How Quibi failed despite $1.75 billion funding

The Unique Story of Quibi

What do you actually need to start and run a business? You’ll answer many factors like a good team, funding from investors, business acumen, a huge vision for startup and many more factors. What if I told you that a startup had the best combination of everything required to make it successful but even then if failed?

Your reaction would be quite strange and you would be confused that how the hell did a startup fail when they had all the bells and whistles. This is a unique story of Quibi that failed despite having almost everything. It’s a must read case study for aspiring entrepreneurs.

What makes the case study for Quibi interesting is the fact that they managed to raise more than $1 billion in the seed round of funding but decided to close their operations just after 6 months. It was started in August 2018 by Jeffrey Katzenberg and Meg Whitman. After raising more than $1.75 billion in funding, they decided to launch their startup in April 2020 during the pandemic.

But before we begin, we will talk about both these 2 co-founders and how the hell were they able to raise such a huge amount in such a short span of time. First up, Jeffrey Katzenberg was the chairman of Disney Studios from 1984 to 1994. When he was there as the chairman, Disney produced a lot of hit animated movies like The Lion King, Beauty and the Beast and The Little Mermaid.

After being the chairman at Disney Studios, he became the co-founder of DreamWorks Animation. DreamWorks produced a lot of successful movies like:-

• Kung Fu Panda
• How to Train you Dragon
• Madagascar
• Shrek

All of these movies were blockbusters at the box office which helped DreamWorks solidify their position as a strong animated movie producer. This helped the brand as they got acquired by NBC Universal for $3.8 billion in 2016.

The 2^nd co-founder, Meg Whitman was equally competent as she had previously worked in companies like:-

• Walt Disney Studios
• DreamWorks Animation
• Procter & Gamble
• Hasbro

But her biggest achievement was when she became the CEO of EBay in 1998. She didn’t stop there as later she became the CEO of HP. So as you can see she was equally competent if not more when compared to Jeffrey Katzenberg.

Both of these co-founders were in their mid to late 60s when they started this startup and were both billionaires. Both had their fair share of connections, network and experiences which was necessary to make a startup successful.

Now you’ll be able to get a complete picture of how they were able to raise such a large amount of money in such short span of time. These 2 co-founders weren’t your usual aspiring entrepreneurs who just started out, raised some funding and later made it big after years of grinding and hustling.

These 2 co-founders were experienced business CEOs who had been at the peak of their careers and wanted to collaborate to continue their winning streak. The investors that invested in Quibi included:-

• Big Hollywood studios
• Banks
• Private Investors
• Venture Capitalists as well as
• TV, Telecom and Tech companies

Some of the notable investors who invested are as follows:-

• Walt Disney
• 21^st Century Fox
• NBC Universal
• Sony Pictures
• Time Warner
• Viacom
• Lionsgate
• MGM
• Goldman Sachs
• JPMorgan Chase
• Alibaba Group

Now we will talk about what happened after they started their business operations. Quibi which is a short form of Quick Bites wanted to focus on short content. They wanted to make video content which should be less than 10 minutes so that the viewers can watch it on the go even when they don’t have a lot of time.

But what set them apart from other competitors was the fact that they shot their videos in 9:16 format. This meant that you can watch their content in portrait mode without rotating your phone.

Now we will be talking about the reasons why their idea failed so miserably:-

1. Bad Idea – The first and foremost reason for the failure of Quibi was that the idea was quite strange. They were oddly positioned and were competing against the likes of YouTube, Instagram, TikTok and Snapchat in mobile content. But they failed to appeal to the users as these brands had already pushed content as stories and reels which used to work in the 9:16 aspect ratio aka portrait mode.

But at the same time, they were also positioned against the likes of Netflix, Hulu, Disney TV, Apple TV and Amazon Prime where they were competing against big budget premium content. Although they tried to differentiate themselves from others but were dominated by other brands both in terms of mobile content as well as big budget premium content. They became the startup that was neither performing well in the mobile content nor did it performed well in premium content.

 

2. Covid-19 Pandemic – The pandemic forced people to stay indoors and this resulted in consuming a lot of content. This could have been a big opportunity for them to capitalize but they failed big time as their content was designed in 9:16 aspect ratio and was meant to enable people to watch it even if they’re on the go, example – travelling in a metro.

But when everyone was in home and no one is on the go, they either watched content in landscape mode or on their TV. By this time, they didn’t even have the functionality of playing their content on a TV. Hence, they failed to capitalize on this situation where other brands succeeded like Netflix or Amazon Prime which were equipped with every facility as well as lots of content to binge-watch.

 

3. No Testing – The biggest reason why they failed was due to the fact that they didn’t try to test their products and services with a MVP. Had they launched their content on a small level and received feedback to improve it, they could have made it big. But they launched their operations by having almost 50 shows on day 1. This became their biggest drawback as they were unable to use feedback to improve their content and shortcomings.

 

4. Too Much Cash Burn – The funding that they received was used to market and advertise heavily in order to make a presence in the marketplace. They also used a lot of well-known actors and directors from Hollywood to create interest in the minds of viewers.

This increased the cost of production and a lot of money was being burned to create shows that they didn’t even knew was good or not. The same money that was burned in marketing and celebrity tie-ups could have been used to test the market and gradually improve their offerings with the feedback that they receive. Quibi spent a total of $63 million on TV, Digital and Print Ads. This shows that scaling up rapidly isn’t a good idea and you shouldn’t spread yourself too thin.

 

5. Too Pricey – Even when Quibi was launched, it was too pricey as users had to pay $4.99 per month which could have been a pricey affair considering that you still had to see ads. If you wanted a more seamless experience without any ads, you needed to pay $7.99 per month. If they were new to the marketplace and really wanted users to sign up and consume their content they should have skipped ads and created just 1 package in the first place.

 

Conclusions

They shut down their operations just after 6 months of beginning. At that time, they had 500,000 paid subscribers. The platform stopped officially on December 1, 2020 and they decided to sell their remaining assets, platform technology and content rights to a buyer who was willing to acquire them.

This was a classic case study in itself and teaches young aspiring entrepreneurs that you’ll still fail miserably despite having everything if you fail to analyse, adapt and pivot accordingly. Money isn’t also everything. Hence, if you lack resources but have a huge vision for yourself, then starting working on your dream because you might be the next big thing in the marketplace.

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