Why did toygaroo go out of business?

Nikki Pope, along with co-founders Hratch Hutch Postik, Rony Mirzaians, and Phil Smy founded Toygaroo in 2010. She appeared on Shark Tank in Season 2 Episode 2, seeking $100,000 for 10% of her company. She pitched the company as the “Netflix for toys,” a subscription service that would allow families to rent toys until their children outgrew them, rather than purchasing new ones each time.

After being on Shark Tank, Toygaroo’s website traffic skyrocketed. However, this rapid growth caused a number of problems for the company. For example, their inventory costs started to increase significantly and they had to pay more for shipping services. This, in turn, caused their profit margin to plummet. As a result, the company was not able to keep up with their growing expenses and they eventually went out of business.

Despite getting $250K in two funding rounds and an appearance on Shark Tank, the company ultimately failed. In April 2012, Toygaroo filed for bankruptcy and officially shut down in 2013. Apparently, their planners and investors didn’t take into account the sheer amount of toy inventory needed and the costly shipping prices, which quickly ate up their capital. Phil Smy, a software designer and web developer who helped to build Toygaroo’s website, explains what happened in an interview with Failory. He reveals that Toygaroo’s problem was their focus on growth over toy sourcing, and they made the mistake of putting too much emphasis on marketing instead of optimizing their website. As a result, they had a lot of people signing up, but not enough to justify the high costs of running a subscription service.