10 FinTechs to fail in the market after raising funding – part two

As business application company Instabase is the latest FinTech company to join the unicorn list, it is good to look into and learn what caused other FinTechs to fail in their quest.

Having previously explained how FinTech unicorn Aiwujiwu was able to crash and burn and how JP Morgan’s FinTech app for millennials was unable to take off, here are another five failed FinTechs.

Canopy Financial

As shown in the previous list, payments companies can be tough to start and another to fall victim to the bankruptcy curse was Canopy Financial. The FinTech was founded in 2004 in San Francisco and officially shut up shop in 2009.

The company was an electronic payment, account management, and investment technology platform for health-related spending accounts. Its tools included plan design, expense tracking, investment trading, online bill payment, ACH processing, card management and account management, among others.

At first glance, the company had seemed like it would be a leader in the FinTech space. It had received a healthy amount of attention, including several awards marking its as one of the fastest growing businesses in the US.

Canopy was also impressing investors, having collected around $85m in venture funding from backers including Financial Technology Partners, Foundation Capital, and GGV Capital. Spectrum Equity Investors, a Boston-based venture firm, had supplied the largest investment, deploying $62.5m.

Their appeal seemed to be well founded. In 2007, the company’s CEO Vikram Kashyap had reportedly stated the business had reached revenues of $9m. TechCrunch reported at the time of the close that Canopy had been rumoured to be claiming a $60m revenue and $9m EBITDA.

These numbers might seem a little odd for a company on the brink of closure, and the simple reason for this is because they are likely made up. According to the report from TechCrunch the company had been making up financial statements and even forged audited statements from KMPG. Fallout from this revelation were multiple lawsuits.

The exact reason the company did flop and filed for bankruptcy was not made clear, but given that financials were likely fake, it could simply be the company failed because of a lack of business.



Moving from the innovative to the slightly weird. Blippy looked to capitalise on the world’s growing love of social media and urge of sharing every little aspect of their lives, regardless of whether anyone actually cares. This seemed to be Blippy’s problem. The startup had positioned itself as the “Twitter of personal finance”, where a user would post and follow each other’s updates on things they have bought or services they’ve used.

Blippy aimed to serve as social media site where people could discuss and compare shopping with others.

The business only lasted three years – launching in 2009 and closing by 2011 – but was able to grab attention of several notable investors, including Charles River Ventures and Sequoia Capital. During its short life, the company was able to raise around $12.7m from backers.

In 2010, the platform received some bad publicity after credit card numbers of four of its users had been published on the Google search engine, according to a report from Venture Beat. While this is a significant security issue, the company co-founder had stated that the incident was “less bad than it looks” as only a handful of people had been affected.

While this is a bad security flaw, it was not the cause of the downfall. TechCrunch reported the platform failed simply because it could not get the users. The company had only ever had around 100,000 users, of which, only 30% had actually shared a purchase. Another stumbling block for the company was the lack of a clear business model, with the company opting for a ‘get user adoption and figure the rest out later’ approach.

While the company failed, it did not stop co-founders Ashvin Kumar and Chris Estreich. The duo came together again and launched Tophatter in 2012. The new business is an e-commerce marketplace where shoppers compete on 90-second auctions to win deals of up to 80% on electronics, clothing and jewellery. The company, which is still in operation, has raised a total of $21m in venture funding.



Going back the start of the FinTech world, years before anyone had every thought to combine the words financial and technology, Bennz was looking to change the way people paid for products online.

The concept of Beenz was very similar to the concept of cryptocurrency. The company was founded in 1998 and had a goal of creating a new online currency, coming a full 11 years before the first Bitcoin was ever deployed. It worked by enabling users to earn the digital currency Beenz by visiting a website, through online shopping, or logging in via an internet service provider. These tokens could then be used to buy products from participating merchants. The company had the goal of becoming the internet’s currency, a statement which has become very common in the past few years.

While the business was only around for four years, it had seen a respectable rate of growth. It had 13 offices around the world and a staff base of over 250, according to an article from the Guardian. There had been notable support from investors as well. Crunchbase claims the firm had pulled in just under $60m in venture capital from backers including Sycamore Ventures, New World CyberBase, DRW Venture Partners, and ING Barings, among others.

Regulators’ concerns to the world of digital currency has never died down. Even this week, the Bank of Lithuania released new guidelines to the regulation of security tokens. Earlier in the year, the European Securities and Markets Authority (ESMA) released its advice to the European Union Institutions on initial coin offerings and how they should be regulated.

Back in 1998, Beenz faced similar challenges and concerns from the market. It got to the point that when it launched in the UK, the police and the Financial Services Authority (now the Financial Conduct Authority) raided its office over concerns on its operations, according to an article from CNET.

It appears the FinTech failed due to its inability to convert users into revenues and that many of its business customers had closed, according to The Register.

It looked as there could be a happy ending from Beenz when Carlson Marketing Group purchased the business and all of its hardware and software in the tail-end of 2001, according to Finextra. Plans had been to integrate the technology with its existing reward points offering and develop a range of new services together. The acquisition included five million registered accounts of Beenz who were welcomed into the Gold Points Reward system. Like Beenz, these points could be redeemed at a selection of merchants.

Unfortunately for Beenz, Carlson chose not to renew the domain name and it eventually sold in 2012 to another company, putting an end to the Beenz name and currency forever.



Thoughts of making a digital currency were popular in the late 90s, with Flooz.com another looking to revolutionise payments and the way people give gifts. The company launched its services in 2009 and only managed to last three years until it was shut down, having poor adoption rates and criminal organizations using it to launder money.

Similar to Beenz, Flooz wanted to build a digital currency, which would act similar to a loyalty points system. Users were able to send digital greeting cards and an online ‘gift currency’ to anyone with an email address. Other ways of obtaining the Flooz currency were through promotions from businesses or by simply buying them. These tokens could then be exchanged at participating online merchants.

Headquartered in New York, Flooz looked like a promising company, it had raised two venture capital funding round which totalled $35m, and attracted investors including Silicon Alley Venture Partners, Oak Investment Partners, Venture Strategy Partners, Maveron, and Brentwood Venture Capital.

Even Hollywood actor Whoopi Goldberg was enlisted to help promote the company, according to a report from MentalFloss. Goldberg led an $8m ad campaign which spanned radio, television and print to promote the platform and its uses. An article from The Guardian even stated Goldberg agreed to promote the company in her free time with the hope of becoming a business partner.

Celebrity endorsements for cryptocurrency is strangely common. Some of the other celebrity endorsers over the years include actor Jamie Foxx, boxer Floyyd Mayweather, actor Ashton Kutcher, singer Akon and Paris Hilton. Professional boxer and singer Manny Pacquiao who revealed his cryptocurrency PAC Coin during a concert. These have caused a wave of concerns from players in the market, with some stating that individuals who would never have bought cryptocurrencies would do so just because of the celebrity endorsement.

Despite interest from investors and the support of a major actor, Flooz was just unable to get enough people using its services, the article from the Guardian states. There was both a limited number of merchants and consumers using the platform.

One of the major causes for the FinTechs downfall was a money laundering incident in 2001. Following an investigation from the FBI, it had found a ring of Russian credit card thieves had used Flooz to purchase around $300,000 worth of currency in the space of three months.

The company was forced to uphold payments to merchants, which meant it had to pay the fraudulent transactions itself. The company’s chief executive and founder Robert Levitan stated the fraud situation was made worse as banks ceased all payments for goods purchased with the Flooz currency.

The company’s website, which has since been shut down, reportedly said, “Flooz.com has been adversely affected by dramatic changes in capital markets and the general slowdown in the economy.”

In 2001, the company was forced to enter bankruptcy.



Payday lending giant Wonga was founded in 2006 by Errol Damelin and Jonty Hurwitz and it managed to become a very well-known brand. While the company was witnessing strong adoption and growth, it did not have the best reputation. Several UK MPs even named the company as a “legal loan shark” and expressed disgust towards the football kit sponsorship it signed with Newcastle United. This is just one example of the bad opinions expressed to the payday lender.

The company might have been getting a lot of bad publicity, but investor interest was still high. Between 2006 and 2018 the FinTech pulled in around $158m in funding. Big name venture capital firms including Accel, Balderton Capital, Meritech Capital Partners, and Dawn Capital were among those to see the appeal of the payday lender.

Wonga had built an algorithm which was capable of assessing thousands of datasets on an applicant before approving a loan. Questions were raised by the high interest rates the company had put on its loan with annual rates of over 5,000%. It defended these by claiming its loans are for days and weeks not years.

Its negative reputation looks to have caused problems for the company, with it failing to make profits in its last few years. The company reportedly had losses of £80m in 2015, £66m in 2016 and £66m in 2017.

The nail in the coffin for Wonga came after it was found the lender had been mis-selling loans to individuals unable to pay it back or were buried under huge interest rates. An article from the Guardian states that around 540,985 claims for reimbursement have been made, with at least 389,621 eligible for redress payments. Making the situation worse for the borrowers is administrators have only set aside £41m for claimants.

In a bid to stop the company sinking, it raised an emergency £10m to help pay debts, but it was not enough. The company ceased operation in 2018.

After the collapse, it was believed around 200,000 customers still owed over £400m in short-term loans according to an article from the Guardian. Consumers that had taken out loans were still required to make their monthly repayments even after the closure of the business.

Consumers were able to make redress claims up until 30 September 2019.

Copyright © 2019 FinTech Global

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