critical situation, eToys was unable to pay its credit responsibilities, accumulating more than $240 million dollars in debts. In addition, its great competitors, increased their sales, taking eToys to bankruptcy in 2001.

Four bankruptcy cases in the technology industry

NapsterThis is probably one of the most famous technology companies from the past decade in the world. It was created by Sean Parker and Shawn Fanning in 2000, as a music file sharing service, taking the music business to a new level. In 2001, Napster reached a huge popularity, obtaining more than 26 million users sharing music.

After some years of activity, Napster started to have legal problems with different artists, for copyright infringement, closing its services in 2001. Two years later, Napster was bought by Roxio, working as a music subscription service, and five years later it was purchased by Best Buy for almost $120 million dollars. In 2011, the company was bought by Rhapsody.

Four bankruptcy cases in the technology industry

Related: The Bankruptcy process and some of its legislation concepts by Suzzanne Uhland

Four bankruptcy cases in the technology industry