Why startups fail: reasons for liquidation and high-profile cases from around the world

Startup liquidation is not merely the end of a business, but the result of numerous factors: from management errors to external crises. We have analyzed how the process of closing a company unfolds, why it happens, and which global stories demonstrate that even billion-dollar investments do not guarantee success.

Closing a startup represents the final stage of a company's life, when it ceases operations and undergoes official procedures to settle all legal and financial obligations. This process is carried out if the business has lost its potential for development or has encountered serious difficulties.

The process can be voluntary, if the founders themselves decide to close the company, or compulsory, when the initiator is a court or a state authority—for example, in the case of bankruptcy.

Among the main reasons for liquidation are:

— lack of demand for the product — if the idea does not resonate with the audience and does not generate revenue.
— lack of funding — without investment, it is impossible to sustain growth and development.
— team errors — conflicts, lack of competencies, or leadership issues.
— poor management — legal problems, inefficient structure, or bad strategy.
— lack of flexibility — inability to adapt to market changes.
— external factors — crises, changes in legislation, or geopolitical instability.

Many startups do not survive the so-called "valley of death" — the period between launch and profitability, when investments and managerial resilience are particularly important.

Well-known global examples show that even the most promising companies can shut down:

Cruise — an American self-driving car startup, suspended operations in 2023 after financial and managerial difficulties.

Argo AI — a company created with the support of Ford and Volkswagen, failed to scale its autonomous driving technology and ceased operations.

Theranos — one of the most notorious failures in startup history: the company, which promised a revolution in medical testing, was exposed for fraud and shut down in 2018.

Blockbuster Video — failed to adapt to the digital age and lost the competition to Netflix.

CloudNordic — a Danish hosting provider, liquidated after a cyberattack that led to the complete loss of data.

These cases show: startup liquidation can be the result not only of market errors, but also of human factors, technological risks, or even crimes.

For entrepreneurs, understanding these reasons is not a cause for fear, but a tool to proactively identify vulnerabilities, build resilient processes, and reduce the likelihood of business closure.