👋 Welcome to another edition of Why They Died. Your occasional trip to the startup graveyard, where we investigate what caused once high-flying companies to fail.

Hi, friends 🧟

Welcome to the second edition of our occasional series, Why They Died. I’ve only posted one of these before, but it seems like this little spinoff series is a fan favorite already.

For all the new folks who’ve joined recently and are unfamiliar with Why They Died…instead of analyzing the winners as we do with How They Grow, we unpack startup failures. For more details on this shorter series (~5K words), check out the intro to Why Vine Died.

Now, why are you not getting your usual HTG post today?

Unfortunately, I didn’t have enough time for a ~10K word deep dive. Last week I was in New Orleans Thursday through Sunday for my friend's bachelor party. As you can imagine, there wasn’t much room for writing. 🙃

So, I excitedly invite you on our second trip to the startup graveyard. On this cemetery tour, we’re visiting…Quibi.

Favor: If you enjoy today’s post, please click the little heart button to like it—it helps more people discover my writing—or share How They Grow with a friend or two.

Poised to be the mobile-first Netflix, this is one of the most spectacular failures in tech and entertainment. Quibi— short for "quick bites”—was touted by its extraordinarily veteran co-founders as a platform that would radically transform the way people, particularly younger viewers, consumed content on the go.

Except, the only thing that was quick about Quibi was how fast they burned $1.75B (yes, billion) of investor capital. From launch to shut down…Quibi was live for the same amount of time it takes a Granny Smith apple to ripen on a tree. 👀

That’s 6 months….Yikes.

Before we unpack the 7 Reasons Why Quibi failed, and of course, the practical takeaways from each, here’s a quote from Quibi co-founder, Jeffery Katzenberg, from a keynote at SXSW.

Alright, enough memes (for now). Let’s get to it.

Obituary: Here lies Quibi 🪦

The idea of Quibi was simple: a streaming platform designed exclusively for the phone, with original content broken up into 10-minute segments.

Think TikTok meets Netflix, for $5 with ads or $8 without per month.

Instead of committing to watching a full-length show or movie, you could fill moments in your day by watching Quibi. With this format of shows, the idea content-wise was to create a new way to tell stories. And their secret sauce as a product?

The “Turnstyle”, which allowed videos to work beautifully in portrait and landscape mode while in full-screen.

Whether this feature was a gimmick or a true innovation is hard to say given how little time Quibi was on the market. But what is clear, is that bringing to market (1) a new platform, and (2) original content at the same time was a poor choice of a go-to-market strategy. More on this soon.

Now you might be wondering, “How the hell did a company raise so much money before acquiring a single user?” Absurd, I agree.

And not just a lot of anyone's money…they raised from the top dogs in Hollywood and Wall Street. Including Disney, Alibaba, Goldman Sachs, JP Morgan, NBCUniversal, Sony Pictures, Time Warner, Lionsgate, and several others.

Arguably the only reason for this is because of Quibi’s co-founders, Jeffrey Katzenberg and Megan Whiteman.

Jeff was the former chairman of Disney (‘84 to ‘94) during the media giants animation renaissance — the period when Disney made some of their gigantic hits like The Little Mermaid, The Lion King, Aladdin, and Beauty and The Beast. After this successful tenure, he became co-founder and CEO at Dreamworks, another little animation company producing hits like Shrek and Madagascar. Then there was Meg, who was the former CEO at both eBay and Hewlett-Packard (HP). She’s also a board member at Dropbox and Procter & Gamble (P&G).

And with Jeff as a Hollywood heavyweight, these entertainment companies bought into Jeff’s thesis that (1) consumers wanted Netflix-level content on the go, and (2) that the existing streaming solutions were not convenient to watch on phones. Essentially, the vision was that TV was changing and people wanted a different type of media. This was the gap in the market Jeff pointed to.

So, Quibi raised $1.75B over two funding rounds ($1B first) based entirely on trust in the founding team and their vision. This massive cash war chest was used to build out their platform, hire executives from companies like Instagram, Hulu, Netflix, and Snapchat, as well as cast celebrities to build up an extensive pre-launch library of Quibi Originals. And these celebs—who were announced over time to build up hype—included names like Kevin Hart, Idris Elba, Zac Efron, Anna Kendrick, Jennifer Lopez, Justin Timberlake, Liam Hemsworth, and even Steven Spielberg.

Then, piggybacking on the momentum behind these A-listers, they were able to attract massive advertisers. Before launching, they announced that companies like Google, P&G, Pepsi, and Walmart had committed to spending $150M in ad spend for the first year. They also announced a partnership with T-Mobile, allowing the carrier’s 83M+ US customers to get Quibi for free. That’s a massive channel partnership, unlocking a day 0 distribution advantage. Plus, they invested heavily in their own advertising, spending over $100M on awareness marketing (including at the Super Bowl) before launch.

And just to reiterate…this was all before having one single user.

Nonetheless, all of this investment wasn’t enough. So, what the hell happened? 😕

As we look at all the reasons behind probably the fastest collapse in the entertainment/tech industry, we’ll see it really boils down to this: Jeff and Meg heavily over-indexed on their experience, and solely relied on their instincts, which proved wrong.

Let’s go deeper.

Post-mortem: What we can learn from Quibi’s 7 causes of death

There are a lot of reasons (as covered in Why Vine Died) why most startups never make it. And our startup autopsy suggests 7 main reasons Quibi failed.

• Not addressing an untapped and pressing problem/desire: AKA, nobody needed it.

  • Lack of problem validation, built on a faulty thesis

  • Over-indexing on a single big launch

• Entering a deeply competitive space without an advantage

  • Miscalculating the market they were actually entering

• Quibi’s core value—their content—was low quality

  • The inability to license content due to technical constraints: Dual focus on both a platform and content play

• Selling the wrong value, and bad marketing

• Disconnect between product and organic user behavior

• Resistance to adapt in response to the pandemic

• Too much money, too quickly

We’ll start with Quibi’s nonstarter.

1. Not addressing an untapped and pressing problem/desire: AKA, nobody needed it.

Sure, Jeff and Meg had a grand vision that was exciting to rally behind. That’s why investors poured in cash.

The thing is, nobody actually cared. Quibi didn’t add value to people’s lives, and time and time again they failed to answer the most important question there is: “Why do I need this?”

I clearly remember seeing Quibi ads pasted all over the New York subway system and thinking that exact thing…“Why would I download that? What’s the point?”.

Unfortunately, Quibi could have been successful if its go-to-market strategy had any form of a hypothesis-driven approach. As you’ve seen over and over again in this newsletter, the most successful products start small and expand. They find a niche audience, create a wedge into the market, and use it as an initial hook to break in. It’s all about figuring out if people want what you need, learning and iterating as fast as you can, then growing from there.

That’s what you’d call as essential as knowing your ABCs in startup land.

Quibi, however, was not treated as a tech product in that sense. Rather, much more like a Hollywood blockbuster with a grand launch day.

In hindsight, that explains very well why the investor lineup noted earlier had very few Silicon Valley VCs in it. Tech people were skeptical about the overreliance on the founders’ backgrounds. Likely, they also noticed the disconnect between their experiences and how to launch and maintain a high-growth tech product. If someone at Sequoia asked, “How do you know people need this?”, Jeff and Meg would have probably had an answer based on their own observations and instincts.

Simply, the first time Quibi actually tested its hypothesis was when it launched. 👇

Lack of problem validation, built on a faulty thesis

Having deep expertise in your domain as a founder is a massive advantage. By and large, that’s because it means you understand the market and customers deeply and are in a leveraged position to uncover a unique insight into a problem.

But, in Quibi’s case, the founding team’s vast experience and previous successes worked against them. Jeff and Meg’s conviction that this is where the market was going and what people wanted was so strong, that they simply did not accept the notion that they could be wrong.

And if you’re that confident and sure in yourself, you can see how “building lean” and rolling something out more incrementally all seem like a waste of time.

In short, these two boomers saw a bunch of “kids” who couldn’t get off their phones (not wrong about that) and thought they could just shove more content in front of them there and win. That’s kind of like saying at a restaurant, “Hey, all these people are eating right now. They must all be so hungry. Let’s go sell them more food.”

Quibi never ran an MVP (minimum viable product) or any experimental beta to try to test what kind of content and what kind of features resonated well with their target users. They never even did focus groups, and honestly, I struggle to see Jeff or Meg speaking to users about the idea. Because, if they did, and if they asked the right questions, they would have known right away that people actually didn’t want to watch short-form drama series episodes when they had a few minutes to kill on their phones. They’d have had people asking why Quibi when they have TikTok, Instagram, and YouTube for free when they’re on the toilet. And why Quibi when they are paying for Netflix and Prime already?

Any startup that feels as though they don’t need to launch an MVP or beta is fooling themselves. Mistakes will be made and money will be wasted. You just can’t take shortcuts here.

In Quibi’s case, they were essentially running a $2B high-risk, high-reward, experiment to validate the most important thing underpinning the business. And that’s the biggest mistake you can make — building something nobody needs.

So, Quibi never got to product-market fit, and they scaled far too quickly without any validation. Looking back, it’s easy to imagine that just chopping up a movie into 20 pieces doesn’t add any real value. Instead, Jeff and Meg could have preserved capital before they knew what they had was working. And as their audience grew, they could have ramped up their library of shows and the rest of the product.

Except, they did the total opposite. They didn’t just launch with an untested product. They had a massive launch event. 👇

Over-indexing on a single big launch

Even for Apple, the company famous for iconic product launches, that just isn’t true.

Where that is more true though, is with theatrical movie releases. Opening weekend is huge for Hollywood, and perhaps that’s why Jeff and Meg steered the ship that way.

But in the world of tech, the idea of a single launch is nonsense. Airbnb famously “launched” multiple times, as has SpaceX (who are literally launching rockets) with test flights. At first, nobody knows you and very few people will care. There is nothing stopping you from launching multiple times, trying new things, tweaking the product/positioning, or even rebranding. Ultimately, with each launch more people will keep trying your product if you’re listening to their feedback and baking in your learnings from the time before.

Again…one big launch day is almost always a mistake. Of all the companies we’ve looked at in How They Grow, (if I remember correctly) not even one of them “launched” like this.

🛠️ Takeaway: Expertise can be a double-edged sword. It brings you the value of knowing the customer and market, but also can lead to overconfidence in customer assumptions. Nothing substitutes speaking to customers. Big ideas and insights should still be treated as untested hypotheses, and the only job you have in the beginning is to figure out of you’re right as fast, and as cheaply, as possible. Once you have an inkling of validation, go and validate the next risky assumption. And this incremental approach should gradually spend more capital, and (in most cases) totally avoid this misconception that a product needs to “launch”.

Onto the second cause of death.

2. Entering a deeply competitive space without an advantage

Let’s start with this. There are obviously limits to a consumer's appetite for another streaming site. Like, how many do we actually need, seriously?

Just considering the period when Quibi was available, here’s some data on how many services people actually subscribed to:

60% of people subscribed to 3 or fewer when Quibi launched. And Quibi was entering the market having to compete with titans like Netflix, Prime, Hulu, etc who not only had broad libraries of content (and were spending many multiples more for more of it), but also had brand advantages, distribution power, and large platforms with huge audiences already paying them and locked into shows.

Simply, Quibi had to fight out of the gate to be, at least, a top 3 service in the consumer's mind.

And the hook they were using to try and disrupt the space—and win a place on the coveted podium—was mobile-first short-form TV shows. Except, again, there was really no indication people wanted that.

That was Quibi’s challenge against the incumbents. But, Quibi also lacked an essential advantage that the new subscription services that were also entering the market at a similar time (circa 2020) had.

Take Disney+, HBO Max, and Peacock. All three of those (now very successful) services already had a deep catalog of original content that they had a loyal audience around. By launching a new streaming platform, all they had to do was bring over their existing audience and bring them the exclusive content they were familiar with.

Quibi, on the other hand, had no such audience. No hits, no must-have content, and really just nobody knowing their shows. In a super competitive space like streaming, that’s a massive disadvantage. AKA: audience > than the ability to turn your phone sideways.

Okay, we’re talking a lot about the streaming market here. And we should be, because Quibi had the same price point as other streaming sites, and for all intents and purposes, was a place to stream content.

Except, Jeff and Meg spent a lot of time focusing on that space (in honestly, what seemed like a bit of a Hollywood ego war with their Hollywood buddies), at the expense of another market that they really should have considered themselves as being in. 👇

Miscalculating the market they were actually entering

Quibi was regularly spoken about by leadership in the context of Netflix and the then-nascent Disney+.

But, if you are a mobile-only app, designed to be used on the go and to fill transitory moments of boredom, and people are consuming content….it doesn’t take too much to realize you’re competing against TikTok, Instagram, Snapchat, YouTube, etc.

If I am on my phone, no matter what your app is, you are competing for my attention against TikTok or Instagram. Those apps are highly addictive, and it’s why people regularly complain about being sucked into the scrolling vortex without realizing even how they go there.

So, Quibi needed to break that and say, “Hey, we’re a better use of your time.” While I never used Quibi, so perhaps I am wrong (although I don’t think I am), a neat way to turn your video horizontally isn’t that big a deal. I regularly watch YouTube on my phone and never thought their method was a problem. Do I really need full-screen in both views?

And speaking of these apps (which Quibi didn’t really position themselves against)…they are all free. They all have highly shareable content, are full of variable rewards, and have friends and community basked inside of them. For many people, that’s the pricing model they needed to compare themselves to, and $5 or $8 a month is, as this man would say…“It’s too damn high!”

This is evidence of a clear lack of understanding of the power of substitutes. You can say you’re not like Instagram all you want, and you can claim “but we’re different” as much as you like, even spending $400M on marketing to make sure I get it, but if I’m on my phone, that’s your competition. And again, on the “direct competition” side, if I’m lying in bed in the evening ready to watch a show with Julia, my TV sounds way better. 🤷

The gap for Quibi becomes harder and harder to find.

🛠️ Takeaways: To very much oversimplify it, startup success comes from careful market analysis, sensible product design, pricing aligned with value proposition, and iteration based on customer feedback.

When looking at a market, you need to find what your competitive advantage is that gives you a shot (which could be an asset or distribution advantage). That comes from first knowing all your competition (direct, indirect, substitutes, adjacent, apathy), and then (1) sizing up the market’s appetite for another product like yours, and (2) understanding your customer’s perspective about what you do and where you fit in the market. Remember: positioning is how your customers see you, not what you write on a document and talk about as a team. 

So, perhaps the saving rope here could have been incredible content. If Quibi had a House of Cards-level show that attracted an audience and fan base, they could have built momentum.

Except, you guessed it, they didn’t.

Enjoying this Why They Died analysis so far? Consider sharing it with someone. 🧟🧟

3. Quibi’s core value—their content—was low quality

Content quality is the main determinant of why somebody signs up and stays subscribed to a streaming service.

And for Quibi’s big launch, they rolled out a library of 175 original shows and 8,500 episodes. For perspective, Apple TV+ (launched in 2019) currently has 50 original shows (which is give or take 100 episodes) and 30 original movies.

To make that happen, they had to mass-buy as much content as they could get. And for a $1B budget (including script buying and production), they couldn’t exactly be too picky. This meant they were buying the bottom-of-the-barrel stuff that the other giants were ignoring.

As one producer working on a Quibi project said: “If we have a show that’s going to be a huge hit, you pitch to Netflix, HBO. If it doesn’t get traction, you pitch to Quibi.”

Besides that being a quality problem in and of itself, there was another huge problem: screws don’t work very well as nails.

Meaning, the projects were designed for traditional streaming, and not written for short-form consumption. You can’t just buy a movie and chop it up to become a short-form series. I struggle to see how such a short episode gives you enough time to build character and tell a real story worth sticking around for. Users complained about the same thing: rushed narratives with hard-to-make-sense of shows, leaving people with a cheap aftertaste.

Despite all that, as the Verge wrote:

Yet, their content could not be further from GoT.

Plus, people love the binge. They love well-paced stories worth talking about. Quibi just didn’t have that because they weren’t trying to be that.

Basically, the tradeoff was 1 episode of a brilliantly done Stranger Things episode or 5 episodes of (despite excellent actors) B-rated crap.

That might be a strong word, but feel free to be the judge…(I suggest just picking one of these)

• 50 States of Fright

• Murder House Flip

• Dummy 

• When the Streetlights Go On

As the Verge reported:

Then, on the note of content, there was another big issue. 🤦

The inability to license content due to technical constraints: Dual focus on both a platform and content play

Quibi’s content had to fit a very specific format: 10-minute segments, and adaptable to both vertical and horizontal screens.

That uniqueness limited their ability to be able to license. Both licensing from existing content from other networks/studios that could have attracted people, as well as licensing out their own originals in the future to other platforms.

And the real problem with that is best illustrated by looking more closely at the issue of focusing on both Quibi being a platform and content play simultaneously.

Let’s take Netflix. First, they built a platform, and for supply, they licensed other people's content that had a fan base already to flesh out a library and hook people in. Only later, once they had an audience, did they get into Netflix Originals.

On the flip side, Disney had an extensive library (supply) that they built across decades of production. Then they build a platform, laying in that supply and bringing along their loyal Disney audience.

You can see how both of them approached bringing in audiences in different ways by picking either a platform or a content play to enter the market.

Since Quibi was trying to innovate on both fronts (and was unable to license) they had no audience. Nobody had discovered the content or the platform yet. And unfortunately running ads and creating awareness before launch isn’t bringing you a loyal audience. It’s just setting an incredibly high expectation across a bunch of people who now know your name.

Perhaps if they had been a pure content play, they could have licensed mini-shows out to other content platforms. This might have built their loyalty to this new format first, then brought that audience to a platform later on. Or, if they were a pure platform play, they could have opened it up to other creators (attracting them with the creative constraint of short-form TV) and built an audience without spending billions on custom content creation. 🤷‍♂️

🛠️ Takeaway: Most obviously, make sure your core value is, well, valuable. You need to be acutely aware of what people are paying you for, and what features of that they prioritize. And a more nuanced lesson: don’t try to be too many things at once.

4. Selling the wrong value and bad marketing

Somewhat shockingly given Jeff’s background in the movie business, Quibi missed the point that the value of a streaming service is not the tool, it’s the content.

Arguably, that’s why all of the streaming products look and feel nearly identical. The app just isn’t what people care about.

Yet, when you look at Quibi’s marketing efforts, it was all about the platform and its uniqueness, rather than their “best” shows.

Consider the Super Bowl ad. Not a show in sight. 👇

People are far more likely to ask their friends if they saw the trailer for a cool new show than ask if they’re looking forward to being able to turn their phones sideways.

Simply, Quibi was selling the wrong unit of value.

A similar example of this is their 5 Oscars ad spots. Both of these campaigns feel a lot more like an ego-driven attempt by Jeff and Meg to show off their new Hollywood toy to their Hollywood friends over actually acquiring customers.

In unconfirmed market research after the two ads, 70% of respondents said they thought Quibi’s “Quick Bites in under 10 minutes” was a food-delivery service. Not great marketing. 🙃

🛠️ Takeaway: If you’ll bare with me through this cliche—sell the hole, not the drill. Once you understand why people buy your product, that’s the message you want to reinforce and spread. Fancy marketing ads with high production value that leave people scratching their heads is how you burn through $1.75B and close up shop in 6 months.

Anyway, people still downloaded the app to give it a go during the 90-day free trial. After 3 months of being live, Quibi had 5.6M users (very few paying though). But, with those users in the app, Quibi missed some important features. 👇

5. Disconnect between product and organic user behavior

Quibi’s failure to understand and connect to its target audience was just as apparent in the app's (lack of) features as it was in its marketing.

Here’s Jimmy Donaldson (MrBeast), probably the most successful content creator and YouTuber in the world, explaining it in 30 seconds:

Not allowing screenshots shows us that Quibi just didn’t get that most of their target users enjoy engaging around memes. If you watched Succession, you know exactly what I mean.

Shows and movies these days find a lot of success around someone’s screenshot combined with a few words going viral.

Limiting shareable content—especially on a phone perfect for sharing—was a big opportunity missed. This capped content from being able to spread organically through virality right at the knees. And even if the shows were bang average, people would have probably made memes about that.

Eventually, Quibi leaned into meme culture and added the feature, but yup, the hole in the bucket was already too big.

If only they’d spoken and prototyped with users first. 🏄‍♂️

Of course, missing a small feature like this alone isn’t at all why Quibi failed. The point more generally is they were disconnected from the people they were trying to get using Quibi and how those folks behaved.

🛠️ Takeaway: It’s not always enough to know how and why customers use your product. Understanding who they are— and not just in the context of the problem you’re solving for them—is often where a lot of opportunities lie. One aspect of that is to consider the cultural context of your target audience. That’s a big advantage that comes along with building something where you are the target customer.

This leads us nicely into…

6. Resistance to adapt in response to the pandemic

Being a product that was steadfast in being mobile-only for an on-the-go use case, at a time when people were being locked into their homes, was definitely a contributing factor in making Quibi something that people were less inclined to try.

So, sure, an uncontrollable macro factor like that can’t be ignored in this post-mortem. And Jeff minced no words thinking that in June 2020: “I attribute everything that has gone wrong to coronavirus."

But being adaptive is certainly within the wheelhouse of leadership’s control. And a statement like that quickly brushes off ownership to the larger problems we’ve gone through. [Note: later on, Jeff recanted and did take more responsibility.]

One clear way they could have made themselves more useful while people had large TVs around them all day, was to allow people to actually watch Quibi on them. Yet—and I’m hesitant to use the words “for the longest time” given 6 months is insanely short—for the longest time, Quibi just ignored the demand to cast efficiently onto a big screen. And I truly mean “for the longest time”—they released apps for Apple TV, Android TV, and Fire TV just one day before Quibi announced they would be shutting down operations. The dumpster fire that must have been going on in the Quibi offices for that to happen. 🤦‍♂️

The pandemic is an obvious and easy excuse, but the truth is people didn’t stop using their phones while at home. Just take TikTok, which soared during the pandemic

Simply, people’s daily lives changed, and Quibi didn’t.

🛠️ Takeaway: A startup’s primary advantage is being able to move quickly. That might mean spinning up a campaign to capitalize on a culturally relevant thing that springs up unexpectedly…or, changing something fundamental in the face of a world-altering event. There are very few cases where sticking to your guns and not addressing user feedback (when the data also tells you the same thing) is the right move.

7. Too much money, too quickly

Lastly…let’s talk about the money. 🫰

Quibi just raised too much of it before they had anything. Of course, raising a lot of money is not a reason for failing, but it did speed up Quibi’s time to shut down.

Because they raised so much in such an unconventional way, skipping the usual funding path of seed rounds, Series A, B, etc which all theoretically work off milestones around proof of PMF and growth, Quibi set itself up to have to be a near instant success.

Because it wasn’t, they were not going to get any more money at their crazy valuation which essentially forced them to shut down.

If they raised less and were more cash-conscious, they might have avoided many of the mistakes above and ended up with something people still use today. The rule of thumb is to develop without investing too many resources while testing and iterating quickly. Then, once you know you’re filling up the right rocket, give it as much fuel as possible.

In the end, Quibi was forced to sell to Roku for a (relatively) mere $100M.

🛠️ Takeaway: Be wary of raising money at an unreasonably high valuation. While exciting to get a term sheet that tells you that your business is worth more, it could be signing a death sentence for it. It may well be setting higher than reasonable growth expectations that you’ll need to meet. Which for starters might mean you have to prioritize the wrong things to satisfy investors. And secondly, if you don’t get there, the next time you need to raise you’ll get hit with a down round (lower valuation), which you certainly want to avoid at all costs.

And that just about brings us to the end of this analysis. There were some other issues I considered getting more into, but I didn’t think they were particularly actionable or nearly close to Quibi’s main problems. To keep it super brief, they had internal management issues (specifically, the co-founder relationship between Jeff and Meg) as well as some legal trouble around their Turnstyle technology. But the only real takeaway here is just make sure you don’t steal other people’s IP, and invest in a healthy co-founder relationship.

Awesome! That’s a wrap on our second edition of Why They Died. 🎬

If you enjoyed today’s post— consider subscribing if this is your first time reading, or showing some love by telling a friend or two about How They Grow.

Otherwise, have a wonderful week, and I’ll see you next time.— Jaryd ✌️

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