Another $1 Million Crowdfunded Gadget Company Collapses (techcrunch.com) 109
An anonymous reader writes: In 2012, a company raised over a million dollars on Indiegogo to build a robotic dragonfly. It was originally supposed to be delivered in 2013. Unfortunately for backers, the company seems to be struggling to complete the project. They haven't been able to resolve issues with the drone falling apart after just a few seconds of flight. Unless they locate investors soon, they're going to run out of funds to continue work at full force. They're in the process of uploading all design work and their knowledge base, in case they have to officially cancel the project. They say some part-time work will continue as long as funds allow. The TechCrunch article warns, "This is just the latest example of how consumers need to be more careful with crowdfunding. There are no guarantees with crowdfunding and there is more risk involved than what's advertised."
Duh... (Score:5, Insightful)
They did not even have a working prototype just a bunch of guys with an idea they had on a napkin. Only fools invest in these things.
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The Indiegogo project page states the developement had begun (in at least 2012) on a $1m grant from the US Air Force
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They did not even have a working prototype just a bunch of guys with an idea they had on a napkin. Only fools invest in these things.
I think this is the really important part. You should be thinking as an investor, even if all you get out of the affair is a product.
Even big time investors lose their money in a business, but they reduce their risk by first making sure that the company already has an element of something tangible and they also do due diligence. It is probably harder to do due diligence on sites such as Kickstarter or Indiegogo, but you do what you can and then decide whether you can afford to write-off your investment if s
Re:Duh... (Score:4, Insightful)
But these people aren't investors. An investor has unlimited upside, so that even if a few projects fail, the ones that do succeed will make up for it. The most these project backers can get is the product they ordered. So it's all of the risk with none of the reward.
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But these people aren't investors. An investor has unlimited upside, so that even if a few projects fail, the ones that do succeed will make up for it. The most these project backers can get is the product they ordered. So it's all of the risk with none of the reward.
Kickstarter investors have unlimited upside from the vast number of products they may someday buy that may have never existed without Kickstarter. Any good purchase ends up providing more utility to the buyer than other things they could have spent their money on. Kickstarter investors are not investing in equity, they are investing in the utility gained from owning the product being invested in. Sometimes that utility will be nothing when product development fails. But as long as a reasonable number of inv
Re:Duh... (Score:5, Insightful)
I think KickStarter, et al, have perhaps unintentionally blurred the lines between research, development, and order fulfillment.
Ostensibly these organizations are supporting development, but by essentially treating projects as order fulfillment, they ignore the fact that development can fail.
Now in this case it appears that, whether they knew it or not, people were funding research, and of course research can (and in fact usually does) fail.
Obviously greater transparency would help, but I'm not sure that crowd-funding would survive that reality. I suspect the majority of crowd-funding participants want the feeling of actually investing/participating in development, but they don't want any of the associated risks - they just want order fulfillment.
Personally, I'm waiting for someone like Amazon or Alibaba to optimize the order fulfillment part of they system by holding the money in escrow. The manufacturers have to get a loan based on the money held in escrow, which should be doable if (1) they have the manufacturing contracts in hand, (2) some reputation, and (3) guaranteed payment by a reputable company. Probably means there's a minimum and maximum order size, but the option of guaranteed deliverable or 100% refund would probably cause mass migration, leaving KS and others doing actual crowd-funding, with all the risks it implies.
Re: Duh... (Score:2)
Re: Duh... (Score:5, Insightful)
At which point, millions of dollars are put into an escrow account by thousands of enthused people, and a loan for some amount less is issued to the inventor to actually produce the product. When units start shipping, the money from the escrow account is used to pay off the loan and any balloon expenses, with any extra going to the inventor.
This would help filter out the people who use kickstarter in the "Hey, I have a neat idea, but i'm going to need about 500K to find out if its even physically possible." but say it in a way that insinuates that the 500K will bring it to your doorstep. Those projects belong on GoFundMe.
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The whole point of investing is that the investor takes a risk in exchange for what could be a greater reward. Smart small-time investors do not invest money that they cannot afford to lose. Smart big-time investors spend a lot of time calculating risk a
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I guess things could be structured as a loan, but frankly these loans are going to be terrible risk. If the business idea fails you are not getting your money back. The inventor will declare bankruptcy or simply be unable to pay.
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How is a product supposed to be developed and manufactured when the owners don't have the money they raised from the crowd funding?
I guess my point wasn't clear - Call the new company "OF" for "Order Fulfillment". You see something on the OF page and you order, then you get charged if minimum order size is made (and there's probably a maximum order size as well). The money is collected by "OF" and held in escrow. It will be paid once the customer receives the product within a specified time. If the cust
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Honestly, what you're talking about sounds like a marriage of Kickstarter and Massdrop, and probably could be a successf
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If someone were able to personally obtain a loan for the product anyway, why would they approach Kickstarter/Indiegogo?
The problem is that very few banks will lend you money when you say "I want to manufacture 10,000 of these, and *if* I can sell them, I can pay you back." The service that "OF" provides is that it already has all the funds in escrow. "If I manufacture 10,000 of these, I have a guaranteed payment of $500K" is something that specialized banks finance on a fairly regular basis.
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The problem is that very few banks will lend you money when you say "I want to manufacture 10,000 of these, and *if* I can sell them, I can pay you back."
Even fewer banks will lend you money when you say "I want to manufacture 10,000 of these, and *if* I can, I can pay you back." Selling stuff at a profit, where you know the production cost, is the easy part.
Banks absolutely do not want to lose their capital. If they think there's a 2% chance of not getting paid, then you're not getting your loan. Venture capital, they know they face 80-90% failure rate, but they hope that the projects that fail to fail do so extravagantly. Kickstarter/IndieGoGo are for
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Even fewer banks will lend you money when you say "I want to manufacture 10,000 of these, and *if* I can, I can pay you back."
Agreed. It is why you already need to have the manufacturing contracts in hand. Thus you know the costs, the delivery dates, etc.
Kickstarter/IndieGoGo are for projects so speculative that they can't even attract venture capital.
The problem with that is that is not how they're seen at this point in time by the vast majority of the customers and many of the sponsors. The howls of outrage when projects fail to ship make it clear that the majority of customers do not distinguish between simple order fulfillment and a speculative venture. Nor does KS et al make any great effort to make the difference betw
Re:Duh... (Score:5, Interesting)
I've "bought in" to 3 kickstarter like projects... One - an RC paper airplane, came off very much like a long lead time order fulfillment. Another, attempting to compete with Amazon Firestick and Chromecast, perhaps predictably, faltered when they tried to swim with the competition in delivery of "protected content" and ultimately refunded the "investment;" personally, I didn't want delivery of protected content and they weren't going there when I bought in, but I understand why they later decided it was "essential to the product," and from that point, their failure was all too predictable. The third: Jolla Tablet, remains to be seen.
I've worked in a half dozen startup environment companies where a 33% success rate would be huge, and investors rarely get anything back from failures in "the real world." If you're putting money into kickstarter and similar projects, you have to know that money is at risk, subject to anything from delays to total loss. I view it more as "philanthropic investment" than product purchase. You're tossing these guys a few bucks because you believe in them, and maybe if they succeed you get the first round of cool widgets when they come out. So far, I've always eventually gotten product or a refund - that's a really amazing track record in the world of inexperienced business people.
If you want to purchase products with hard delivery dates and money back guarantees, stick to Amazon. Startup ventures are something else entirely.
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Only fools invest in these things.
Only fools call providing money through crowd funding an "investment".
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Besides the representation of investment as a long lead order fulfillment system, I can't imagine where they aren't violating some investment laws whether it be because they aren't providing investors with shares or not accounting for fulfillment as capital gains.
As for people trying to tout their anecdotally high success rates (e.g. 33%) compared to traditional investing, they seem to missing the fact that almost no Kickstarter has approached a novel problem.
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Yes, investing carries a risk. What's that got to do with kickstarter?
Kickstarter is no investment. An investment is me putting money behind a project with the intent to eventually either get control over the project or at least get money + X*money back from it. With X usually being at the very least in the double digit percentage, if not triple digit. At least expected.
Kickstarter's ROI is more in the area of getting the product earlier, cheaper or with some added special "members only" features, or a comb
Re:Duh... (Score:5, Insightful)
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People voluntarily taking a risk with their own money with the hopes of a return is the definition of "the market".
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People voluntarily taking a risk with their own money with the hopes of a return is the definition of "the market".
That is 'a' (rather than 'the') definition for market. It is extremely common nevertheless to expected the return for an investment to be monetary profit, not whatever you get in return. Else even NGOs and other non for profit institutions would qualify as "the market". So I'm ok with my use of "market" if most people get my meaning, which is the entire point of language and definitions IMHO.
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Mod parent up.
I've thrown money at crowdfunding projects simply because they look cool and I'd like to see them succeed. Some of them do (someday, when I have land, I'll get a Flow Hive). Some of them don't (the Human Resources game looked cool, but, alas, it was not to be).
The foolishness is expecting every single crowdfunded project to succeed.
Re:Duh... (Score:5, Informative)
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The Gear VR2 sitting on my desk, and the multiple engineering builds of the rift I've seen don't agree with you, but hey, gotta hate the facebook.
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AFAIK, backers got their rewards. That's much better than many other projects.
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At the absolute very least, you need a proven history of delivering on previous promises. The only kickstarters I've backed are from companies which have already given me a product via conventional channels and are asking for help. Those kinds of things generally work out fine, because you know they can deliver, can be trusted, the quality of their previous work.
But, yeah, the "we have a bright idea" crowd have a long way to go to prove themselves.
Re:It's almost as though there is a moral here (Score:5, Insightful)
Re:It's almost as though there is a moral here (Score:5, Interesting)
Personally I like to buy things that already exist rather than plunk down money on something that doesn't, and would probably suck even (if ever) it does get made.
Or, only spend money on kickstarter that you are willing to lose. It should be treated no differently than spending money on a trip to Vegas. If I give myself a budget of $500 to gamble with, I am perfectly happy if I leave Vegas with $10 of that money left. And if someone spends $500 on 10 kickstarter campaigns, he should be very happy if 5 of them end up sending him a product someday.
Kickstarter is only for pie in the sky dreams that couldn't get traditionally funded, but where people want to give the founders a shot because their products sounds cool. Or at least that is how I think people should treat Kickstarter. People can spend their money however they wish.
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ANOTHER one? (Score:5, Insightful)
You do know that most ventures fail within the first few years, right?
I mean, 1 MILLION DOLLARS? Even Trump recognizes that's a small sum—for old buildings, let alone a robotic fucking dragonfly.
You know what, though? The crowd got what it wanted: They crowd was able to participate in helping really smart people spend a few years tinkering away on something interesting to both them and the crowd; that's exciting enough, especially if the world gets access to the fruits of their labor.
Christ. "Another one"; get real.
Re:ANOTHER one? (Score:5, Insightful)
I completely agree with this sentiment.
Making a robotic dragonfly is very hard, they had a good idea, and a plan, and were able to sell it. They spent the money trying to do it, did some research, and now they are trying to make sure what they did ends up available to everybody.
Yeah, it's a failure in that they weren't able to do what they wanted to; but it wasn't a scam, or dishonest, just normal everyday good-effort failure.
Re:ANOTHER one? (Score:5, Funny)
"six year old prodigy invents perpetual motion machine"
Six year olds ARE perpetual motion machines :-)
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"six year old prodigy invents perpetual motion machine"
Six year olds ARE perpetual motion machines :-)
Only if you can keep them perpetually six years old. This might require some temporal mechanics.
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Yes. They seem to spent honest amount of effort on their idea, and still have not given up. This is not like some scoundrel who just take the money, and leave without a trace. There was real development, albeit it fell short. And judging by the project scope, it is reasonable to conclude that one million is not nearly enough to run a robotics team for several years.
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"They haven't been able to resolve issues with the drone falling apart after just a few seconds of flight."
Seriously?
After blowing through a million dollars they haven't been able to get the thing to stay together for more than a few seconds? Have they ever heard of this stuff called "glue"?
If it's so damn easy, why aren't you the one pocketing that million dollars?
Re: Seriously???? (Score:1)
Ethics.
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*sigh*
We're not gonna hear the end of that Manhatten Purchase by Minuit, are we?
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[goes outside]
You wait. Time passes.
[comes back in]
The answer appears to be yes, but only in an approximate parabola.
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Why more careful? (Score:5, Insightful)
This is exactly what crowdfunded projects are supposed to be.Projects can fail.
This seems to be a 100% genuine failure. I would not even regret having spent money there. Other projects (e.g. Clang!) failed in a more circumspect way.
Indiegogo and Kickstarter are no warehouses like Amazon.
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Re:Why more careful? (Score:4, Insightful)
Yep, it is only a failure in delivery.
Had I spent money on it, I would not have considered the "investment" failed.
I (co-)founded several companies in my career. The chances of success are rarely better than 1:4, rather 1:10 in most cases.
So instead of saying "it failed" let's use "We found a 1-million-US$ approach that doesn't work" ;-).
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In this case the failure is down to just one thing, wing motion. They straight up and down design assumption is simply too difficult for a high speed too rigid wing. A more circular motion would work better, with continual adjustment of wing pitch to achieve desired air flow.
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Maybe if they had open accounting and I knew exactly how much they enriched themselves.
At the moment they are a mess of perverse incentives and an invitation to scammers.
The backers came out of this poorer, how did they starters come out of it?
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That project seems to be rather transparent or at least tries to.
There are project where I ended up angry (Clang! is an example).
I did not dig into details, but from my current PoV I probably would not be angry here.
I (co-)founded startups that burnt more per month and nobody got rich in the process ;;-).
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Your VCs almost certainly got a look at the books.
IMO million dollar plus should set some money aside for auditing of the books, if an independent third party says the obligations have been met they get the money, if not there's an audit and we all get to see how they really spend the money.
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Well (Score:3)
Example? (Score:3)
I don't understand, they were pretty upfront with what they had and what they want to try to do. Seems to me that is kind of the point of Crowd Funding, when you can't get real investors.
Seriously, everyone seems to want guarantees about everything - lighten up people, if you want to have a guaranteed return by Treasury Bonds...
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I don't understand, they were pretty upfront with what they had and what they want to try to do. Seems to me that is kind of the point of Crowd Funding, when you can't get real investors. Seriously, everyone seems to want guarantees about everything - lighten up people, if you want to have a guaranteed return by Treasury Bonds...
But you have two fundamentally different reasons for lack of "real investors", the market risk and the project risk. For example I backed a Kickstarter to create public domain recordings of classical music, extremely low project risk since such recordings are made all the time but clearly not a good economic investment. The game Elite: Dangerous would be somewhere in the middle, sure it's a new game but within a known genre and without any truly experimental technology. And then there's the ones that promis
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And even that is not a guaranteed return.
What bugs me in kstarter, is not when it fails (Score:1)
I mean you bet X bucks, company might or might not manage to do it, if it fails, you lose.
I'm OK with that.
The problem is even when one out of a hundred (thousand?) projects is a huge success, e.g. Oculus Rift, backers don't get rewarded for it. AT ALL.
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I posted a suggestion for solving this problem here:
http://news.slashdot.org/comme... [slashdot.org]
Your thoughts?
all the best,
drew
lessons for you (Score:1)
1. Youth - good, and required, principal ingredient for success and the future of any company. But is 2x-edged sword. Need experience for what is essentially an aerospace project.
2. Equipment - do not need new stuff. Buy everything from used test equipment dealers. Most older stuff is not only more cheap but is more reliable. The only exception might be o-scopes/analyzers, as the Rigol stuff is dirt cheap and decent performance. Some of their combo scope/logic analyzers are used by my employer as 'throw-awa
"issues with the drone falling apart" (Score:3)
"haven't been able to resolve issues with the drone falling apart "
It doesn't sound like they need more funding; it sounds like they need better engineers.
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Given that engineers a fond of food, clothing, housing and beer, they needed more funding
Another IndieGoGo scam (Score:4, Interesting)
It's worth pointing out that Kickstarter would never have allowed this campaign. IndieGoGo is so much scammier that it's ridiculous. I don't think I'd ever 'invest' in a crowdfunding campaign from either site, but if I did it would be Kickstarter because of the following policy differences:
- With IndieGoGo, you get to keep the money even if you don't reach your funding goal.
- With Kickstarter, you can only show actual prototype hardware in your videos/campaign site - no mockups or 3D rendering allowed.
It's pretty easy to see how these differences mean that IndieGoGo is the go-to site for products like:
https://www.indiegogo.com/projects/robot-dragonfly-micro-aerial-vehicle#/ [indiegogo.com]
https://www.indiegogo.com/projects/batteriser-extend-battery-life-by-up-to-8x#/ [indiegogo.com]
https://www.indiegogo.com/projects/anonabox-access-deep-web-tor-privacy-router#/ [indiegogo.com]
https://www.indiegogo.com/projects/kreyos-the-only-smartwatch-with-voice-gesture-control#/ [indiegogo.com]
https://www.indiegogo.com/projects/solar-roadways#/ [indiegogo.com]
just to name a few.
More careful??? (Score:2)
Why, exactly, do "consumers need to be more careful" with a $99 speculative advance order of a fancy little toy???
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You beat me to it. Speculative, relatively small dollar amount, toy. Seems that the possibility of failure is quite well understood.
Paying for something, in-advance, is always understood to be a risk. That's why we have various forms of eskrow.
Why more careful? (Score:2)
If I contribute to hardware sometimes it's just because I want the research to be done, even if I give the production of a final result only a 50/50 chance (or worse) of delivering. Some things work to, some things don't, but the beauty of crowdfunding is that at least you are funding development of things that simply would not exist otherwise. You don't need to be more careful; you need to contribute more ambiously and care less if you get something you can hold from it.
Robotic Fireflies do exist (since 2013) (Score:1)
Invest (Score:1)
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In Soviet Russia, a T.P.Burnum is born every minute!!!
Re: People know there's risk (Score:3, Insightful)
Liberals are well aware of that. Liberals are also aware that if you make people's lives better through such Commie things as universal education and not bankrupting them for the crime of getting sick they tend to be more productive.