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Crowdfunding: Crowded with failures


High profile: Pebble was one of the major successes on Kickstarter with each model of the smartwatch launched on the crowdfunding platform exceeding its funding goals. Unfortunately, that couldn’t save the company after it ran into debt from slowing retail sales. — Pebble

High profile: Pebble was one of the major successes on Kickstarter with each model of the smartwatch launched on the crowdfunding platform exceeding its funding goals. Unfortunately, that couldn’t save the company after it ran into debt from slowing retail sales. — Pebble

Crowdfunding is great when it works. However, the technology landscape is littered with crowdfunding failures.

The idea of crowdfunding is a simple one – to enable anyone with a good idea to help raise money for their projects by ­receiving contributions from the public.

That at least is the promise of crowdfunding sites like Kickstarter and based on the millions that it has raised on a daily basis to help fund projects, it’s an extremely popular one.

In fact, crowdfunding sites have been great sources of some of the most innovative products in recent years.

Many people who successfully funded their projects on ­crowdfunding sites have actually gone on to form fairly successful companies – case in point is Peak Design, a company that started out on Kickstarter but has now gone on to successfully retail camera bags and photography accessories.

According to Kickstarter’s ­extensive statistics, technology-­related projects have some of the lowest success rates on the site – only 19.72% of technology-related Kickstarters have actually been successful and that’s not counting those (such as Pebble) that ­succeeded in crowdfunding but eventually failed as companies.

We’ve pieced together a number of recent technology-related ­projects which exceeded their original funding goal, but ­eventually turned out to be less than stellar or downright failures.

Anyone looking to back a ­project on crowdfunding ­platforms should take it as a ­cautionary tale – if it looks too good to be true, it most probably is.

Pebble

Pebble is practically the poster child of crowdfunding, at least until the company closed down and its assets were bought over by Fitbit.

Launched on Kickstarter by founder Eric Migicovsky, the ­original Pebble was an interesting concept – for backers it was a US$99 (RM450) smartwatch that connected to the smartphone via Bluetooth, and allowed you to ­display messages and notifications and respond to them.

While this may not sound that amazing, you have to understand that this was in 2012 and the Pebble was a concept ahead of its time – two years before Google even released Android Wear and three years before Apple marketed the Apple Watch.

Migicovsky launched the Pebble on Kickstarter with a target of US$100,000 (RM442,550).

Thanks to word of mouth and strong buzz around the project, by the time the fundraising closed, the company had raised over US$10.27mil (RM46.2mil), which was then the most funded project in the history of Kickstarter.

The Pebble was actually a ­success and despite some initial delays, the company went on to ship some 300,000 units of the first Pebble by the end of 2013.

The company was so successful that it went on to launch the Pebble Steel (a metal version of the first-generation Pebble) and also the Pebble Time, which featured a colour display – both exceeded their funding goals, with the Pebble Time again hitting another Kickstarter milestone, taking in US$20.3mil (RM91.4mil).

In 2016, Pebble again launched the latest Pebble devices on Kickstarter, namely the Pebble 2, an updated version of the Pebble with a heart rate monitor, Pebble Time 2 (with colour screen) and the Pebble Core, a tiny keychain device that featured 3G and GPS so it could track your workouts and stream audio using Spotify to Bluetooth earphones.

Though the Kickstarter for both were successful and the company even managed to deliver a few Pebble 2 devices to backers, there was trouble behind the scenes.

Apparently, the Pebble ­company had run into some major debt thanks to slowing sales – apart from Kickstarter, the company also relied on selling their products in brick-and-­mortar stores as well as online.

The problem was that by 2016, the wearable market had slowed down and customers that bought wearables looked for devices with more fitness tracking features, something which the Pebble did not do well and that the Pebble 2 promised but had yet to deliver.

Unfortunately, it was too little too late for the company – even before the Pebble Core, the Pebble Time 2 and most of the Pebble 2 devices were delivered to backers, the company closed down and the assets were sold to fitness wearable company Fitbit which bought only the intellectual property and dropped support for existing Pebble devices.

Ouya

Unlike the Pebble, the Ouya owed its success more to hype and promise than actual reality.

In its Kickstarter campaign in 2012, founder Julie Uhrman launched a video promising a revolutionary gaming console that was open as it was based on the Android operating system and would cost just US$99 (RM440).


While hype managed to drive the Ouya to greatly exceed its funding goals on Kickstarter, after the dust settled, nobody really wanted an underpowered gaming console which essentially ran smartphone titles. — Ouya

According to the sales pitch, the Ouya would feature a store where developers could produce games and get a cut from the sales of games without paying licensing fees to Ouya.

The console itself would be a tiny box that connected to your TV and it would come with a wireless controller.

All this sounded so good that the Ouya managed to raise US$8.6mil (about RM38.7mil) on Kickstarter, with another US$15mil (RM66.38mil) of capital investment from venture capital firm Kleiner Perkins.

The Ouya actually made it to market as promised.

However, despite the hype and Kickstarter success, the Ouya was essentially doomed from the start.

The main problem was that the Ouya was essentially running a smartphone operating system with hardware specifications that were middling at best – hardly a rival to dedicated gaming consoles like the Microsoft Xbox 360 and the PlayStation 3 which were launched almost 10 years before.

Even when compared to smartphones, the Ouya was quickly being left behind as the market for Android smartphones was booming and new, more powerful phones were being released every six months.

On top of that, despite the promise of the open platform, game developers didn’t rush to create exclusive games on the Ouya and the store mostly featured games that can be found on the Android smartphone.

It’s no surprise that after all the Kickstarter hype was over and the devices were delivered to backers, the actual sales of the Ouya were so poor in retail that the company eventually fell into debt.

It wound down the business after its assets were acquired by Razer Inc.

Triggertrap

Like Pebble, the Triggertrap was a Kickstarter project that grew into a fairly successful company before it crashed and burned.

Not nearly as ambitious as the Pebble, Triggertrap was a very simple and interesting idea – founder Haje Jan Kamps wanted to create a “smart” remote trigger cable that could connect to your DSLR’s camera shutter.

The first product was an Arduino-based remote control for cameras – essentially a tiny ­computer, it featured a microphone, laser sensor and ambient light sensor.

Once connected to a DSLR, the Triggertrap will trigger the camera’s shutter when it detects sound or changes in light intensity.

The Triggertrap Mobile was a simple product that sold well, but the company was undone by its Triggertrap Ada campaign because it severely underestimated R&D costs. — Triggertrap
The Triggertrap Mobile was a simple product that sold well, but the company was undone by its Triggertrap Ada campaign because it severely underestimated R&D costs. — Triggertrap

When the Triggertrap is used with a cheap laser pointer, it’s great for capturing images of wildlife, as it will automatically trigger the shutter when an ­animal breaks the line of sight between the laser and sensor.

Triggertrap v1 blew past its modest US$25,000 (RM112,000) Kickstarter goal and received more than US$77,000 (RM346,000).

The success of Triggertrap v1 led to Triggertrap Mobile, which was a cable that connected the Triggertrap to an Android or iOS smartphone and could also utilise the smartphone’s camera or ­accelerometer to trip the camera’s shutter when it detected motion or vibration.

What led to the company’s demise was Triggertrap Ada – again launched on Kickstarter, it exceeded its US$62,000 (RM274,380) goal and received nearly six times the amount the company was asking for.

Project Ada was meant to be a modular trigger which allowed the system to hook up different sensors or multiple cameras and flashes to the unit so that all of them can be controlled by a single unit.

Unfortunately, the company had severely underestimated the cost of manufacturing and after burning through 80% of the Kickstarter funds to create the prototype, it realised that the final product would cost five times more than it had estimated.

After several rounds of staff ­layoffs, the company eventually cancelled Triggertrap Ada and refunded what was left of the Kickstarter funds.

But it was a costly mistake – Triggertrap announced that it could not recover from the loss and closed down operations ­earlier this year.

Pono Music Player

Backed by musician Neil Young, the Pono Music Player launched on Kickstarter with a US$800,000 (RM3.53mil) goal.

The idea, according to Young, was to ­create a digital music player that would play music as it was meant to be heard and that means being able to handle audio in various lossless formats.

The player would also come with a music store called PonoMusic that offered music encoded in lossless formats.

The Pono Music Player grew out of musician Neil Young’s wish to listen to high-quality music. Despite delivering on its promise, the player lacks many of the features of most standalone music players. — PonoMusic
The Pono Music Player grew out of musician Neil Young’s wish to listen to high-quality music. Despite delivering on its promise, the player lacks many of the features of most standalone music players. — PonoMusic

The Pono Music Player raked in US$6.2mil (about RM27.9mil) with over 18,000 backers supporting the project.

However, when the player was released, it was a little underwhelming – for US$400 (RM1,800) you got a chunky Toblerone-shaped player that comes built in with 64GB of storage, microSD card slot and ­touchscreen display.

Music ripped from CDs or purchased online could only be transferred to the ­player using a USB cable and there was no wireless support for streaming audio or transferring files – a distinctly last-­generation device, except for the built-in high-quality audio components.

Battery life is reportedly not particularly great for a music player, at only about six hours.

The player is still being sold but it’s difficult to see how far the product will go because most people use their smartphones for music playback or streaming music from services like Spotify.

Zano Drone

Created by the Torquing Group in Britain, the Zano was launched on Kickstarter on November 2014.

The Zano was described in its Kickstarter campaign as “an ultra-­portable, personal aerial photography and video capture platform, small enough to fit in the palm of your hand”.

Photos and the impressive video of this nano drone showed a tiny quadcopter that could connect and be controlled by an iOS or Android device.

The page also described the Zano as so intelligent that it could automatically avoid obstacles and be piloted either using gesture controls on the smartphone or set to automatically follow the operator.

The company also claimed that right out of the box, anyone could capture “stunning aerial photographs and videos” with “no complex flight training required.”

When launched on Kickstarter with a goal of £125,000 (RM687,000), the ­company managed to breeze past the goal and eventually reached a total of £2.33mil (RM12.8mil).

The Zano drone promised many advanced features in a palm-sized quadcopter, but the few shipping units that made it to customers could barely fly and were missing most of the promised features. — Torquing Group
The Zano drone promised many advanced features in a palm-sized quadcopter, but the few shipping units that made it to customers could barely fly and were missing most of the promised features. — Torquing Group

In fact, demand was so high that the company opened up a website for pre-­orders, which took in an additional 3,000 orders for the Zano.

From here on, the story is very familiar – it was hit by delays and then manufacturing issues with propellers, just to name a few issues.

Nevertheless, some 6,000 drones ­eventually reached a few pre-order ­customers, according to reports.

Interestingly, only four backers on Kickstarter received the Zano – Torquing decided to ship most of the units to the pre-order customers first because PayPal would only release the money upon ­fulfilment of the pre-orders, whereas the funds from Kickstarter backers were already in the company’s hands.

The only problem was that they were barely functional – bad video quality was the least of the problems experienced by the Zano drones.

Some drones barely made it off the ground, while others that did fly would veer off and crash into walls and there was no sign of the promised autonomous flight feature nor any sort of obstacle avoidance.

Delays continued and by November 2015, Torquing announced it would go into creditor’s voluntary liquidation, announcing that it had not only used up its Kickstarter funds but had also gone into debt by another £1mil (RM5.5mil).

The final blow came when Zano shut down its servers. As the drones were designed to connect to the servers for downloading calibration data and updates, they would no longer fly and were permanently grounded.

Zano, which at the time was Europe’s most funded Kickstarter, failed so ­spectacularly that Kickstarter itself employed freelance journalist Mark Harris to dig up exactly what had happened.

What was uncovered was that while the creators of Zano were not scamming ­customers, they did not actually have a properly working device even when the device was shipped out to customers.

Tiko 3D printer

The Tiko 3D has the dubious honour of being the second most funded 3D printer on Kickstarter and was so popular that it also earned a Kickstarter Staff Pick shortly after it launched.

From a goal of US$100,000 (RM442,600), the Tiko 3D actually closed the campaign earning US$2.95mil (RM13.3mil).

So what did the Tiko 3D promise? Well, the main selling point of the Tiko 3D is that it is an all-in-one 3D printer built around a ­unibody design, requiring little set up and had a relatively low price of US$179 (RM800).

The project launched on March 31, 2015 with an expected delivery date of November 2015 – an unrealistic time frame for research, development, production and delivery.

In that time, the company went from ­outsourcing production to renting a factory to assemble the printer and eventually the shipping dates slipped to July 2016 and ­finally December 2016.

Although it had over 16,500 backers on Kickstarter, the company only managed to ship about 4,100 Tiko 3D printers – those that received them found that they ­suffered from severe problems.

Apparently, the wireless printer wouldn’t connect to a WiFi network or load the ­filament printing medium properly. Some even had a bend in the struts that stopped the printing head from moving.

And even the ones that actually managed to work produced substandard 3D objects.

While the technical issues were not ­insurmountable, by this time, the creators of Tiko 3D were already in financial trouble.

As of February 2017, the founders of Tiko 3D had this post on Kickstarter: “We had no idea how difficult it would be to go from ­prototype to mass production. We learned along the way, but most mistakes were costly and irreversible. Our greatest mistake was committing to inventory too soon.

“We didn’t realise it at first, but by ­ordering components in bulk, we had backed ourselves into a corner. Design flaws appeared, and we were trapped. By the time we understood our predicament, it was already too late.”

The founders of Tiko 3D are now looking for investors to bail out the business.

Understandably, some backers are demanding refunds, to which Tiko 3D’s founders had this classic line: “No. If we cannot refund everyone, then it is unfair to refund anyone.”

The moral of the story? Back Kickstarter projects at your own peril.

   

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