Another Crowd-funded Drone Project Collapses (bbc.com)

An anonymous reader writes: Less than two weeks after we heard about the "robotic dragonfly" project failing, the BBC brings news that an even bigger crowd-funded drone project has given up development as well. The ZANO mini-drone raised a whopping £2.3 million on Kickstarter ($3.5 million), after asking for a mere £125,000 to get off the ground. They were supposed to start delivering drones in June, and a few hundred of them slowly trickled out. In October, they posted a long update detailing their plans for shipping the other ~15,000 drones they had been paid for. Their latest update, posted today, says, "Having explored all options known to us, and after seeking professional advice, we have made the difficult decision to pursue a creditors' voluntary liquidation." This will leave thousands of backers without a drone, despite paying £140 or more apiece.

Comments

Follow the money

[BarbaraHudson]

For once, the advice "follow the money" is especially apropos. How can you make $3,500,000 disappear? Sounds like there should be some recovery options against the people running this.

Re:Follow the money

[The-Ixian]

If you want to invest your money in risky ventures you should expect to lose it.

Don't risk what you cannot afford to lose.

Re:Follow the money

[fustakrakich]

How can you make $3,500,000 disappear?

Oh please! You're kidding, right? We can make 8.5 trillion disappear, okay? In fact, multiply that by about 500, and you have the derivatives markets...

Re:Follow the money

[gstoddart]

What 'recovery'?

You're not an "investor", you're essentially a "benefactor".

Think of these crowd-sourcing things as giant tip jars. You don't get any guarantees.

Why do people act like these things are any different than throwing change into someone's guitar case?

Re:Follow the money

[Lumpy]

Not just follow the money. They had NOTHING but a napkin idea at the start, that is how you end up with a guaranteed failure.
Back projects that have real prototypes and real ideas on how to scale up to delivering thousands or tens of thousands. Honestly if any of the people running it was getting more than 100K a year in income from this then they are dirty thieves that need to have their pants set of fire.

Re:Follow the money

[jwdb]

Further, considering that they raised nearly 30x the crowd funding goal -- the estimated necessary funding required to fulfill pledges ...

That's not how manufacturing works. Minimum funding goal is how many pledges you need to at least overcome your anticipated fixed costs, but there's still a marginal cost associated with fulfilling each individual pledge. When you get 30x the expected number of pledges, that means your variable costs will also be 30x greater. On top of that, if you have to produce 15,000 pieces rather than 500 (say), then your fixed costs also rise as you now have to redesign your product for volume manufacturing, whereas previously your prototype process might have been sufficient.

... there's clearly something worthwhile to investigate ...

No, there's not much to see here, just another startup that underestimated the challenges in going from prototype to volume, spent too much money on the transition, and went bust. The backers have my sympathy, but without evidence there's no basis for assuming malfeasance.

Re:Follow the money

[bluefoxlucid]

It's a venture with risks; you took the gamble. When banks do this, they want a market analysis, a comprehensive business plan, timeline projections; when people play on Kickstarter, they just throw money in and ignore the disclaimer of no responsibility. I can speak the language of comprehensive project plans and market projections; most folks can't, and wouldn't understand it if you put it in front of them, so what do you want?

The lower-regulation space allows fools to part with their money, and it brings the advantage of funding people whose vision stares down the longest barrel of hell--or just picks up on things the usual suspects can't grasp. You want those advantages, you allow that sphere, and you warn the players this is the nondescript poker table where we don't check too close for credentials; you might meet a few card mechanics who can shuffle four times and put the cards in any exact order they desire, but they're mostly decent people trying to play fair. You want it both ways, you set up two tables, and let the players pick where they want to sit.

Re:Follow the money

[iplayfast]

They had a demo of what appeared to be a working product. They said it worked. They lied. I want my money back.

Re:Follow the money

[Triklyn]

... you took that analogy way further than necessary... or i would say desired. but yeah, if i fund a kickstarter it's generally with the understanding that "if this project doesn't implode, then i've made a purchase, if it does implode, well, that's what happens sometimes."

Re:Follow the money

[Triklyn]

it's slightly different, it's a conditional purchase/pre-pay.

i make a pre-payment with the understanding that there's a chance that the venture might completely fail, but also with the understanding that if i don't, collectively i mean, then this item/idea that i find intriguing WILL never materialize.

But if it does succeed, then i am owed this thing that i payed for.

it's a purchase conditioned on them not completely screwing the pooch.

Re:Follow the money

[Balial]

So much this. If you think it's a great product, wait until it's all built and buy it on the store shelves. if you think it won't land on store shelves, and you really want it, and it's worth losing your money over it, then chip in on the kickstarter. All kinds of businesses fail, surely the ones that are started by a couple of guys with no experience and only a webcam are going to fail more. I'm not sure why people think these are risk free.

Re:Follow the money

[vux984]

Why do people act like these things are any different than throwing change into someone's guitar case?

I expect it is because the guy with the guitar case isn't promising to give anyone a drone if you put money in his case.

You aren't wrong that people are setting their expectations wrong with kickstarter. The money goes in and the product may or may not ever come out. That's a gamble you take.

Its certainly not really an "investment" because your maximum reward is a consumer product worth roughly what you put in, and you certainly aren't a shareholder of the venture that creates the product.

But kickstarters do have an obligation to make a good faith attempt to deliver on their promise. Its not illegal or even a breach of contract to fail at the attempt. But it would be a breach to simply take the money and walk away or otherwise act fraudulently.

Its clearly a very different proposition than outright charity too.

Re:Follow the money

[bluefoxlucid]

I'm not sure why people think these are risk free.

Because the world is fair and movies are technically accurate.

Re:Follow the money

[bv728]

3.5m - 5% for failed Pledges = 175k - 10% for Kickstarter and Credit Processor Fees = 350k - 20% for Taxes (this is income!) = 700k Total received budget ~= 2.28m Now, figure 30% of that is shipping (684k), 40% of it is manufacturing (912k). Left over: $684K Now, common wisdom is that hiring one guy at $60k a year costs you $100k a year total in physical plant, HR, Payroll, benefits, etc. While I doubt they had ALL of that, let's say they're five guys, so now they have $184k to absorb any unexpected expenses and such. So if you have to do thee site visits due to QC issues, or have a supplier disappear (not entirely unlikely, but one of the less well known issues), or have to hire two or three extra people to handle the volume you just weren't prepared for, that's gone, you don't have any flex left. And those are the more common issues - imagine you do two site visits and then have to pay to have someone else do your manufacturing at 50% more: because it turns out everyone was lowballing their quotes, and when you go back to the other companies they tell you that they can't do it at that price. Not excusing them, but people tend to go "How could they lose [LARGE AMOUNT OF MONEY]" when the answer is "Most of what the campaign made was already earmarked to known costs - each pledge did not make them a lot of money, because what they were doing was expensive!" And they made the same scheduling and budgeting mistakes everyone makes.

Re:Follow the money

[viperidaenz]

Right, it's not an investment.
It's a gamble.
People don't seem to get upset when their lottery tickets don't win. Kickstarter isn't much different.

Re:Follow the money

[PopeRatzo]

They had a demo of what appeared to be a working product. They said it worked. They lied. I want my money back.

P.T. Barnum had a word for people who find themselves in situations like yours.

Re:Follow the money

[ttucker]

Even calling it a gamble is misleading. It is a sort-of donation, that you might get a free gift for later.

Re: Follow the money

[Aaden42]

I've had 100% successful delivery from the projects I've backed. Caveat emptor.

You need to do some background research. Treat it more like a speculative investment, not buying widgets from Amazon.

If there's a huge rift between their best prototype demonstration and reality, probably best not to back. If it looks half their funding goal is to cover the special effects budget in the "demo" video, pass that one by...

Re:Follow the money

[farble1670]

Not when there's fraudulent misrepresentation involved. The promo video they showed everyone was totally fake.

https://www.youtube.com/watch?...
doesn't look faked to me.

Re: Follow the money

[BarbaraHudson]

Their variable costs haven't gone up 30x. First, they were ordering bodies in batches, one for each color scheme. They only got one (or maybe two) batches. Same thing with shipping - they haven't shipped the bulk of the orders, so shipping costs are also not an excuse for "no money". Also, if you read their postings, they were still planning on hand-assembling ALL of them, over a period of several months, which is why they said some people would have to wait until February. In other words, they didn't change their assembly process. Since they haven't assembled the vast majority of them, most of that money should also be floating around.

They weren't planning on hiring extra staff for the increased production requirements (even though many backers suggested they do so), just sticking with their original plans and extending the time. 5 days a week, 40 hours total, no additional staff. So there was no "scaling up production" issue. Oh, and they told everyone that they were taking a 3-week Christmas vacation. No crunch time for these dudes, not in their work ethic.

They've said there's no money for refunds for those who pre-ordered, or for those who were backers. So it's all been spent while only minimal production has taken place, and most of the parts haven't been ordered.

They've blown through the money, continuing even when simple accounting would have shown that they couldn't meet their commitments. Why? Gotta keep paying themselves for their amazing leadership and ingenuity, I guess ... Should have been put into receivership when it was obvious that from a financial point they had spent so much that there wasn't enough for the rest of the parts, or shipping. People would have at least gotten some money back.

Re: Follow the money

[jwdb]

Their variable costs haven't gone up 30x.

Have you seen their balance sheets? Their orders? Their setup costs? How much of the raw materials did they already procure? How much did it cost to get their electronics partner tooled up? If not, then on what basis are you making such assertions as though they are fact?

Unless we get to see a financial report, neither you nor I will ever know what happened. If you really care, go get them to open up their financials, but until then all you have is speculation.

In other words, they didn't change their assembly process.

The update linked in the summary says they've worked out how to get their partner to do the motor mounting as well, so they don't have to. Sounds like a production change to me.

Since they haven't assembled the vast majority of them, most of that money should also be floating around.

So it's all been spent while only minimal production has taken place, and most of the parts haven't been ordered.

Why? Gotta keep paying themselves for their amazing leadership and ingenuity, I guess ...

Speculation, speculation, and speculation edging towards slanderous.

Should have been put into receivership when it was obvious that from a financial point they had spent so much that there wasn't enough for the rest of the parts, or shipping.

Very true, and is the actual discussion we should be having here, rather than all the pedestrian complaints and accusations.

Doing this would require having accountants and oversight from some kind of board, say of contributors and/or Kickstarter staff (feature request for Kickstarter v2.0?), and we'd need to work out a system to keep them accountable. Of course, that would increase the overhead, and thus make some otherwise-viable projects unviable again. It also turns Kickstarter into just another shopfront, while I'm more interested in using it as a staging ground for ideas that could not make it on their own, so I'm not sure I'd support having more oversight.

Crowd Funded = Scam Artist

[Archangel Michael]

I'm beginning to think that Crowd Funding is the latest greatest version of a scam artist's dream.

Step one: Promise the world
Step two: Set up crowd fund account
Step three: Exploit Media for free publicity
Step Four: ???
Step Five: Profit!
Step Six: don't deliver anything to anyone.

Re:Crowd Funded = Scam Artist

[paiute]

It's like The Producers, only with computers.

I smell a remake.

Re:Crowd Funded = Scam Artist

[tnk1]

Presumably that can and does happen, although most are not scams, just poorly run or run into unforeseen difficulties.

Kickstarter is about backing projects, and when those projects are advanced, like this concept, the project can fail due to either technical difficulties or inability to cost effectively manufacture the objects.

So, realistically, while most people would prefer to invest in projects that will produce a result, there is a substantial difference between a Kickstarter for something like a board game, which is relatively easy to publish, compared to an advanced drone, which is not easy to build, and the manufacturing process has to be built from the ground up.

People who get into Kickstarter projects expecting a product at the end are advised to have some understanding of the relative difficulties involved of the project they are supporting and then not support it if it is too speculative.

In this case, the project was sort of speculative. They were asking for 120,000 to get started, and they got two million. While that improved their ability to work on the project, it caused expectations to rise, and probably caused the team to make the mistake of increasing the scope of their project beyond their comfort zone.

Re:Crowd Funded = Scam Artist

[Archangel Michael]

Sorry, but there are already fifty different "drones" on the market. This wasn't ever going to be successful, mainly because it wasn't really new or innovative. It was "me too" project.

Re:Crowd Funded = Scam Artist

[plopez]

Read "The Road to Wellville". It is set during the great breakfast cereal and processed food boom in the 1890's. A pattern followed by the great railroad buildout, the automobile boom of the late 1800s to early 1900's, the tech boom ofthe 50's, 70's, 80's, 90's, and later. The oil boom, cattle boom, etc. Nothing ever changes.

Re:I'm starting my own crowd-funding site

[TFlan91]

404

Yup, I "invested"

[iplayfast]

They showed a completed project. They said it appeared in numerous places. It looked like all they needed to do was get money to start production.
Their Risks and challenges paragraph. 100% confident. They know it works. How are you supposed to do due diligence on a product when they outright lie.
I've complained to kickstarter, letting them know they are being tarred with the same brush, because dammit, kickstarter recommended them!

Risks and challenges

Through innovation and diligent research and development, We are 100% confident in delivering an Autonomous and Intelligent aerial photography and video platform. We know our technology works.

We have enlisted a world-class British EMS (Electronic Manufacturing Service), with over 20 years of experience in bringing cutting edge high-end technology products to market, to manufacture ZANO for our Kickstarter backers.

We have taken into account that component lead times potentially could cause delay in delivering ZANO to our backers on time. We have conservatively estimated a June delivery, however, Our component suppliers often need to order the raw materials to manufacture their components 12 months in advance, as a brand new product, it is difficult for us to estimate initial volumes and provide an accurate forecast to our suppliers. We want everyone to be able to experience ZANO experience, that's why we have not put a cap on the amount of ZANO's we are making available for the Kickstarter campaign. We have built fantastic relationships with our component suppliers who believe in ZANO and our vision to make aerial photography and video accessible to everyone. Our component suppliers have set aside large volume buffer stock to cope with the initial demand from Kickstarer! However, there is always a risk involved with large volume component supply, we thought we had better mention it! The risk isn’t if you will get it, it is simply when you will get it, if any supply issues arise! (We are working hard to ensure they do not!)

Re:Yup, I "invested"

[Lumpy]

All of that is 100% bullshit out of their mouths unless they were making them out of strange space materials. and if these were all custom carbon fiber and titanium , everyone should have walked away understanding that it was 100% BS for the price point.

Absolutely NO plastic injection company requires a 12 month lead time for ABS supplies, that is complete horse shit. Circuit boards even auto placed and tested have a MAX 3 month lead, and these jokers should have had the board design done and the files ready before the first kickstarter order came in.

They were bullshitting everyone and they knew it.

Re:Yup, I "invested"

[viperidaenz]

It's got HD video with image stabilization
WiFi control
Lots of bright, animated flashing lights.
Sonar obstacle detection
On-board microphone, that can apparently filter out the whine of the propellers?
On-board speaker
Motors can spin both directions! Up to 100,000rpm! in case you want to fly it upside down? wtf?
Fully autonomous
Facial recognition
Mesh networking, swarm capabilities

All in a tiny drone that fits in your hand, with 10 - 15 minutes of battery life, weighing less than 60 grams

Back to their claim of 100,000rpm motors: With a 1.5 inch diameter prop size, that means the tips are spinning at over 450mph. They also claim to be able to go full speed one direction to full speed the other direction in 200ms. That's a delta of 900mph in 200ms. From motors too small to have ball bearings. Too small to be brushless. They're fricken pager motors.

A 1.5 inch prop with a 4 inch pinch at 100,000rpm only has a static thrust of 60 grams. It needs 100 watts to spin it. It's terribly inefficient.

It's all bullshit.

Manufacturing is Hard

[TechyImmigrant]

Excess revenue is a big problem for a crowd funded project.

You might know how to build 200 units and ship them. Get some friends in to a soldering party.
But if you need to build 200,000, you need manufacturing.

Manufacturing require up front investment, employees, time and effort. The payoff is over a longer period as you ship products to market. If you build 200,000 then stop, you're going to make a huge loss, because you spent all that money setting up the manufacturing.

Re:Manufacturing is Hard

[Anonymous Coward]

Making 12 000 items at a rate one per day would take 33 years of working daily, assuming one person. 396 could make them in a month. That starts sounding like a mass production effort.

Kickstarter = inherent risk

[rsborg]

I really don't like the whining here.

Let's see what happens to the actors involved:

1) Project owners - will now have egg on their face and shouldn't (hopefully) have further options to scam on kickstarter (or gofundme) projects.
2) Contributors - note the title isn't customer or consumer - should be happy they weren't strung along for longer. Some projects simply don't pan out, and this was one of them. Next time ask for credentials or track record before contributing.
3) Kickstarter - Laughs all the way to the bank on their commissions. Will they ever take action against these kind of projects? Sounds like it's detrimental to their bottom line, so probably not likely.

Probably inability to scale

[allquixotic]

The fact that they were able to trickle out a few hundred units suggests that their production process was not at all fit for producing as many units as were demanded once they got popular. They were happy to accept the money coming in, but they didn't realize until it was too late that it would cost way more than that to develop a production facility that could pump out the units requested in a reasonable timeframe.

Building huge quantities of things is hard. Very hard. Just ask any car manufacturer that has tried to take a prototype or limited run vehicle and pump out hundreds of thousands of them per year. It's a completely different ballgame. It requires a very large investment in production facilities, automation, tooling, labor, supply chain, and distribution to take even a relatively inexpensive product concept and make many thousands of them, compared to making a few hundred. Some companies offer parts of the solution "as a service", but ultimately you are going to need some kind of deep customization for most products, and especially for something fairly unusual like drones.

If you only had 500 orders, you could very possibly build each one by hand in a garage. It would be tedious as all hell, but with someone dedicated to making trips to hardware stores to acquire tools and parts, someone dedicated to boxing them up and shipping them, and 2 or 3 people building them, you could definitely have a garage business where you churn out 500 drones every 3 to 6 months or so. 15,000, though, is a quantity that demands a completely different manufacturing approach, unless you plan to tell people who ordered last that their drone is scheduled to be delivered in 2025.

Based on the fact that hundreds of people got (presumably working) product out of them, I'm willing to bet that their primary, and successful, production "facility" was most likely a garage and/or basement, or a small leased or rented building with only the most basic facilities. The other possibility is that they actually tried to pay for the much more expensive full-blown process, the scale of which would let them produce around 50,000 or more drones per year, and completely ran out of money when trying to fulfill the remaining orders.

This is what happens with crowdfunding, unfortunately, unless they agree to sign a contract up-front that they either owe you your money back, or a finished product as originally advertised.

A word to the wise

[OnceWas]

Hardware is hard. Really really hard.

The list goes on, and on.

Even hardware projects with experienced teams can fail. If you see a hardware crowdfunding project, be fully willing to accept that your 'investment' (which is what it really is) is more likely to disappear than result in a finished product.

Crowd funding is not a store, but a gamble..

[modi123]

Even though places like Kickstarter really try to make it look like some sort of store the projects are all gambles. There are a few areas that seem to have it down right (books, comics, etc) and I have had success, but tech stuff? *low whistle* You have to approach those different.

Neal Stephenson's 'Clang' comes to mind.
https://www.kickstarter.com/pr...
http://www.polygon.com/2014/9/...

Re:Yeah, I'd say "f it" and head to the beach too

[fustakrakich]

Couldn't fly for more than a few seconds. You could do just as well with a stick of balsa wood, a rubber band, and a propeller.

40 minutes... Not too shabby