Lily Drone Files for Bankruptcy

http://www.droningon.co/2017/03/01/lily-file-bankruptcy-whilst-customers-remain-apprehensive-refunds/

by samfisher83 • 9 years ago

115 111 9 years ago

"Lily raised over $35 million in pre-sales and even secured $15 million in investment"

How in the holy crapping hell did they manage to burn so much cash with NOTHING to show except a fraudulently-produced pitch video?

Is there criminal investigation happening? This smells very bad.

edit: removed capital letters of outrage and replaced with asterisks

mikeryan• 9 years ago

Is there criminal investigation happening? This smells very bad.

Yes.

https://www.forbes.com/sites/ryanmac/2017/01/31/failed-drone...

zatkin• 9 years ago

They supposedly didn't even fully pay the company that made that video on their homepage from over a year ago.

According to a different unnamed source, the company who made the video, CMI Productions, has also not been paid in full for its work. A CMI employee did not respond immediately to a request for comment. CTO Bradlow did not respond to questions about the video payments before hanging up on FORBES. A Lily spokesperson declined to comment on the lawsuit to FORBES, though the company is expected to file a response to the district attorney on Thursday.

emcq• 9 years ago

They had a factory line and were manufacturing devices, but they weren't able to reach their claimed production quality and never shipped.

I'm not sure how many failed devices they made which could easily eat millions in material, manufacturing, and design costs.

Hardware is hard!

samfisher832• 9 years ago

Supposedly 34 mil of customer money was in escrow. They were only operating of the 15 mil in investment. I don't know if that is true. If they invested that 34 million they could have made some money in interest.

in http://www.droningon.co/2017/01/12/lily-drone-project-cancel...

Apparently their original footage was from a DJI inspire.

ionwake• 9 years ago

So basically the video was just of some guy controlling a drone? There was no actual following ? The wrist device didn't actually do anything ?

Is this true ? Or did the prototype atleast work ?

basseq• 9 years ago

Not a bad idea as fraud goes:

1. Build slick marketing pitch. 2. Collect $35M in pre-orders. 3. Apologize after a year of "trying" and return the principle. 4. Make $1.75M in interest.

microtherion4• 9 years ago

Supposedly 34 mil of customer money was in escrow. They were only operating of the 15 mil in investment. I don't know if that is true.

The bankrupcy filing posted above in the thread https://pdf.inforuptcy.com/pacer/debke/167122/dockets/2/1-A0... largely bears this out. On page 13, they declare that they still have $25.6M in their bank account, and a bit more than $31M of current assets in total.

By Kickstarter standards, this looks like a fairly responsibly run company.

dang• 9 years ago

"Please don't use uppercase for emphasis."

https://news.ycombinator.com/newsguidelines.html

NDizzle• 9 years ago

Nothing to show for it? I bet a non-zero amount of execs at that company have a sweet rock waterfall pool in their back yard...

jerryr2• 9 years ago

As samfisher83 pointed out, $34M was in escrow, so they were probably running on closer to $15M. When setting up a volume production line for a complicated product, it's really easy to burn through tens of millions of dollars. Kickstarter scares the crap out of me for this reason. Typically, I would recommend that a startup begin with a small domestic run of the simplest product possible, targeted at an early adopter market. There's so much a startup has to put into place for hardware: a contract manufacturer (and a sane contract, which takes time to establish), suppliers, supply chain, testing (development and production), certification, packaging, sales channels, distribution, support, reverse logistics, etc. Companies such as PCH, Dragon, etc. can help accelerate some of this, but there's still a ton of work to do. Trying to simultaneously tackle all of that and a complicated engineering design requires a ton of resources--more than a typical startup will have.

Setting up a reliable manufacturing line and test procedure typically takes about 6 months from the time your engineering team begins handoff to the contract manufacturer. Moreover, as much as we'd like it to be, manufacturing is not agile. All of that work is very change-intolerant. So, if you begin the handoff with a half-baked design (which most startups do, in my experience) that you have to change as you proceed through the setup process, you can easily blow away that nominal, 6-month timeline with tooling changes, contract renegotiation, supplier verification, etc. as your engineers scramble to work with the factory to make the design manufacturable and cost-effective.

Jumping straight into a full-blown manufacturing effort is not a cash-effective way for a startup to prove a complicated design. You can force it to work, but it's really expensive. Apple, for example, parallel-paths a lot of stuff. They can afford to discard a million-dollar tool and move on if it doesn't work out. They also send huge engineering teams to Asia for months at a time. Instead, I'd suggest that startups begin with more manual domestic builds in the low hundreds of units until the engineering team is confident in the manufacturability of the design and the manufacturing requirements are understood. These will, of course, have much higher per-unit costs, but you can iterate way, way faster because you're not constantly flying overseas to battle the inertia of a manufacturing line.

Unfortunately, Kickstarter--while still qualifying as an early adopter market--is driving first-run numbers way higher than they should be for the average startup, which is causing them to jump too quickly into scale manufacturing efforts. Because of this, I think we are seeing some spectacular failures such as Lily.

tl;dr: Manufacturing is expensive. Kickstarter is driving hardware startups into manufacturing too soon.

PeterisP• 9 years ago

The price point of a particular product is a key part of its market positioning and viability.

Functionality X at $500 has a very different market than the same functionality X at $1500; if a startup is aiming to check for product-market fit, then the expensive manual domestic builds would be aimed at a different target market that also requires and uses different features, requires different marketing and sales channels, etc with requirements and preferences that often are entirely opposite of what the "real" product should have.

Such an iteration would help in handling the actual manufacturing, but would not help in building all the other parts of the business as intended as it would drive all of them in a wrong direction.

Furthermore, who funds the very large fixed costs of design and development? If they had chosen "more manual domestic builds in the low hundreds of units" then they would have saved money/scale in manufacturing but would not have the funding needed for the engineering team to make the actual product, whatever they had was funded essentially by pre-sales.

It's also reasonable to have products that are totally unviable if the volumes are low, because to get an adequate price you need economies of scale. A business plan that clearly states "we either go big or go bust" can be a valid business plan; many real industries have a situation where selling just 1000 units is worse than selling 0 units, you either manufacture at scale or close up the shop.

minimaxir• 9 years ago

HN discussion of the Lily Drone when it was first announced: https://news.ycombinator.com/item?id=9532777

That is one of the first videos I've seen in a long time where I've thought "wow we can do that now?"

binarymax• 9 years ago

Here is the video: https://www.youtube.com/watch?v=4vGcH0Bk3hg

ww520• 9 years ago

There are lies, damn lies, and commercials.

sleepybrett• 9 years ago

The DJI Mavick does most of the things that video claims the lily can do.

ryandrake• 9 years ago

Tools to make better and better hoaxes/vaporware are more available to more people than ever before. BS detectors need to be recalibrated at least once a year

semi-extrinsic2• 9 years ago

Color me unsurprised. They marketed it as an action-sport-filming drone, but the top speed was utterly inadequate for essentially all actionsports where drone filming would be cool. It literally wouldn't keep up with Usain Bolt running the 100m, nevermind a regular person on a bicycle.

Shameless plug: a friend of mine is one of the founders of a competing startup making a self-filming drone that has more than twice the top speed, so is actually usable. They've been shooting on location with top athletes using pre-production models for the past year, first production models are going to final assembly these days.

https://www.staaker.com

Edit: s/full disclosure/shameless plug/ as per discussion below.

CGamesPlay• 9 years ago

the top speed was utterly inadequate for essentially all actionsports where drone filming would be cool.

This wasn't the reason they failed, though. They sold plenty of units, they just never delivered them.

olegkikin• 9 years ago

There are many drones on the market that have high speeds and can follow you. AirDog is one of the well known ones, can go up to 42 mph, costs $1600.

The cool thing about Lily was the waterproof aspect. There are very few of them that aren't toys and aren't very expensive at the same time.

sizzzzlerz• 9 years ago

And there is one fewer now

Bartweiss• 9 years ago

Lily also promised enough 'coordination' to track an athlete from multiple angles over varying terrain and obstacles. That's a much taller order than "follow me", and it doesn't look like they ever managed to get something that could track a skier or kayaker the way they implied.

dewyatt• 9 years ago

I really don't like when people use "full disclosure" as an excuse to advertise.

enraged_camel4• 9 years ago

I think HN as a whole has way too much self-promotion going on.

It's especially grueling when people preface it with stuff like "shameless plug" or "not to push my own product, but..."

dmalvarado• 9 years ago

2nded

semi-extrinsic2• 9 years ago

I agree, and I apologise. Wrote the post quickly, and the second part went more towards "shameless plug" than what I thought about when I typed "full disclosure". Edited now to reflect this. (And for the record, I have no involvement, just a friend of mine is doing this and I think it's cool.)

tsuraan• 9 years ago

Slow drones can be great for filming parkour runs, where the runner doesn't make a lot of forward progress but instead has a lot of vertical motion through interesting environments. e.g. https://www.youtube.com/watch?v=iS1itQxzAc4 had bits that were filmed with a DJI phantom, which isn't a terribly fast drone. Something slow with great obstacle evasion and auto-following would be perfect for parkour (not sure if Lily was supposed to have either feature, though).

Still, I'm sure that you're right about the vast majority of action sports.

harikb• 9 years ago

See how your tag line "Now you can finally be in front of the camera, and not behind it" sounds now with respect to your comment

laurent123456• 9 years ago

$35 millions for doing nothing is quite impressive. I was watching the South Park episode "Go Fund Yourself" [0] just last night, and as often they are pretty much spot on.

[0] https://en.wikipedia.org/wiki/Go_Fund_Yourself

tyleo• 9 years ago

Whenever I see companies like this with a spectacular demo but no product to show, I always think of the Richard Feynman quote, "For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled."

neduma• 9 years ago

Meh.. what about NeXT/BlackBox/SteveJobs? There was actually none of it exists and he did awesome PR and made it work.

enraged_camel4• 9 years ago

Steve Jobs was one of a handful of people in the world who could pull off such feats. I think tyleo's comment still stands when it comes to everything (and everyone) else.

rgbrenner• 9 years ago

but next was well on its way to declaring bankruptcy...

Next had terrible sales.. even jobs said so. The factory they built was so underutilized, they assembled the computers by hand instead of using the equipment because it was less work than doing the maintenance on it. It was designed to produce 150,000 machines a year... next sold 50,000 machines total over 6 years (an average of 700/month).

After 6 years, Next abandoned the computer market, focusing on software. They tried to sell the factory to Canon, who pulled out of the deal. They laid off 2/3rds of their employees.

On multiple occasions, investors were forced to put in more funding just to keep Next solvent.

Just a couple of years after abandoning hardware, they agree to merge with apple.

I wasnt able to find an exact number, but the amount of money apple paid for next may actually exceed the total revenue next pulled in during the 12 years they were in business.

tim3333• 9 years ago

Feynman's quote was more in terms of the product obeying the laws of physics. Most of Jobs' products did.

settsu• 9 years ago

Seems safe to assume that NeXT's existence was predicated largely—possibly entirely—on Steve Jobs reputation to actually deliver millions of units. In the end, he arguably "made it work" by the thinnest of margins.

A better, if flawed, comparison to Lily might be the Apple I: entering an established, growing market with a product which lowers the threshold for adoption in very specific ways. (I'll defer to more informed, educated, and insightful individuals to carry this comparative analysis any further...)

Isamu• 9 years ago

Right, Steve never existed, nor did the NeXT box ever ship.

elmar• 9 years ago

I think the killer was really the very low projected price of the pre-order, even today nobody makes a drone that does what Lily was supposed to do for less than $999. They figure out they could do it but not at that price point, they would be losing a loot of money on each unit.

jlarocco• 9 years ago

That's one thing that keeps me away from most Kickstarter projects and very early pre-orders from new or unknown companies.

Even if the technology is feasible and there's a working prototype, there's still a lot of work to do to get it mass produced, and problems and unanticipated expenses can crop up all along the way, especially for people who've never gone through the process before.

ptero• 9 years ago

This is a good point, but demos (real, hardware-based demos, "not made in powerpoint") are also critical to prove that one has a working technology.

There is still a big step to make it cheap, reliable and appealing enough to be commercially successful, but "X is possible and we know how to do it" demo is good base to build from. My 2c.

nom2• 9 years ago

You don't need working demos or even abide to physical laws to attract investors. Thanks to the power of social media you just have to choose a good cause, make it look cool and create a fake demo video. Most people just repeat what they read, critical thinking is a thing of the past.

See WaterSeer [0], SolarRoadways [1], Fontus self-filling waterbottle [2], ...

[0] https://www.waterseer.org/

[1] http://www.solarroadways.com/

[2] http://www.fontus.at/

covercash• 9 years ago

According to this, the demo video was faked: http://boingboing.net/2017/01/16/lily-drone-demo-video-that-...

M_Grey• 9 years ago

So, nature can't be fooled, but investors sure can be. Ouch.

acchow• 9 years ago

Probably like Magic Leap

ransom1538• 9 years ago

I would much rather fail at the power point stage. Failing later is worse: inventory, employees, lawyers, bankruptcy.

latenightcoding• 9 years ago

New favourite quote.

DrNuke2• 9 years ago

lol they raised so much with nothing in hand but a few cad files while we have a worldwide original test bench for drones made&done and can't raise a penny? deeper line being can you startup a single-model drone in an already populated, very competitive market?

rboyd• 9 years ago

That looks like awesome tech, but it also looks like your only major customers would be drone manufacturers or hardcore hobbyists/racers? Maybe perceived market size is the problem with your raise?

DrNuke2• 9 years ago

Efficiency certification going to be regulated pretty soon for safe flight permit so this would open a pretty big market for services, training of certificators and our novel universal efficiency benchmark, we think.

mikikian2• 9 years ago

Here's the court filing [1] describing the circumstances that led up to the bankruptcy.

[1] https://pdf.inforuptcy.com/pacer/debke/167122/dockets/2/1-A0...

mikikian2• 9 years ago

Looks like the IP will be for sale soon.

"68. Second, the Debtor will pursue a competitive auction and work to close a sale transaction. The Debtor intends to file a sale procedures motion shortly after the Petition Date to initiate that process. The Debtor has received indications of interest from a number of potential buyers of its intellectual property portfolio and believes that its planned 363 sale will realize value from the portfolio. Due to the potential loss of value to the IP if it goes stale, the Debtor hopes to expedite the closing of any transaction. "

duskwuff• 9 years ago

The real question is whether there's any real IP to be had. Their demo video was faked, after all -- was there any work "behind the scenes" on a functional prototype, or is the portfolio limited to the (now worthless) brand?

microtherion4• 9 years ago

"Lily, whom despite raising millions in dollars to build their highly anticipated consumer drone, have just filed for bankrupcy."

On an entirely unrelated note, this is an early contender for "most ungrammatical sentence I hope to read today".

theoh2• 9 years ago

Isn't it just missing one comma? (I suppose "whom" should be "who")

clebio• 9 years ago

Lily has (a company has filed for ...). And generally "millions of dollars". meh.

microtherion4• 9 years ago

"whom" is wrong in 3 different ways in my opinion:

(1) It should be "who", not "whom". I find that hypercorrection immensely annoying.

(2) But actually, since Lily is a company, it should be "which", not "who".

(3) But even "which despite raising […] has filed" is wrong. It actually should just be "Lily, despite raising […], has filed" or "Lily, which raised […], has filed". "which despite raising" subordinates "has filed […]", so the whole sentence turns into a noun phrase missing its verb phrase.

bane• 9 years ago

Man, one of these days I need to go get $35 mil in funding and produce nothing but a vision video.

alekratz• 9 years ago

...and then file for bankruptcy?

dahdum• 9 years ago

Are the founders going bankrupt, or just the company? I'm guessing only the latter.

DroningON• 9 years ago

SelFly is next, 8,000 backers, $1m and yet an impossible specification... http://www.droningon.co/2017/03/09/selfly-1m-funding-next-za...

coverband• 9 years ago

At least they seem to be shutting down in an orderly fashion (maybe because of the State intervention) and attempting to refund most customers. The bankruptcy court documents also talk about some potentially valuable IP and patents.

pencilpup223• 9 years ago

This news is over a week old...

techthroway4432• 9 years ago

Your point?

krushing• 9 years ago

A floating camera has to be one of the major hardware projects Snap is working on.

vkou• 9 years ago

So, their demonstration videos were completely fabricated.

"Are you sure that the GoPro lens does not create a unique deformation/pattern on the image? I am worried that a lens geek could study our images up close and detect the unique GoPro lens footprint. But I am just speculating here: I don’t know much about lenses but I think we should be extremely careful if we decide to lie publicly." - an except from an e-mail by a Lily founder. [1]

There's optimism, there's prototyping, there's proof-of-concept demos... And there's plain, old deception.

[1] http://liesandstartuppr.blogspot.com/2017/01/consider-lily.h...

Balgair• 9 years ago

Now that is a quote that has every HS physics teacher shaking their heads.

pfarnsworth• 9 years ago

Exactly as I expected.

iamleppert• 9 years ago

I know someone who worked for Lily. Apparently, they hadn't progressed based the vicon stage in terms of actually getting their drone to fly indoors, let alone outdoors.

Expect the IP, if any, to be near worthless.

Who knows the reason(s) why, but it doesn't seem like they had very good engineers or leadership if they burned through all that time and money and couldn't even get basic flight working.

yalogin• 9 years ago

Speaking about spectacular demo videos how is magicleap doing?

neotek5• 9 years ago

What amuses me about Kickstarter is that the stuff that's actually going to work, that's 100% definitely going to ship - that is to say, Alibaba resales, existing product repackaging, etc - are the one thing that Kickstarter doesn't allow.

But if you want to create a project that literally breaks the laws of physics, something which a high-school science student could demonstrate is physically impossible, Kickstarter will proudly slap their editor's recommendation on your project and help you pimp it to the media so you can widen your net and catch more suckers to siphon money from.

Stuff like Water Seer, Fontus, Solar Roadways, Triton Artificial Gills - that's all I think of when I think about Kickstarter now. Their brand is utterly toxic to me, and don't even get me started on Indiegogo!

Lily Drone Files for Bankruptcy

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