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You Don’t Want to Be On This List: Companies That Squandered Investors’ Money

 

1. Solyndra: The 2011 bankruptcy of this Fremont, Calif. manufacturer of solar cells—a company that got a $535 million federal loan guarantee—represents one of the most botched funding opportunities in U.S. history. More than a year-and-a-half has passed since Solyndra filed for bankruptcy and laid off its 1,100 employees. However, its failure still gets a ton of media coverage—partially due to the large sum of money the Department of Energy (DOE) invested in it, and also because it was the first company DOE funded as part of a major renewable energy program.

2. Pets.com. A dot-com bubble company if there ever was one, Pets.com was expected to do great things. The company raised money from Hummer Winblad Venture Partners and Amazon.com. From the start, though, the road was rocky. During its first fiscal year, the company’s revenue was $619,000. Unfortunately, during that same year it spent $11.8 million on advertising. (Remember the Pets.com sock puppet?) Regardless, the company filed for IPO in February 2000. After it went public, Pets.com realized it was in trouble and tried unsuccessfully to sell. In November of the same year, the stock fell to $0.19–from $11 at the IPO–and Pets.com shut down.

3. Beacon Power: This company received a $43 million loan guarantee from the same federal stimulus program as Solyndra. Beacon was specializing in a technology that captures extra energy from the power grid in flywheels. This ability to store energy is essential to incorporating wind and solar in the grid. Nearly all the money Beacon received from the government was used to build its facility in upstate New York, however, it was driven out of business due to low natural gas prices. Along with a handful other renewable energy companies the DOE invested in, it just couldn’t compete.

4. Color: Ah the infamous start-up. A photo-sharing app comparable to Instagram, Color raised $41 million in a 2011 venture funding round—before attracting a single user! It hadn’t even launched. Color had originally been set for takeoff with $14 million in funding—including $9 million of from Bain Capital. When Sequoia Capital got involved, the stakes tripled. Color’s trademark was location-based photo-sharing, as opposed to follower-based sharing, like you use with Instagram. Confidence in Color was obviously quite high, as it raised even more in funding than Yahoo paid for Flickr in 2005. But when Color fell, it fell fast. Its user metrics failed to move the needle, and by fall of 2012, Color’s board and shareholders had decided to wind down the company.

5. Fisker Automotive: Based in Anaheim, Calif., this luxury, hybrid sports car manufacturer received $529 from the Energy Department in 2009. The investment was made so Fisker could build a Delaware factory where it would make a mid-priced model. However, demand for electric cars was wavering, and the sedan was put on hold until 2014. The company announced layoffs, and more than a third of its government loan was drawn down. As of March 2013, Fisker has hired a legal team to prepare for potential bankruptcy filing. It laid off three-quarters of its staff this spring, and has about 40 remaining.

Below: Not squanderers by any means, but did you know they filed for bankruptcy?

6. Anchor Blue: Formerly Miller’s Outpost. Good old American threads Mom probably picked out and loaded in your duffel bag before shipping you off to summer camp. West coasters are generally more familiar with Anchor Blue/Miller’s outpost than those of other regions. The company had more than 100 stores in the west, with origins dating back to 1948. It was backed by private equity. Apparently back in the olden days, Anchor Blue’s popularity spawned from the fact that it carried Levi’s. The company filed for Chapter 11 bankruptcy in 2009, closing over 50 stores. In 2011, the post-economic downturn led them to close all stores and halt corporate operations.

7. Harry & David: This company definitely didn’t squander anyone’s money; it’s actually doing great. But unbeknownst to many, Harry & David—those guys who make big holiday fruit baskets you can order from anywhere in the country—temporarily went bankrupt a couple years ago. At 101 years old when it filed, the company had an impressive run. It was after a god awful sales season in in 2010, which was Harry & David’s 100th anniversary in business, that the company was forced to file. Thousands of Medford, Ore. residents were put out of the work they depended on every holiday season. But luckily, it was a false alarm. Everyone’s favorite fruit basket vendor emerged from bankruptcy within a year. Harry & David is well and thriving, and is owned by private investors Wasserman & Co. and Highfields Capital Management.

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Kabbage Team

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