This night I had a terrible insomnia most likely caused by constant thoughts about my not so successful start-ups. This is not a rare occurrence these days (or more precisely these nights) – a side-effect of entrepreneurship, I believe. Anyway, around 2 am I became tired of mulling over the same problems and the same dubious solutions, however sleep was still successfully eluding me, so as per usual I sought the modern remedy for escaping real life – my phone. Somehow starting with the review of the best and the worst dressed at the Oscars, then going to the analysis of Donald Trump’s triumph at Super Tuesday I ended up reading a very interesting (but terribly long) article by Mark Harris about notorious Zano Kickstarter campaign. Zano was supposed to be a super small and a super cool drone for personal use (mainly selfies and videos), at least that was promised to its Kickstarter backers’ by the start-up Torquing Group.
Their Kickstarter campaign was astonishingly successful – it ended with over 12,000 backers and $3.5m crowdfunded investment, which was 20 times Torquing Group’s original goal. As M. Harris states in his article, “it was, and still is, Kickstarter’s most funded European campaign”. But it is also one of the biggest failure of all Kickstarter campaigns: only four Kickstarter backers and some guys, who pre-ordered Zanos directly, did get their drones, which were a terrible disappointment, barely working and without any fancy features, promised by Torquing. The company itself went bankrupt leaving their backers without drones and without money. It is an awful story, which now is used as a case study by crowdfunding platforms as well as by technology entrepreneurs around the world. Lessons are multiple: from how to run (or not run – it depends on your point of view and, I guess, business ethics) a crowdfunding campaign and how to (definitely) not run a technology business.
Since Zano case occupied my time from 2 am till 4 am, I managed to read plenty opinions about the lessons which have to be learned from its failure. At some point I will give this case for my students – it is really educational. I personally also learned something – otherwise precious hours of my nocturnal life are terribly wasted. However, I am not so sure, that these insights are student-friendly, at least they are not for the freshmen. And so it goes:
- It is possible (in fact very easily) to sell products, which do not exist - vaporware. It seems that you only have to concoct a cool back story, preferably showcase a hip co-founder and promise unbelievable technology. Oh, and have a good video, which may not even show your real product or prototype. And people will believe you!! Zano case showed that clever marketing and PR can sell and oversell products, which have not yet reached a VMP. They promised such technological features, which were doubtful at very best, but even Engadget at one point proclaimed Zano as one of the best products of the International Consumer Electronics Show in Las Vegas. And it seems that the guys from Engadget did not test it or seen it working! But please, understand me correctly – the lesson is not to exaggerate PR and marketing of a non-existent product. I just think that this case shows the true power of PR. You absolutely must have the working prototype or MVP and you absolutely need to create a good story behind it, even if there is none.
- People will believe if you promise a too good to be true technology, especially if you add to the equation unrealistic delivery terms. This is definitely a lesson, what not to do. Zano drone was unbelievable, excellent too good to be true case. Still more than 12,000 people believed in it and formed expectations to one day have such technology in their possession. This shows that people do not pay attention to technological details and do not question the feasibility of cool gadgets. This is good to know, if your goal is to run a scam. But if you want to build business, you have to do a reality check, even if you personally want that cool technology. Lesson for me is to double check and triple check feasibility of innovative ideas, which technology guys might present as “piece of cake” and also quadruple check marketing guys that they will not promise a trip to Mars when our rocket is not assembled yet.
- It is very cool to become an overnight success. I want that too! Probably as the majority of entrepreneurs I want my start-up to become the next big thing. I want to be written about, to expand and supersize, and to boast about high profile endorsements and huge achievements on my FACEBOOK, TWITTER, INSTAGRAM and this blog. But once again – reality check is necessary in this scenario as well. What drove Zano and Torquing into a certain death was not only unrealistic promises of their inventor and marketing, but also greed – and, I am certain, greed not just for money, but also for success. I can imagine that when they saw the number of Kickstarter backers explode beyond initial prediction, they were caught in euphoria and a dream that they can do it. That they can deliver much more drones than they thought, despite having no working prototype and no experience in mass production. I am honestly surprised how easily such important things were ignored and my lesson is – never trade reliability and credibility for overnight success and better underpromise than underdeliver.
- New black BMWs are the right car choice for start-ups, which launch crowdfunding campaigns. Come on, guys! Really? I know that we all want at some point to enjoy the fruits of our labour, but you got your BMWs when there was no product in sight. It is definitely very hard not to lose focus, when you suddenly get more than $3m into your bank account. I believe, that you feel rich and successful! But that is up-front money, which were given for your future performance, therefore rigorous financial planning is in order. So my lesson, if it ever happens for me in the future, is to immediately hire a very competent CFO, who is able to stay grounded and keep me and my colleagues grounded as well. The focus must stay on building a product, not personal luxury.
To sum it up, this case made me realise that I pay too little attention to marketing and PR in my own start-ups. I believe I have a good story behind both of them, however, my attempts at showcasing it so far were few and inadequate. So now I am going to write a press release while inspiration is still there :).