Monday, August 28, 2017

Buying through crowd-funding is risky because it's essentially venture capitalism

Crowdfunding disaster: Silicon Valley startup takes customers’ money, shuts down

Kanoa won’t ship its $300 earphones to customers who pre-ordered them

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.

“This is not the outcome we had foreseen, and with the quick turn of events, we are emotionally overwhelmed,” the company’s website stated. “We know you are disappointed, and can only ask that you understand that we genuinely tried.”
Cival Van Der Lubbe, Kanoa’s founder and CEO, did not immediately respond to messages seeking comment Friday. An email sent to the company’s main help center was not returned.
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.
Kanoa created some buzz when it unveiled its wireless, bluetooth enabled earphones back in 2015, before Apple had released its wireless Air Pods. In a press release announcing the product, Kanoa promised all sorts of high-tech features. Music played through the earphones was supposed to change in pace and volume as the user’s heart raced during a workout. Kanoa said users would be able to control how much ambient sound the earphones let in — listeners would be able to block out the outside world, or set the earphones to let them hear oncoming traffic while biking or walking.
Kanoa launched a pre-order campaign on its website as a way to crowdfund the company, and orders started coming in. The earphones retailed for $300, and early backers got discounts of up to 50 percent. But customers said Kanoa kept pushing back the ship date for their orders — customers who expected to have their earphones by the summer of 2016 still hadn’t received them a year later.
Then on Saturday the company suffered another blow: a scathing video product reviewposted on YouTube by a reviewer who goes by the online name “iTwe4kz.”
“This is trash. You don’t want to have these,” he says in the video, which had 129,000 page views Friday. “This is not a company that you want to deal with.”
The feature that was supposed to let users regulate ambient noise didn’t work, the video claims. And even without using that feature, the reviewer said his music cut out after 10 or 12 seconds when he had the earphones connected to a phone in his back pocket.
The company shut down four days after the review went live on YouTube. In the farewell note posted on its website, Kanoa said its investors backed out of a pending round of funding.
“We are in negotiations with investors for funding, and also large tech companies on an acquisition, while prioritizing our commitment via KANOA to you,” the company wrote. “Unfortunately, without that investment, we do not have enough capital to stay operational while we find a solution.”
That means Kanoa won’t fill any more pre-orders, it said. Kanoa also let go of its employees, and let its customer support and social media channels go dark.
Kanoa didn’t say who the would-be investors are. The company originally got its start with capital from its founder, according to the company’s website.
A Facebook group for Kanoa customers has nearly 1,900 members, many of whom were posting angry comments about the company this week.
Lisa Marie Grillos, a freelance designer from Santa Cruz, first heard about Kanoa’s earphones while working on a project at Facebook in September 2016. She and some of her fellow designers got excited about the product because it looked so cool, she said, and they each ordered a pair for about $200.
Because she bought the earphones through the Kanoa website, and not on a crowdfunding platform like Kickstarter, Grillos didn’t think there would be risk involved with her purchase.
“I had no qualms about it being very legit,” she said. “It just seemed like they had a final product.”
After waiting almost a year, Grillos asked for her money back in July. A company representative emailed her, asking if she was sure. She thought about it for a few days and replied yes. Grillos says she never heard back from the company and still hasn’t received a refund. Neither have several other customers contacted by this news organization.
“I definitely felt swindled.” Grillos said. “It’s definitely soured my desire to buy things online from small companies.”

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