OSSIC's Shut Down Highlights Crowdfunding Risks

Image: Ossic via Kickstarter

OSSIC set out to create a set of 3D headphones that delivered the best possible sound as they calibrated output that took into account your anatomy, the environment you're in a a bunch of other data using some whizz-bang technology and algorithms. But, despite reading a stack of money, the Kickstarter has shut down, saying they needed more money to move from a proof pf concept to production. That's despite raising in excess of US$2.7M after seeking a modest target of "just" $100,000.

The project to create the OSSIC X headphones was very ambitious. And, it seems, most of the 10,263 backers of the project aren't going to see anything for their speculative investment. About half of these project contributors ploughed in more that US$249 for no return.

It's easy to see the flaws in this project with 20/20 hindsight. But such an ambitious program started with a target of just $100,000. Anyone who understands the research and development process behind the creation of a new product understands that the costs of development, prototyping and certification are substantial. So, the low initial target either indicated a lack of understanding of how things get made or was intentionally low to ensure it attracted attention.

The developers sent out post to backers in February telling them new Mac software was being released. This followed up a post in January saying the first units had shipped. So, it all looked like good news until today.

This is the problem with crowdfunding projects. Backers are largely unaware of what's really going on. The project shut down post says that the compnay is out of money and that "the team has done everything possible including investing our own savings and working without salary to exhaust all possibilities".

Crowdfunding is a good thing. But, and I write this as someone who was burned by a failed project and lost $200, the communications that accompany these projects are rarely completely clear. The OSSIC team didn't keep their investors in the loop about the challenges they were facing. By setting a $100,000 funding target but collecting $2.7M they created an expectation that this was going to succeed. After all, surely the initial funding target was realistic.

In the mean time, when you see a crowdfunded project you'd like to contribute to, be prepared for that money to just disappear. If the product makes it to market consider it a gift. Otherwise, you're really contributing to someone's entrepreneurial education.


Comments

    Its amazing how a startup can "run out of money" when the organisers pay themselves a million dollars a year.......

      I'm not sure that was the case here but I take the point that this does happen - particularly when when some VC finds hit a company. I know of one AU start up that made it big in Silicon Valley with VC finds. Suddenly, the founders when from four guys in a shared apartment living on pizza to big money. They said to me there was an "obligation" to live large on that money.

      For example, they were expected to live in a place with a nice garden and have nice cars so they could hire gardeners and have the car washed daily in order to provide employment for other people.

      It's a weird world over there.

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