If you want a solid example that backs up the startup maxim “hardware is hard,” look no further than the cautionary tale of Goldee, a software startup that turned its attention to hardware and the connected home, only to have the situation go from bad to worse, and culminate in hurt feelings, permanently damaged code and a lot of backers who are left without anything to show for their financial investment in the company’s vision.
Crowdfunding, of course, is not the same as pre-ordering from a large established company – ‘backers beware’ is the only reliable motto patrons of the funding method can reasonably expect to trust. But Goldee’s situation, and its public description of what happened, stand out because it outlines not only the challenges with any hardware project looking to crowdfunding as a way to get things started, but also because of the founder’s account of what apparently transpired internally after things went south.
“Without gaining further funds, we were progressively running out of money so I had to dismiss some of our employees,” writes Goldee founder Tomas Baran on the company’s official site. “Unfortunately, this generated some hard feelings and culminated in our server and code being hacked and permanently damaged by one of our ex-developers. This was the final blow to our already troubled situation.”
Problems arose long before then, however, with Goldee admitting that the crowdfunding campaign wouldn’t come near to covering its costs, and instead was intended to act as a way to prove demand for the concept and attract more traditional investment from sources including VCs. This, too, isn’t uncommon among crowdfunding campaigns; companies will even seek amounts that undershoot their actual targets in order to ‘overfund,’ which makes for a better story in the media.
Baran, in his note, says a major error was spending on the initial crowdfunding money on continued development of the project based on the assumption that more money would be rolling in soon – leading to a situation where there’s no route to pay back original backers, and no way to complete even a modest initial production run.
Hardware projects often meet with a similar fate – but Goldee is a prime example of what happens when a project simply can’t live up to its own hype. For all the recent advancements that have made building new hardware devices and companies arguably easier than ever before, the reality is that the odds are still stacked mostly against anyone who sets out to strike a new path in physical consumer goods.
We tried to contact Baran for this story, but an autoresponder suggested it was unlikely we’d hear back due to a current high volume of inbound email to his address.