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Facebook IPO BlunderSpaceX Resurrects Space TravelZynga's Dying Breaths Uber's Legal BattlesCrowdfunding & Microlending Take RootDaily Deals a Dying Trend?Start-ups Step Up After SandyDisgruntled CEOs Act Badly Post-ElectionBad Medicine Causes Meningitis Outbreak
It seems like this year some businesses fell out of favor with the entrepreneurial gods, while others basked in their glory. Golden children Facebook and Zynga got their silver spoons yanked away, while SpaceX, Airbnb, and Kickstarter were blessed beyond measure. See who came out of 2012 on top.
For investors and the tech industry, there wasn’t much to like about Facebook’s feverishly anticipated IPO in May. The offering experienced technical, tactical, and ultimately, legal problems: by August the company’s stock had lost more than half its value. (More recently, the price has risen, reflecting--among other things--Facebook’s improved prospects for mobile.) That debacle gave other IPO-eager companies the jitters and prompted the SEC to review some of its rules.
The touchdown of the Atlantis in 2011 marked the end of NASA’s adventures in manned space travel. But the end of an era doesn’t necessarily mean the end. In May, SpaceX’s Dragon capsule became the first private craft to visit the International Space Station, part of a $1.6 billion NASA contract. SpaceX’s first manned flight is expected in 2015; and NASA has contracted with two other private companies for “space taxis” to keep us boldly going, etc.
You know what they say: it’s all fun and games until somebody loses $53 million in one quarter. At Zynga--until recently a favored Facebook friend--the stock is down. Advertising is down. Innovation is down. (EA, which sued Zynga for copyright infringement, is just the largest firm complaining that Farmville’s parent doesn’t grow its own.) Last month, the company shed 5% of its workforce; more than a dozen key executives had already beat a retreat. For investors who bought into the lackluster IPO last December, it’s been a long year of disillusionment. To non-gamers, the decline of a business selling virtual objects for real cash might seem like the restoration of sanity.
Uber wants to be disruptive but all it gets is dissed. The start-up, which lets people summon town cars or cabs with a smartphone app, has twigged off officials in many cities, who complain about lack of pricing transparency, drivers’ use of electronic devices, and infringement of local laws like New York’s prohibition on prearranged taxi rides. Taxi drivers in Chicago have sued over trademark violations and consumer fraud; San Francisco drivers brought a similar complaint. One score for the team: Uber reached a deal early this month with the Washington D.C. City council that gives the company freedom to operate there with local drivers. Many people who have tried Uber say they love it, and tech enthusiasts want the company to persevere.
With banks still playing Mr. Stingypants, capital-hungry small businesses increasingly relied on mass appeals through sites like Quirky, RocketHub, and Kickstarter. Microloan ventures like Kiva, meanwhile, continued to add U.S. cities to their developing-world portfolios. In April, the government--egged on by an entrepreneur-driven campaign--made it safer and easier to go out in the crowdfunding waters with the JOBS Act. That law, among other things, capped investments at non-shirt-losing levels; allowed donors to receive equity; and increased the amount entrepreneurs can raise and how many folks they can raise it from.
Researchers into consumer psychology could write whole books about the disenchantment with daily deal sites. The avalanche of offers got tedious. And there are just too many companies, although economic Darwinism is culling the herd. Many merchants, meanwhile, experienced a brief, sometimes unmanageable bump in traffic that cost them money and didn’t reliably produce new regulars. Groupon’s stock price is down more than 10% from its IPO. Amazon wrote off more than 90% of its investment in Living Social. Gilt Groupe has closed down its men’s fashion site, slimmed down its food site, and is trying to sell its Jetsetter travel site. Maybe it can offer it as a deal.
This year Airbnb emerged as a champion of the sharing economy. Last year’s ugly headlines about homes left looking like Keith Moon stayed there have been largely forgotten. Instead, the company became a hero for waiving fees for hosts and guests in areas affected by Hurricane Sandy and creating a platform for those offering free housing in wake of the disaster. Sandy was also a big moment for Instagram, which experienced more than its share of big moments this year (including a $1 billion acquisition by Facebook). Users posted 800,000 photos of the property-gobbling storm and its aftermath, creating a Twitter-challenging enabler of citizen journalism and a new way to chronicle history.
Whether they were acting out of necessity or protest or spite is a matter for debate. Certainly the CEOs who announced layoffs after President Obama’s reelection insisted they had no choice. Robert Murry, CEO of Murry Energy, blamed Obama’s “war on coal” when he let go 156 people. Zane Tankle, the CEO of Applebees, told Fox News he might have to dismiss some people, while the CEO of Pappa John’s said some of his franchisees might do the same. Maybe all these people should have laid off workers before the election. That way, they could have used rising unemployment numbers to make their case for a Romney victory.
Just a few months ago, most people didn’t know what a compounding pharmacy was. Now they’re crying out for regulation, responding to an outbreak of fungal meningitis, which has killed 38 patients and sickened 440. The contaminated drugs at fault come from the New England Compound Center, in Framingham, Massachusetts. That business, founded by Barry Cadden, was forced to close and may lose its license. Inspectors found potential contamination at another Cadden company, called Ameridose. Some people should not be serial entrepreneurs.
-- Leigh Buchanan