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Another Crowdfunded Startup Takes Customers' Money, Then Shuts Downs (mercurynews.com)
An anonymous reader quotes the Bay Area Newsgroup:
A Bay Area startup that promised to give music lovers state-of-the-art wireless earphones is instead closing its doors, becoming the latest in a string of crowd-funded companies to take customers' money and shut down without shipping a product. San Francisco-based Kanoa ran out of capital and shut down this week, leaving in the lurch scores of customers who paid $150 or more to pre-order high-tech earphones they never received. The company emailed customers on Wednesday to break the bad news, directing them to a letter posted on the Kanoa website...
Kanoa is just the latest local crowdfunded company to disappoint customers. Last summer San Francisco-based startup Skully imploded, to the dismay of 3,000 customers who paid $1,500 each for high-tech motorcycle helmets they never received. In February, Lily Robotics, another San Francisco-based startup, filed for bankruptcy. Unlike Skully and Kanoa, Lily promised to reimburse the more than 60,000 customers who paid for but never received its camera drones.
In a letter online the company claimed they are "in negotiations" with potential investors, "and also large tech companies on an acquisition" -- but unless and until funding materializes, "we do not have enough capital to stay operational..."
"We know you are disappointed, and can only ask that you understand that we genuinely tried."
Kanoa is just the latest local crowdfunded company to disappoint customers. Last summer San Francisco-based startup Skully imploded, to the dismay of 3,000 customers who paid $1,500 each for high-tech motorcycle helmets they never received. In February, Lily Robotics, another San Francisco-based startup, filed for bankruptcy. Unlike Skully and Kanoa, Lily promised to reimburse the more than 60,000 customers who paid for but never received its camera drones.
In a letter online the company claimed they are "in negotiations" with potential investors, "and also large tech companies on an acquisition" -- but unless and until funding materializes, "we do not have enough capital to stay operational..."
"We know you are disappointed, and can only ask that you understand that we genuinely tried."
It's a well-known risk of crowdfunding and backers are warned about this risk a gazillion times.
This shouldn't be shocking to anybody even remotely sane.
If you're outraged by this, you should instead be outraged by the psychiatrics wards' inability to keep you locked up inside.
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Crowdfunding is not a game that promises to deliver. Realistically, it is a 50:50 thing and people need to understand that and need to stop complaining that it is not a 100% thing. On the plus side, you get a 50% change of getting something you would otherwise have a zero chance. If you take the probability of failure into account, it is actually a pretty good deal in many cases (if you want what is being promised). Also, if you are somewhat realistic in your expectation, you can recognize campaigns that have only a very low probability to actually deliver.
That said, if you expect it to be a 100% thing, then stay away from it as you have _not_ understood what this is about.
Most ACs are not even worth the keystrokes to insult them. Be generically insulted by this and ignored otherwise.
People confuse crowdfunding with pre-ordering. In crowdfunding you sponsor someone's attempt to achieve something, because you want it to happen. Perks are just an additional incentive. Sometimes a perk happens to be a product, but it's still a perk for your sponsorship, not something you bought or pre-ordered.
None of these people were customers. They were charitable people donating to a yet unstarted business with the hope of getting something in return.
The sooner the media stops calling everyone who parts with money a "customer" the sooner people may start setting their expectations straight. Businesses have failed at inception for millennia. It's only recent that we decide that it's constantly newsworthy when a small insignificant one with little investment fails.
All the risks of equity, fewer rewards than bonds. Sign me up!
Yeah, baby! Bend over and let me show you my wedding tackle one more time!
It's not about business tactics. When you crowdfund you essentially become an investor. Where professional investors get equity crowdfunders get a promise to be delivered upon success. Whether or not success happens or not your money was spent on a dream not a finished product. This sort of thing can't be blamed on the start-ups, it's not like they go out of their way to fail, but rather it's the fault of those crowdfunding it for gambling on a product that hasn't been made yet.
Startups exist because it is not just a matter of having the money. The founder has a very important role. Otherwise investors you be hiring people to create the products, not buying shares of high risky companies owned by people they barely know...
Investors invest in the founder, someone with the vision and the skills to get the job done. Someone that knows how to judge if someone they are hiring is good or not. Someone that comes and make a difference when things are not going well.
If you don't have that someone, then anyone with the money could have done it before you, there are real reasons why no one did it yet...
* Any headphones
* Any chargers
* Any pens
* Any watches
* Any jerky
* Any box
* Anything for your pet
* "World's first" anything
* "Premium" anything
xkcd is not in the sudoers file. This incident will be reported.
If I were a conman, I would hang around crowdfunding sites to harvest suckers.
When a bank or venture capitalists funds a product or company, they make money out of it if the product is successful - they take a risk with an upside. In a crowded funded product, the funders are fools who don't partake in the success of the product in the off chance that the product is successful.
These things are always a risk. If you're going to put your money in a company for a yet-to-be released product, make sure they have an existing track record. If they're on Kickstarter (or similar), check their previous campaigns; were they successful? are their products useful? did they deliver what they promised? If they're an established company, maybe question why they're turning to crowdfunding instead of investor backing; is the product all it's cracked up to be? is the company doing well financially? is their leadership stable?
And at the end of the day, make sure the money you spend is money you can lose, unless what you're getting is something you can hold in your hand or guarantee a refund.
Where's my Dashbot/Voder?
"Shipping in July"
No update since April.
Obviously you need to stop investing in startups in the Bay Area.
KANOA send headphones for review, this guy THOROUGHLY reviewed them and SLAUGHTER the product, shortly after they closed their web page
https://videosift.com/video/Re...
It's a well-known risk of crowdfunding and backers are warned about this risk a gazillion times.
Its a well known risk of any new startup regardless of where the funding is crowdsourced, friends and family, angel investors, venture capitalists, etc.
... I've had VCs explain to me they want to see friends and family involved at very early stages. It speaks to a commitment one will have to the project due to the life long grief one will face for losing friend and family money. As opposed to VCs you don't give a crap about and will never have to see again. Crowdfunding contributors, you don't even have to face them in the real world. Just a post to a website, "sorry, it didn't work out".
When things take longer than expected and they burn through all the money and have to shut down, does it matter where that money originally came from? Did many crowdfunding contributors even do any "due diligence" research beyond reading the project web page? I bet friends and family do better "due diligence".
FWIW
If I were a conman, I would hang around crowdfunding sites to harvest suckers.
When a bank or venture capitalists funds a product or company, they make money out of it if the product is successful - they take a risk with an upside. In a crowded funded product, the funders are fools who don't partake in the success of the product in the off chance that the product is successful.
VCs also own the project. They will fire founders who are failing and bring in professionals to actually deliver on the original idea. Crowdfunding contributors have no such control.
You must be an American, with a declared major in the arts, or communications if you have a drawer of jock straps (that you haven't stolen, that is, then arts it is!).
I. HAVE. SPOKEN. SHUDDUP!
Investors invest in the founder, someone with the vision and the skills to get the job done.
No, they seem to invest in someone with a vision and a willingness to follow it. In many cases the "visionary" is just an ideas guy and they then have to find engineers to actually make the thing. Engineers also have the habit of saying "nope". For example...
When I was in the medical industry as a startup, we kept on getting compared to these guys:
https://www.indiegogo.com/proj...
and that device was somewhat more capable (on paper) and not dissimilarly priced. Although the market was different people still wanted to compare. Now, I spent about an hour looking at it and decided it would never work.
For example, by a cursory look at the hardware, they have a ECG (can work, but would be inaccurate on the forehead), reflectance pulse-ox (definitely can work, potentially more accurate but calibration isn't settled yet), a thermometer and a few bits and bobs, like a thermometer. They claimed to able to measure *internal* body temperature which is clearly a lie to anyone who thinks about it for 3 seconds. They also claimed to be able to measure blood pressure. This is not clearly a lie unless you know about medical devices. The only remaining option is pulse transit time. That works, but needs frequent recalibration, i.e. half hourly measurements using an oscillometry cuff. Even then I don't know off hand if there's actually a certified machine on the market.
Anyway a brief investigation to me demonstrated beyond doubt that it would fail. They raised about $50 million and the FDA has told them to remote brick the devices.
Anyway as an engineer trained in the field, it was obvious from me that it was utterly impossible with state of the art technology. It's also kind of obvious that a startup which isn't centred around some leading engineers in the field is going to be able to quickly surpass the state of the art when many people have already tried.
SJW n. One who posts facts.
They should have put their solution on a blockchain so they could have raised $10+ million with an ICO!
-IOVAR Web Dev Platform
This should be treated as a crime, and they need to be hunted down and make them return everone's money and then fine them for three times the amount they collected. I believe a senator need to be contacted on this to bring a bill to stop this nonsense.
What? Earphones for $150? LOL!
You don't magically become an investor by giving money to these projects. Investors have legal protections and they can exerte not only control on the project but also rake in royalties if the product is successful. None of these things are available to people that "invest" in these indi projects. In fact if these projects had an actual viable business plan they would find real investors/banks etc... rather than going the crowdfounded route.
The only way to describe the status of those that "invest" in these projects is like what happens when you do a donation. People are donating money with no strings attached. That is the reality, and saying they're investors is dishonest at best.
More on topic for this article, Hillary got dozens of foreign governments to crowdfund her political slush fund, AKA the Clinton Foundation.
Whadda you expect? They're from SF, flake capital of the world.
I think the reason that high tech crowdfunded products are so popular isn't due to the inherent foolishness of the people who back them, but because of the failure of established technology companies to actually meet market demand.
Too many products are crippled by their parent company or VC financing MBAs who look at the product and figure out how it can be manipulated into 5 years of new models and revisions, which features can be withheld or turned into vendor exclusive options or upgrades, and so on.
The high tech landscape at all levels from consumer to enterprise is littered with good technology corrupted by relentless marketing and financial scheming to extract the maximum amount of money from the buyer, and quite often with the side effect of not fixing bugs or making basic functionality or features completely reliable.
It seems like so many kickstarter projects are attempts to fix broken products with accessories that ought to be built in features or produce a variant of a product that wasn't crippled at birth by its maker for whatever marketing or long-term pricing games they have.
My parents always said, fools and their money soon part ways. The trouble with many of these startups is that they compete in a much larger market of bigger players. Rather then a untapped market that could potentially have success. It's good to follow your dream, unless so many others have had that same dream already.
IN the early days crowdfunding was a good way to help some small guy produce some open source product you had interest in. The Guy wanted to share his idea with others and needed financial help.
Now a days its abused by people who want to be the next zuckerberg and seem to be driven by money only. Cant get VC so they sucker other people into funding their projects. SO many re-hashes of exsiting projects, SO many narrow topic projects, SO many "expensive" project. Its hard to find anything worth supporting anymore.
Startups exist because it is not just a matter of having the money. The founder has a very important role. Otherwise investors you be hiring people to create the products, not buying shares of high risky companies owned by people they barely know...
I spend a lot of time at poker tables in casinos, and if you play the right games at the right limits you will encounter filthy rich business owners, and here you can talk to them with their guard down.
A common theme when asking serially successful businessmen about how to be a successful businessman: Hire great people. The skill of starting a successful business is identifying the people necessary to make it work and then getting them on board. Elon Musk for instance is good at getting great engineers on board.
"His name was James Damore."
Okay, please explain.
You want a product. You want a product so bad that you finance the company to make it before it even exists. Your reward for doing this is to receive the product.
Is this not just pre-ordering something that doesn't exist? If it works and is successful, you'll be able to pick one up not long after they make them anyway, whether you invested or not. If it doesn't work, you're going to lose money or receive a substandard product.
What's in it for you to crowd-fund that kind of thing?
Now, I have crowdfunded things. Literally, they were all limited run, support-for-the-creators projects, where the product wouldn't exist afterwards and/or the product wouldn't get made otherwise where the creators had a proven history of success.
For example, Defense Grid 2. It couldn't have happened without the kickstarter. The people behind it had proven themselves already. There was in fact already a substantial amount of the game complete. They weren't reliant on just the kickstarter. And actually I profited quite heavily as AMD gave them some graphics cards to give away to backers, I got the game, and all kinds of other stuff. Even then, that kickstarter really worried me, as it's not how I normally do things. I've only ever backed four or five small projects with a tiny percentage of my disposable income. Four succeeded, delivered the product, after having proven they could deliver a product before they even started. One stopped the kickstarter and never took the money because they found investment, and the game came out anyway (and backers got a free copy).
But... at no point did I put money, into an unknown company, with no track history, promising to make something that didn't exist, that you'd just be able to buy normally later even if you hadn't funded it.
I'm afraid I have to apply my normal rule here. If it doesn't exist, in a shop, to buy, today, then it's all hype and hyperbole. For anything from fancy battery technologies and electric cars, to Half-Life 3, to the latest iPhone, or even a movie.
All the pre-hyping stuff just flies over my head, because it's all irrelevant if you can't actually buy that product yet.
You can "invest", but what you're really doing is "donating" - to be honest I'm quite happy donating to a project where I'm enjoying the fruits of their previous labours so much that I think they deserve more. If I get something else out of that too, cool. If not, I've paid them back for something they gave me (yes... even if I have paid more than I needed to, I'm fine with that if - say - a computer game cost me almost nothing but ended up giving me hundreds of hours of entertainment.
I've been known to buy second copies for friends, even if those friends likely won't play that game, etc. It's the only reason I'll buy DLC too... to support the original game).
If you can't buy it today, but you could buy it tomorrow no matter what, then why would you lay down money today instead of just waiting?
Really editors? shuts downs??? The only Downs we have here is creimer, and even he would do a better job editing.
I am pretty sure you can't have blue tooth device having signal go through your body. When it is my back pocket, I cannot hear any signals. Having tried with two different manufacturer I was told that if there is nothing to bounce the signal off, e.g. outside, it does not go through the body and that is why it gets interrupted, and they recommend a front pocket. Now i don't know if it is a load of crap, an EE can chime in, that would be interesting to know, my front pocket in the mean time being too loaded ;).
C. Sagan : A demon haunted world:
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visit randi.org
OK, so I see everyone saying "you know what your risks were" but that doesn't account for things like this: Qube Smart Lights were funded 540%. I ordered 4 bulbs well over a year ago and despite not receiving anything, the lights were being sold on a number of online site including Amazon and their own site. In fact, THEY ARE STILL TAKING ORDERS ON THEIR OWN SITE!! We're not talking about crowdfunds that for one reason or another, never get to the actual product stage; we're talking about a company that produced enough product to sell on multiple outlets yet DIDN'T SEND THE PRODUCTS TO THE BACKERS **FIRST**. Now, after 3 months of no updates they are claiming that they 'Running out of cash flow as the development time for Qube took much longer than we anticipated" among other things. They also claim "We understand the disappointment that may arise from such a decision and would like to assure each and every one of you that we remain committed to our obligations and will continue to source for new funding." yet they dissolved the LLC in California so chances of that ever happening are slim. So tell me again how this should be allowed? Tell me again how I shouldn't expect anything in return for my investment? I paid for shipping on a product I will never receive - how am I not at least entitled to a refund of the shipping?
Investors lose money in start-ups all the time. Conventional wisdom is that start-up failure rate is 90%, although data suggests it's more like 60%. In any case, it should be no surprise that companies with ideas that they can't get financed via traditional means fail, frequently.
Skwisgaar Skwigelf: Hey guys, I haves a good use of the words "unsbuzzle." "My lungs unsbuzzle the air from the earth, as I can breathe... it. Period."
Excessive esses in the title earn you a metalocalypse reference with either Skwisgaar or Toki, for obvious reasons.
I have been a software developer for 20 years. I have a success ratio of 4 out of 5 on Kickstarter projects that I've helped fund. The one that failed was a biotech project - I obviously know very little about that. The ones that succeeded were much more conventional software/hardware projects. You can tell how close they are to a solution based on what the objectives are and their descriptions.
The only type of crowdfunding product I will generally "invest" in is a computer game. And that usually requires a number of factors before I'll put any money into it. 1) It must be from someone with a track record of successful games, most likely in that genre, 2) Must be heading towards completion because I never give money to any project that is basically "I have this great idea for a game....", and 3) It isn't from a company that should be making this game without crowdfunding in the first place. This sounds really restrictive, but I've helped crowdfund a lot of games in my time because I believe in them. A few have failed, and a few I'm suspecting probably won't actually end up being released. But for the most part, a lot of those have been successful and worth the investment. Granted, I'm not getting money from the game released, but I'm getting a game that is certainly a lot of fun to play.
Sarbonn's blog: http://www.sarbonn.com/blog
Another common mistake is shopping around for the cheapest manufacturing because you already burned the crowdfunded money, and ending up in Shenzhen, where clones of your product are hitting the local markets before you've got the first samples in your hands.
They are not necessarily "clones". Sometimes the "counterfeits" are from an "extra" production run of your assembly lines.
Correct title would be : "Another Crowdfunded Startup Takes Investors Money, Then Shuts Downs"
aaaaaaa
Customers get product. Investors get paid a share of the profit after all the costs. Unless the Crowd sourcing agreement made commitments regarding when the backers got product, then the backers get their product (their 'profit') when the company can afford to distribute profits.
So, now, imagine this scenario with the company based in a country with a UBI program.
How many workers could "hang with" the company while it got it's act together because they weren't going to be out on the street, starving, if they did so?
Crowdfunding...just another way to mostly fool people out of their money. Narcissist types that "just gotta be first" to show their other shallow friends "look, I got something you don't". If it's such a good idea, there would be venture capitalist that would be willing to back it. Usually, these things fail because the "startup owners" have no business plan, spend the money on crap, and then, whoops, too bad, we're broke! If I can't walk into a store, Amazon, Wally World etc...forget it. I don't "need" to have it yesterday...I can wait.
Crowdfunding companies like kickstarter have ridiculous agreements which force those seeking crowfunding to offer a 100% guarantee that the product will be delivered. No sane person would agree to that, because in the real world especially on tech projects trying to break new ground things often can and do go wrong. Investors understand this. Smart businesspeople understand this.
That clause keeps away smart businesspeople, leaving the idiot to crowdfund making promises they don't know they can't meet and the scammers who know but don't care. So this happens, again, and again, and again.
Google around. There are real nightmare stories where crowdfunders made promises and their life became a living hell. People bashing on their door at 2AM in the morning demanding their money back. Dragged through the courts. A nightmare.
Looking at their past website you can at least see one problem.
getkanoa web
Unless it is on another page of the website, there's only the option on their website, to pre-order. No data on how many people backed or how much funding is there.
Basically, this crowdfunding was very likely to fail with the backers very likely to have a high risk simply due to not being able to see how the startup is doing. There's no way to know if they've reached their goal, had enough backers or anything at all. Let's say they got 100 backers but they really need 1000. At least if they showed the backers their goal, the backers and the startup knew from the start that they cannot deliver their promise and product. The startup can review their funding and drop their promise before any heavy investment.
Their failure seems to be right from the start.
...is a great way for random people to get free money with no strings attached from other random people, without any consequences! what could possibly go wrong?
Don't you just hate it when they shuts downs?
Legally, that's true. That's why I've seen Kickstarters listing why the people getting the money are going to be able to give you something. Reputation is useful here.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
For my peachy printer.