How in the holy crapping hell did they manage to burn so much cash with NOTHING to show except a fraudulently-produced pitch video?
Is there criminal investigation happening? This smells very bad.
edit: removed capital letters of outrage and replaced with asterisks
in http://www.droningon.co/2017/01/12/lily-drone-project-cancel...
Apparently their original footage was from a DJI inspire.
Is this true ? Or did the prototype atleast work ?
http://www.droningon.co/2017/01/15/san-francisco-superior-co...
1. Build slick marketing pitch. 2. Collect $35M in pre-orders. 3. Apologize after a year of "trying" and return the principle. 4. Make $1.75M in interest.
The bankrupcy filing posted above in the thread https://pdf.inforuptcy.com/pacer/debke/167122/dockets/2/1-A0... largely bears this out. On page 13, they declare that they still have $25.6M in their bank account, and a bit more than $31M of current assets in total.
By Kickstarter standards, this looks like a fairly responsibly run company.
Yes.
https://www.forbes.com/sites/ryanmac/2017/01/31/failed-drone...
>According to a different unnamed source, the company who made the video, CMI Productions, has also not been paid in full for its work. A CMI employee did not respond immediately to a request for comment. CTO Bradlow did not respond to questions about the video payments before hanging up on FORBES. A Lily spokesperson declined to comment on the lawsuit to FORBES, though the company is expected to file a response to the district attorney on Thursday.
I'm not sure how many failed devices they made which could easily eat millions in material, manufacturing, and design costs.
Hardware is hard!
Setting up a reliable manufacturing line and test procedure typically takes about 6 months from the time your engineering team begins handoff to the contract manufacturer. Moreover, as much as we'd like it to be, manufacturing is not agile. All of that work is very change-intolerant. So, if you begin the handoff with a half-baked design (which most startups do, in my experience) that you have to change as you proceed through the setup process, you can easily blow away that nominal, 6-month timeline with tooling changes, contract renegotiation, supplier verification, etc. as your engineers scramble to work with the factory to make the design manufacturable and cost-effective.
Jumping straight into a full-blown manufacturing effort is not a cash-effective way for a startup to prove a complicated design. You can force it to work, but it's really expensive. Apple, for example, parallel-paths a lot of stuff. They can afford to discard a million-dollar tool and move on if it doesn't work out. They also send huge engineering teams to Asia for months at a time. Instead, I'd suggest that startups begin with more manual domestic builds in the low hundreds of units until the engineering team is confident in the manufacturability of the design and the manufacturing requirements are understood. These will, of course, have much higher per-unit costs, but you can iterate way, way faster because you're not constantly flying overseas to battle the inertia of a manufacturing line.
Unfortunately, Kickstarter--while still qualifying as an early adopter market--is driving first-run numbers way higher than they should be for the average startup, which is causing them to jump too quickly into scale manufacturing efforts. Because of this, I think we are seeing some spectacular failures such as Lily.
tl;dr: Manufacturing is expensive. Kickstarter is driving hardware startups into manufacturing too soon.
Functionality X at $500 has a very different market than the same functionality X at $1500; if a startup is aiming to check for product-market fit, then the expensive manual domestic builds would be aimed at a different target market that also requires and uses different features, requires different marketing and sales channels, etc with requirements and preferences that often are entirely opposite of what the "real" product should have.
Such an iteration would help in handling the actual manufacturing, but would not help in building all the other parts of the business as intended as it would drive all of them in a wrong direction.
Furthermore, who funds the very large fixed costs of design and development? If they had chosen "more manual domestic builds in the low hundreds of units" then they would have saved money/scale in manufacturing but would not have the funding needed for the engineering team to make the actual product, whatever they had was funded essentially by pre-sales.
It's also reasonable to have products that are totally unviable if the volumes are low, because to get an adequate price you need economies of scale. A business plan that clearly states "we either go big or go bust" can be a valid business plan; many real industries have a situation where selling just 1000 units is worse than selling 0 units, you either manufacture at scale or close up the shop.
Edit: Also, to your point about going big or bust--I think that's fine as long as the reason for bust is market powers beyond your control. But to bust before launch because you didn't have a viable plan/resources to get through manufacturing is just a shame.
Edit 2: I should mention that I see small domestic runs as one way to deal with the manufacturing problem. Another is to simplify the product for your first run. Another is to raise more money. They all have tradeoffs and I don't think there's a one-size-fits-all solution. I didn't mean to imply that.