This is a cautionary tale not just for backers of ostensible promising hardware presales campaigns but for hardware creators with little to no experience on manufacturing and shipping hardware from Asia.
GOKey, a rewards based project posted on Indiegogo in 2014, raised over $1.2 million with the support of almost 14,000 backers. GOKey was promoted as a combo-battery cable device with a finder application included (similar to Tile). Crowdfund Insider published a story last week that after several years of delays and encouraging updates, founder Doros Kyriakoulis announced the company had run out of money and was considering bankruptcy. Not a good outcome. As one may expect, GOKey backers would not be receiving their promised perks after waiting for years. GOKey backers were, understandably, pretty pissed off.
A few of days ago, an individual with inside information on the GOKey campaign contacted Crowdfund Insider. They wanted to share what really went wrong and clear up a few items regarding GOKey and its creator. Due to their professional standing within the Asian hardware and manufacturing industry, they asked not to be named.
Back in late 2016, this individual was contacted to help out with the flailing GOKey Indiegogo project. This person, based in China, works directly with hardware companies to help facilitate tech projects. Some of their clients are fairly well established shipping millions of dollars in hardware each year. Short of money and saddled with technology setbacks, GOKey was in dire need of help. Even this late in the game, this person believed the project had solid potential if it they could get it to market;
“I had seen the GOKey as something that was doable with today’s technology with a reasonable amount of money. This product should have gone to market and should have done really well,” explained the insider. “We could have done this project in just six months. Professional distributors were very excited about the project. Among the backers of the campaign were a lot of distributors.”
But Kyriakoulis had over-promised and was in the process of under-delivering.
The stretch goal of adding Wi-Fi created a a big problem. It simply didn’t work. They looked at pulling the feature in an attempt to simplify the project and dumb it down. But reconfiguring a device not only takes time but more money/
Kyriakoulis was in a bind. The design was broken and he was dealing with a myriad of Chinese companies in a language he did not understand and culture that is highly risk averse.
“[Kyriakoulis] is an alright guy but no CEO type. That is what was needed. This comes down to execution. He had just met the wrong people. He thought he had hit the big time when he raised all of the money. He hired a big team and they sucked him dry. He came to China and he did not speak any Chinese. Whatever money he had left he had given away in salaries.”
If you don’t have any experience dealing with the Chinese manufacturing world there is a huge risk you will get fleeced. This has happened more than once in the world of perk-based crowdfunding. Optimism and a pocket full of money is not enough. You have to understand the labyrinth of personalities and players. It’s a different world.
“People here can fool you around for a long time. You have to have a team … at least two teams when they start putzing around. There are tons of engineers here but you have to drive the bus. When there is a problem they start pointing fingers at everyone else. If you are not technically inclined you are going to get turned around in circles. If you know how to talk to people here you are going to get results.”
Apparently in the beginning of the project, Kyriakoulis talked to the wrong people who were willing to take his money but were short on results. Many inexperienced creators looking for a manufacturing partner go straight to the largest factory. But large factories can be more inclined to copy your product and rip you off. They have all the relationships in place to quickly clone and ship a promising product. If there is no ongoing relationship or reason to commit, they can easily take your idea and run.
Crowdfund Insider was told that, with the help of this person, a relationship was formed with a Chinese firm that even put some of their own money into GOKey in an attempt to reanimate the stalled project. But when additional tech problems came up they simply walked away. It made no sense for them to continue to fund a project when they would have to deliver to backers and not make any profit. The Chinese investors said there was no way they were shipping 15,000 GOKeys without getting paid. GOKey became a bottomless pit.
“Doros was very stressed at the end. He kept pushing for the backers. He was definitely feeling the pressure. This really crushed him … Doros got screwed by Silicon Valley and then over here.”
This person believes that Kyriakoulis had good intentions but not the necessary skill-set. It all came down to management. In the end, Kyriakoulis did not have the tool kit to deal with Chinese companies that he needed to fulfill his obligations. GOKey collapsed.
The insider is of the opinion that platforms should shoulder part of the blame in projects like this. The platforms collect their money first and then the relationship ends.
“The platforms [Kickstarter and Indiegogo] make money for being a PR site. They have no fiduciary responsibility [for project completion]. They are motivated by something else. They collect their money once the goal is met. I don’t think [backers] should be angry at Doros. They should be angry at the platforms. They should have been helping Doros out.”
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