10 Startups That Failed But Should Have Succeeded

Friendster is credited as being one of the first social networks that led to the social networking age we now enjoy. It was founded in 2002, a year before Tom Anderson's Myspace, and received close to $50 million in funding. The site was popular, and Google made a bid to purchase the company for $30 million—an offer that was rejected (which is still considered one of the biggest mistakes in startup history). Friendster failed because it didn't implement what we use social media so much for now: sharing news. It was profiled-based, and unless you weren't going directly to other friends' pages, you weren't seeing anything new. If Friendster would've focused more in this department, it may have lasted just a bit longer in the social media war, and not have ended up as the gaming website it is today.

Color aimed to be an innovative photo sharing app that would merge users' photo-streams together, based on location, or users who were simply good friends. It was a unique idea in an age of rip-offs, and Color had the funding to back it up. The pieces were there: $41 million from investors, a website, offices, and a lot of hype. It had it all, except an actual user-friendly app. When the app was launched, users became frustrated by the interface and lack of privacy functions. Co-founder Peter Phan resigned shortly after launch, and the company scrambled to redesign itself, instead of fixing its problems. Color came back as an app that let Facebook users broadcast video live to the social network from their phones-but the damage was done and Color closed its doors. You can't build a house when the foundation is always changing.

GovWorks.com had the heart, just not the smarts. Founded in 1998 by two childhood friends, GovWorks was built to help government clients keep track of their contracts, while letting everyday citizens apply for jobs, pay tickets and look up city information. The company grew from 8 employees in 1998 to 250 in 2000, but due to a power struggle between founders, disagreements within management, and their inability to fix bugs within its software, the company was sold in January 2001. GovWorks' demise was the subject of an award winning documentary, "Startup.com." When working with friends: egos need not apply.

In 1999, Webvan was one of the first companies that tried to make a business out of selling groceries online. It was a great idea: we Americans love getting things delivered. Webvan even offered to deliver groceries to customers within a 30 minute window. Great! But we didn't love it as much as Webvan expected. Webvan CEO George Shaheen believed that 35 percent of customers would be buying groceries online by 2003-2004, so he prepared for the influx of imaginary customers and opened up warehouses, ordered fleets of trucks, and bought dozens of expensive computers for the company's offices. The customers never came, and Webvan went defunct in 2001. Amazon recently brought Webvan back to life, and many startups today are hopping on the grocery delivery service, which customers are now soaking up.

Burn, baby, burn. This is exactly what UK-based Boo.com did in the late 90s, when it burned through more than $135 million. Boo billed itself as an online fashion store in 1998, and was backed by investment banks JP Morgan and Goldman Sachs. The site was founded to become a digital center for the cool and chic, and Fortune called Boo one of Europe's coolest companies before it even launched. With so much potential, the founders aimed high, hoping to sell its items in about 18 countries. But back then, the Internet was still young, and only about 20 percent of people were online in the UK. The company built too much, too soon, and couldn't sustain itself when people didn't flock to the site. It closed two years later in 2000.

Pay By Touch is a story of simply having the wrong captain at the wheel of the ship. Back when it was founded in 2002, Pay By Touch allowed users to pay for items with a swipe of their finger on a biometric sensor. Innovative, to say the least. It was the future of payment. Within a few years, the company had raised $340 million, with NFL player Drew Bledsoe as one of the investors. However, during the company's most successful years, CEO John P. Rogers was accused of domestic abuse, drug possession, and taking company money for his own use. One investor said he was "worse than a drunken sailor." By 2007, Pay By Touch was shut down.

Back when the Internet was picking up steam with American consumers in the mid-90s, AltaVista sprang into high gear as a dominate search engine. What led to the company's demise? No one could figure out how to build a business out of web searching. Crazy thought now, right? AltaVista became the first big web company to offer free email in 1998, but it wasn't enough. Just just three years later, a newly founded Google would catch up to AltaVista in market share, and never look back. Yahoo bought the company in 2003, and officially pulled the plug in July 2013, though it had already been brain dead for close to a decade.

Reagan-era surgeon general, Dr. C. Everett Koop, helped co-found DrKoop.com back in 1998. It was WebMD before there was WebMD, and quickly became the top health care website in the world, with 1.4 million unique visitors a month. Soon, though, the company lost track of its mission and established endorsements with hospitals and other medical-related websites that were deemed unethical, and slowly investors pulled out. DrKoop.com shut down operations in 2001 after hemorrhaging millions of dollars each quarter.

WebTV was started as a convenient combination of both the World Wide Web and television. Founded in 1995, WebTV came as a box about the size of a VCR that promised to bring the affordable Internet to living rooms without the use of a PC. Though sales were slow, the company grew enough that Microsoft bought and rebranded it as MSN TV in 1997. But by that time, email and web-browsing on television (through dial-up, mind you) had become stale. The idea was there, but was too ahead of its time. Broadband wasn't widely available, and there wasn't enough "wow factor" to shell out $425 to check email on a TV. Today, we essentially have the functions of WebTV on devices like the Xbox 360 and DVRs.

To man, Napster was the "bad boy" startup of the late 90s. Founded by Shawn Fanning and Sean Parker, it allowed users to share music online for free—something that was tough to even imagine at the time. But it was happening, and happening fast. At its peak, more than 80 million users were swapping music. Then, Metallica stepped in. The band was irate that their songs were being shared for free, and took Napster's founders to court. Lawsuits from musicians piled up and Napster was forced to release a subscription-based model in order to monetize and payback music owners. It failed in 2001, and was most recently bought by Best Buy in 2011 and merged with Rhapsody.