What Happens When a Kickstarter Fails to Kickstart?

Ossic X: Kickstarter for 3D Audio Headphones Raises $2.7 Million But Fails to Deliver the Goods.

May 22, 2018 - The backers are understandably angry. They each ponied up $200+ for a pair of super cool headphones that most will never see. You can view the campaign here. Was this a scam or an unfortunate confluence of bad luck, poor timing, inexperience, and miscalculation? I don't think it was a scam. The company did deliver a few units and just getting those units out the door cost far more than the amount raised by the Kickstarter. Ossic says it had private investors who lost everything and employees and founders who worked for months for free and ended up with nothing. The explanation given by the Ossic Team is heartfelt and persuasive.

There's risk in every business venture and people who start businesses always underestimate the risks (even those of us who've done it multiple times!).

The Ossic Team undeniably blew it. But it sounds like their intentions were sincere and they pushed this project forward believing that it would come together, believing they had fall back positions, believing that some how, some way, that they would be able to make it work out. In short, they were classic inventor-entrepreneurs. They could also look to the Pebble Watch for inspiration and guidance.

In 2012, one of the most successful Kickstarter's of all time was the Pebble Watch - a smart watch launched years ahead of the Apple Watch. Pebble raised over $10 million and delivered its rewards nearly a year late. But deliver it did. I remember following the story and wondering if the backers would bail or if Pebble would fail. Again and again there were setbacks. But things turned out ok. This is the example Ossic probably hoped to follow when things started to go south.

But there's more...

Pebble went on to run a second Kickstarter in 2016 that raised $12.8 million for a Pebble-2 watch. Shortly after that 2nd Kickstarter the company sold itself to Fitbit and stopped making and supporting its products. Here's Pebble's statement on what happened next:

"Pursuant to the terms of the Sale, backers as part of Pebble’s Kickstarter fundraising program who had not received their rewards as of December 6, 2016 were provided a full refund for any unfulfilled rewards. These refunds were issued and processed in December 2016."

Sounds honorable to me.

In the event, Ossic might have wanted to follow the Pebble's example on how to fail. But without a buyer and having spent all of their funds, they didn't have that option.

The bottom line is that project creators can do their best and fail for any number of reasons and Kickstarter backers should understand that they are taking a risk when they put out money for something that has never been made before. To minimize the risk backers should take a close look at who is behind the project and their track record. They should also consider whether or not the technology is totally new or if it's a tweak or redesign of something that's well established. Of course the project creators should do all they can to insure the project is a success and should disclose all of the risks they know (unknown unkowns excepted of course)

The thing that makes Kickstarter unique is that there ARE risks of failure. There's a risk that the project will not be funded AND the risk that it will not come together once it is funded.

The danger in failures like the Ossic X is not that they might happen again. The danger is that Kickstarter will seek to mitigate risk to the extent that it might as well be Amazon. Kickstarter is a godsend to inventors and entrepreneurs. May it live a long and risk filled life.