Unable to fund production of its camera drone, Lily will shut down and refund customers

Lily, the autonomous camera drone that sold a whopping $34 million in preorders, has announced it is shutting down.

In an email sent to customers about an hour ago, the startup said that it was unable to raise an additional round of funding which would have allowed it to start production of the drone. So it announced instead that it will be winding down the company, and offering an automatic refund to all preorder customers.

From the email:

At the same time, we have been racing against a clock of ever-diminishing funds. Over the past few months, we have tried to secure financing in order to unlock our manufacturing line and ship our first units – but have been unable to do this. As a result, we are deeply saddened to say that we are planning to wind down the company and offer refunds to customers. 

Lily’s demise has been a slow one. The startup had delayed shipping multiple times before, first to summer 2016 and then to early 2017. It did raise a $14M Series A round a year ago from high profile investors like SV Angel, Spark Capital, Steve Aoki and Joe Montana — that was supposed to help get its drones to production.

Lily was one of the first autonomous AI-assisted camera drones ever announced, and was supposed to revolutionize the personal camera drone industry. But in the time it took Lily to ship, others drones like Hover hit the market, and DJI developed autonomous flight modes for the Phantom and Inspire (and now Mavic), arguably the three best drones on the market.

While it wasn’t able to ship in quantity, Lily was able to produce prototypes, and even start a beta program so customers could test its hardware in the wild. Part of this timeline was shared by the company, with the latest schedule showing the drone ready to enter mass production in mid-November 2016 and the first devices being delivered a few weeks ago in mid-December 2016. But it seems that instead of pushing back the date yet again, the company decided that there was no sustainable path forward without another infusion of capital.

About two months ago TechCrunch learned that Snapchat was in early stage talks to potentially acquire the struggling camera company, but that didn’t come to fruition.

In its email to customers, the startup said it will issue an automatic refund to customers within the next 60 days — there’s a special form to fill out if the card used to preorder has since expired. This wording makes it seem like customers will receive 100 percent refunds for their preorder commitments, but we’ve reached out to Lily to confirm this.

A high-profile shutdown like this certainly isn’t going to make it easier for hardware startups to win over early adopters and backers online. However, it seems that in this case the startup decided to sacrifice investor’s capital in order to issue full refunds — which will certainly help appease the disappoint of backers.