Dumb Money: Exposing Silicon Valley’s Stupidest Investments

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The stories we hear from Silicon Valley are often heartwarming tales of good ideas paying off: the venture capitalist who saw Instagram's potential right away; the guy who painted Facebook's wall and became a multimillionaire; or the programmer who was told "no" by dozens of potential investors, then started Pinterest.

But Silicon Valley, like any other industry, has its share of truly dumb ideas. For every start-up that changes the world and makes its founders rich, a thousand die quick, anonymous deaths.

Some of tech's clunkers never get off the ground, but others manage to get big, high-profile investments despite having no redeeming qualities whatsoever. (For example, what kind of genius decided to throw $1.2 million at NaturallyCurly, the "leading social network and community for people with wavy, curly and kinky hair?")

In our new series, "Dumb Money," we're going to periodically trawl tech blogs for the worst examples of Silicon Valley stupidity, then subject the investors behind them to public mockery.

Think of it as our gentle plea for venture capitalists to do some actual diligence before giving millions of dollars to two-bit start-ups with no viable business models. It may sting now, but you'll thank us when the bubble pops.

Here are today's foolish investments:

1. Twist (raised $6 million in a round led by Bridgescale Partners)

Twist is an iPhone app that, according to TechCrunch, "aims to replace those annoying texts about running late." It works by using your phone's GPS technology to alert the people you're meeting up with when you leave for your prearranged meeting spot, then updating your ETA automatically while you're en route. In theory, this saves you from having to text "Be there in 5" and relieves anxiety all around.

Here's the problem, though: When people say they're running late because of subway delays or traffic, they usually mean something like: "I'm running late because I needed to finish the end of my Beverly Hills Nannies episode, then stopped to get a pack of gum on the way to the Q." If all your friends began using Twist, those little white lies would be exposed, and your true nature would be revealed. (Luckily, none of your friends will begin using Twist.)

2. Tout'd ($1.4 million, led by Warner Hill Angels)

You could be skeptical of Tout'd based on the apostrophe and missing vowel in its name alone. But it's what this New York–based start-up does that really makes its $1.4 million in cold, hard cash seem a tad excessive. According to BetaBeat, Tout'd is a "social media referral platform" that "allows users to crowdsource questions like, 'What’s the name of a good plumber?' to your social connections, who can provide helpful answers."

Tout'd accepts members via Facebook Connect, which is fitting because there is basically nothing you can do on Tout'd that you can't do in a Facebook status. But who are we to question the wisdom of Warner Hill Angels, the VC firm that led Tout'd to the money trough? The firm, after all, says on its website that it's "advised by some of the country's best and brightest teenagers."

3. Barkbox ($1.7 million, led by Resolute.vc)

Barkbox, which was started by Meetup co-founder Matt Meeker, is a company that sends subscribers a "monthly box of dog goodies," making it the canine version of companies like Trunk Club and ShoeDazzle. According to PandoDaily, "Items in the $17 to $29 per month box include fancy bones and treats, toys, and biodegradable bags for dog poop."

Barkbox might actually succeed, given the number of obsessive dog owners with too much disposable income. But let's not forget: This is a start-up based on the premise that dogs (which cannot buy things) will actually care if they're using last month's chew toy. And now it has $1.7 million in human money.

Anyway, it's not like selling pet products over the Internet has ever failed before.

Have suggestions for "Dumb Money" contenders? E-mail us!