Voice as an Interface

After months of speculation, last week Amazon finally announced its entry into the living room with the Fire TV. It arrived with a bunch of fanfare, at a price point equal to that of the Apple TV and Roku 3 but with a number of extras including (moderately) high performance gaming. From my perspective, the most notable feature was not one that that you saw but one that you heard. See, unlike the simple voice commands of electronics past, the Fire TV includes a voice interface that combines complex command interpretation with full speech-to-text capabilities. It can do amazing things like search for all titles featuring Mila Kunis by just speaking her name.

Voice interfaces this sophisticated have been a long time in the works in a story that has played out over three discrete phases.

Phase 1: The PC Era

The early days of consumer-grade speech recognition came in the mid 1990s with Dragon NaturallySpeaking. For $695, a fully loaded PC in 1997 could, barely, hear what you were speaking in a perfect environment and translate roughly 90% of it into text after a 45 minute training session.  As processor speeds increased and voice recognition research advanced, so did the ability for full blown  computers to take voice and translate it into text. But given the ubiquity of a mouse and keyboard in the computer world, the use of voice as an interface never really took off. In the same amount of time or less that you could say “search for all movies directed by Wes Anderson” to your computer with a headset on, you could type “Wes Anderson movies” into a search box and get the same results.

Phase 2: The Mobile Era

By 2011, compute technology and cloud access had advanced such that voice could finally take on a new form factor while maintaining the accuracy needed for consumer adoption. That form factor: the mobile phone. In the interface-light world of a smart phone, voice as an interface made lots of sense. With Apple’s internally developed dual-core A5 processor and massive North Carolina data center, a mobile device finally had enough power and connectivity to handle complex voice tasks and Siri was born. Siri could listen for a set of keywords, like “call” or “text,” and then immediately voice-to-text transcribe the next words, passing them to the appropriate application. Texting your mom from the car no longer felt like flirting with death - it felt magic. Google quickly realized this as well, releasing Google Search (now Google Now) on Android phones using similar high-power processors and cloud connectivity. Even Microsoft is coming to the party with Cortana.

Phase 3: The Standalone Era

The latest phase of voice interface advancement arrived just a year ago. Thanks to the accelerating sophistication of processors and low cost cloud connectivity, even inexpensive hardware devices are now beginning to support advanced voice control and interfaces. Google Glass was one of the first examples of this, allowing users to say “OK Glass” (a set trigger) followed by a variety of set commands (like “search” or “email”) followed by any freeform text. At $1,500, however, it was hardly low cost. Soon Microsoft followed suit with the Xbox One at a more reasonable $499. With the Xbox One, users can not only control key features of the system (like tuning TV channels and recording shows) but they can also interact with games in new ways. Dead Rising 3, for example, requires voice commands to play.

The Fire TV brings this sophisticated voice interface to a whole new price point. At $99, complex voice as an interface technology is finally easily accessible. Powered by a Qualcomm Snapdragon 600-series processor and wired/wireless internet connectivity to AWS, the Fire TV is the latest innovation bringing voice interface to a whole new class of devices.

With the Fire TV, the speed and connectivity needed for complex voice has finally hit mainstream, and that’s something that has the potential to change the way we interact with devices all around us.

Box’s Not So Magic Number

One of the key metrics we encourage our SaaS portfolio companies at Flybridge to be focused on is the magic number. Sure growth rate and lifetime value and customer acquisition costs and churn are all important but the magic number is magic for a good reason: it gives a great sense for how much sales and marketing spend are driving monthly recurring revenue growth. In other words, it summarizes a number of metrics in a single number. If you’re not familiar with the metric, made famous by Josh James, take a read here to get up to speed.

Our praise of the magic number often translates to religion at our SaaS portfolio companies. In one particular company, after implementing magic number reporting and discovering it to be 1.9, a sales manager cold emailed James to share his excitement. James responded “Hire more reps then” and introed the company to his CTO at Domo (who went on to become a customer).

While we get to apply this metric to our portfolio companies - most of our SaaS companies report it on a quarterly basis - it’s sometimes fun to apply the same lens to other companies. With Box filing their S1 earlier this week, we wondered what sort of numbers they have been seeing. The quick: not such magic ones. 

As we go through this, remember that James’ rule of thumb:

[I]f you are below 0.75 then step back and look at your business, if you are above 0.75 then start pouring on the gas for growth because your business is primed to leverage spend into growth. If you are anywhere above 1.5 call me immediately.

Revenue and Sales and Marketing

Finding the numbers to calculate the magic number by quarter for Box based on their S1 filing is pretty straight forward: just go to the Quarterly Results of Operations section, find the revenues and sales and marketing costs by quarter and use James’ magic number equation (QRev[X] - Qrev[X-1]) * 4 / ExpSM [X-1]. That leaves the following:

Now this is slightly imprecise in that it looks only at new revenue growth not new annual contract value growth in a given quarter, a more true way of calculating the magic number, but it’s the best we can do with the data reported. Given James’ rule of thumb, ever quarter since the quarter ending 7/31/12 has been one worthy of stepping back from, not one worth pouring gas on.

Adjustments

The issue with the calculations above is that they do not take into account what Box counts as Sales and Marketing expenses. Normally this line would contain just expenses associated with the various functions but, in Box’s case, there is more to the story. Box offers free trials of their product and the Sales and Marketing section of the S1 gives a hint of how Box accounts for the expenses associated with the free trials:

Sales and marketing expense also consists of datacenter and customer support costs related to providing our cloud-based services to our free users

Being true to James’ calculations, it’s not really fair to burden the magic number with the cost of datacenter and customer support expenses so, for the benefit of Box, let’s back these out. It’s impossible to be precise here since the company doesn’t break these items out individually but we can use a note in the filing to guessestimate:

Sales and marketing increased by $72.0 million, or 73%, during the year ended January 31, 2014 compared to the year ended January 31, 2013. The increase was primarily due to an increase of $45.5 million in employee and related costs, including higher commission expenses of $16.0 million, driven by headcount growth from 374 employees as of January 31, 2013 to 513 employees as of January 31, 2014, and higher sales, an increase of $12.6 million in datacenter and customer support costs to support free users, an increase of $6.4 million in allocated overhead costs, and an increase of $2.8 million in travel-related costs.

If you assume that all the expenses grew at the same rate from 2013 to 2014 (and this is a pretty big assumption but really the only one that can be used), you can roughly calculate what percent of sales and marketing expenses go towards each line item:

If you apply this same rule of thumb to the reported Sales and Marketing expenses and back out the 19% costs associated with free customers, you arrive at the following:

Better (because the sales and marketing expenses have been adjusted downwards) but still far from great. So how do these compare with some other enterprise SaaS public companies? The answer: not so well.

 

Summary

The magic number isn’t the end all be all for SaaS metrics but it’s a very useful one. It doesn’t take into account things that may benefit Box’s business such as longer than average lifetime values and increasing customer values over time, but it’s an important metric nonetheless. The magic number analysis in Box’s case suggests that the company is spending money faster yet growing slower than comparable public SaaS companies - essentially throwing cash at growing top line revenue with decelerating results. If one of the Flybridge portfolio companies demonstrated these magic numbers, especially on a downward decline, we’d be wondering if it made sense to keep pouring fuel on the fire. We’ll see if the public market will wonder this as well. 

Note: A big thanks to Bart Hacking, CFO of BetterCloud, for running the numbers and germinating this post.

Wearing the Future

If Facebook’s bombshell announcement yesterday that they are buying Oculus Rift does anything, it solidifies the fact the next great platform wars will be waged on the body. Whether it’s Facebook with Oculus, Google with Glass or Sony with Morpheus, it’s clear the big boys are big believers in the wearable future. Expect to see some large companies left out of the phone/tablet wars acquire technologies that position them well in the new wearable ecosystem - I’m looking at you, Microsoft - and others move to develop aggressively in house - say, Amazon.

It’s not clear what part of the body will be the dominate wearable space. The past months have put a lot of focus on the eye but not only are there multiple implementations of this concept (full headset vs augmented reality), there are plenty of other areas of the body that are getting smart. The wrist is one but don’t forget about the neck or hands or feet or ears.

While all these other body parts may be getting connected, they all lack the special feeling of actually seeing the technology in front of you regardless of what you are doing. That’s why the head is so special; it allows for high resolution, persistent information via our most powerful sense - sight. That’s what Google sees in Glass and what Facebook sees in Oculus (pun fully intended).

Business as Usual

The big news yesterday (at least for my mom, my dad, Amanda and The Beast) was that I was promoted to General Partner at Flybridge. I have had an incredible 6 years at Flybridge and am thankful every day that I get to work in such an incredible industry with such an amazing team. My partners Chip, David and Jeff are great friends and even better investors. I’m lucky to be spending my career with them and the rest of the amazing Flybridge team.

I couldn’t be more excited about the times ahead. New York is an awesome place to be building my venture career, and with our strong NYC portfolio (MongoDB, BetterCloud, Tracx, 33 Across, Carnival and two unannounced new investments) Flybridge is a great platform for me to do so.

My title may have changed but how I work will not. After all, being a partner at a venture firm doesn’t just mean being able to sit around a table of coworkers and be viewed as a peer, it also means being able to be a better partner to entrepreneurs. And that remains job number one.

So it’s business as usual for me. Well, business as usual with maybe some fancy new cards.

The Basis For Success in Hardware

The hardware news of the past 24h is that Basis, the smart watch that did everything from count your steps to count your heartbeat, was sold to Intel for “around” $100M. With $33M raised over 3 years, not quite the Nest outcome all of us cheerleaders of the hardware startup ecosystem were hoping for. I’m not sure exactly what went on behind the scenes here but I do think there are some observations on the deal that are worth noting.

Hardware Takes Capital
It may take less capital to get a hardware startup started these days but it still takes meaningful capital to scale hardware businesses. It took Nest $80M and has so far has taken Oculus $93M, Fitbit $66M and Pebble $25M. There are a few alternative ways to grow hardware companies, including loans against orders, but old fashioned equity seems to always be a key part of the equation. To take Basis to the next level, meaning a totally new product, would have likely required an amount of capital that just wasn’t obtainable given the company’s trajectory.

Hardware is a Commodity
With few exceptions, there is absolutely nothing unique about what a specific hardware startup is building. Unless you are like Samsung, Apple or Intel you have access to the exact same building blocks as everyone else out there. You may be able to stick the blocks together in an innovative way or come up with a different way of using those blocks but there is nothing about your pieces on the hardware level that no one else can copy. The hardware is a commodity and without a specific value proposition, key differentiation and powerful software, it doesn’t matter how good your hardware is; it’s no different than what someone else can build. Said another way, technology alone doesn’t win the day - sticking a “optical blood flow sensor” on the bottom of a watch doesn’t get you very far.

Traction Matters
Because hardware is expensive to build and the hardware alone isn’t super valuable as an asset, for consumer facing hardware startups traction really matters. It is traction that got Nest a cool $3.2B and makes assets like Coin and Fitbit attractive. Absent consumer traction, there is a valley of death that hardware startups face due to the fact they are expensive to scale. This death valley falls around the series-B / series-C level with $20-40M raised. See, in the early days (seed / series-A), the hardware startup can sell on the vision of what will be. As the company matures, if the traction isn’t there and a new product is required it can take another $10M+ to get something to market. But lacking the consumer traction, raising that amount of capital becomes difficult/impossible. A similar dynamic exists in the software startup world but the issue is magnified here thanks to the capital intensity of hardware - a software startup may be able to develop a new product with a fraction of the capital required for a hardware startup (i.e. Twitter). Traction matters if your hardware startup is consumer facing.

With Basis out of the mix, what does the future hold for wearables? I remain bullish but don’t think getting there will be easy.

Thoughts on Nest

The internet is awash with Nest -> Google analysis and observations, so what’s one more? Here are my quick thoughts, 18h after the announcement:

1. Google is smart

Google isn’t stupid and the synergies between Nest and Google are numerous. As may have pointed out, the play here for Google is as much about the data as it is about the hardware. Google will now have all sorts of location / behavior / consumption behavior in the real world; something the haven’t been able to tap into in the past. Count that as synergy 1. They also have a new hardware platform perfect for getting Android adoption in a big, massive market. Expect the acquisition to result in more embedded Android devices coming to market and a renewed focus on the space from Google. Count that as synergy 2. With Nest on the wall, Chromecast on the TV, an Android phone in the pocket and (maybe) a Glass on the face, Google has the power to connect all sorts of your physical world to one another. Make that synergy 3. There are plenty of others but, to reiterate the obvious, Google is smart.

2. The battle for the home is just beginning

We’re very early in the connected devices game. The Nest acquisition marks maybe the bottom of inning 1 or start to inning 2. We still have a long game ahead of us. Nest was really the first consumer home device to hit consumer traction of any sorts and that’s part of what Google is buying - the early lead. Expect the acquisition to drive a new wave of startups to focus on the space and for them to bring connectivity to other, previously untouched portions of the home / person. I’m not talking refrigerators with screens on them here; I’m thinking new and novel applications of the fact that a computer an internet connection can now be the size of a Chiclet, powered by a AA battery and cost less than $10.

3. For consumers, design matters

Connected thermostats and smoke alarms have been around for 10+ years. Companies like iControl and Ecobee sold tens of thousands of connected thermostats years before Nest came to market. So why has iControl raised $100M and struggled and Ecobee more or less gone out of business? Simple - consumer experience. Which would you buy and feel proud to have on your wall?

Pretty simple, just like asking which phone you would buy:

Or which pedometer:

When it comes to consumer adoption, design matters.

4. Software, software, software

The magic of Nest was not in the hardware - anyone could glue a screen to a thermostat, connected it to the internet and made a connected thermostat (and, per above many did) - but in the software surrounding the hardware. The design appeal of Nest went far beyond the industrial design of the plastic and extended to the software and user experience. This matters not only because it’s software that acts as the bridge between the hardware and the consumer but also because it unlocks a ton of potential value. As I’ve discussed before, software is the razor blade of hardware.

5. The real winners are hardware startups

Yes, Matt Rogers and Tony Fadell are huge winners here. So are Kleiner Perkins and Shasta Ventures, Nest’s early investors. The real winners here, however, are the hardware startups and entrepreneurs who have had to answer time and time again “to what end?” The Nest acquisition clearly shows there is huge value to be created out of hardware companies and, not only that, startups can play in this space. Naysayers be damned. This benefits those already at it, like Pebble and Fitbit, and those thinking about it.

It’s a good time to be a hardware investor.

New York City Dominates My Dealflow and Other Semi Interesting Facts

Five and a half years ago I graduated from business school, took a week off to travel, and returned to Boston to settle down as an investor. With 2013 coming to an end, now seemed like as good of a time as any to take a look at the past 5 years by the numbers and shed some light into my personal funnel. Yes - the data below is my actual data since January 2009 (but not the data from the full Flybridge team).

Before we start, it’s worth mentioning how I collected this data. At Flybridge we have a tool we purpose built for tracking deals; a system we call Dealflow. Dealflow is nothing more than a database with a web interface on the front but it gets the job done. We use the system to enter investment opportunities we see and collect notes / data that our whole team can view.  We tend not to input entries for companies that fall outside of our early-stage focus (meaning past series-B) or companies where there is no immediate investment opportunity.  The rest gets logged, in theory, by whichever team member is the internal source of the deal.  Like any good sales tracking tool it doesn’t capture everything we see (because sometimes we’re lazy) but it probably captures ~80%.

Aggregate Deals:

In 2013 I entered a total of 609 companies into our tracking system, an all-time high for me that represented a 57% increase from 2012. Looking back, why did my opportunity number drop from 2011 to 2012? Primarily thanks to Caitlin, who we hired in 2012 and took over a bunch of the pieces that I was doing a poor job of managing myself.

NYC:

I’ve already spoken about why I moved to NYC in September of 2012 but it’s interesting to see the numbers. Every year since I’ve been investing, the percentage of opportunities I have seen based in New York and the surrounding area (New Jersey and Connecticut, both of which add less than 10 opportunities per year combined) has climbed. In 2013 the New York area made up over 50% of the opportunities I saw, making up 56% of my deal flow. Moving to the city absolutely helped me see more New York-based deals but the yearly increase is much more than that; it’s a reflection of how quickly the New York startup ecosystem is growing.

Source:

In Dealflow we try enter where the opportunity came from to track who the source was. Opportunities fall in five buckets:

  • Transom - Blind / cold emails into the investment professional
  • Other Investor - Sourced or mentioned by another member of the investing community outside of Flybridge
  • Conference - Discovered when the company presented at a conference
  • Service Provider - Sourced or mentioned by a service provider like an investment bank
  • Personal Network - Sourced by someone in the investment professional’s personal network

Personal Network has consistently grown in the past 5 years, which is to be expected as my own network got both broader (I know more people) and deeper (I have strengthening connections with some of those people). Not sure what more to say, although I’ll come back to source type in just a minute.

Investments:

In my time thus far at Flybridge, I’ve entered a total of 2135 companies into Dealflow and invested in 4 companies. That means the odds of getting funded by me after being entered into the system, in aggregate, is 0.19% - one in 534. The reality is that the odds are probably somewhat less given that Dealflow likely understates the total number of companies I’ve seen (per above). If we assume I only enter 80% of the opportunities I see, that number drops to 0.15%. 

2013 was active for me with two investments in the year. For the year the odds of investment were 0.33% according to Dealflow, almost 2x my aggregate odds over the five year period. I think this is a combination of two things: 1) an increase in high quality, New York-based entrepreneurs starting companies in exciting spaces and 2) an increasing confidence on my part to write checks.

Matching up my investments against the source of the opportunity is fun but doesn’t make for a pretty graph because it’s just one line: 100% of the companies I have invested in came from my personal network. You know how they say that a warm introduction to an investor is best? The numbers prove it true.

Missed Deals:

In collecting the data for this post I also decided to go back and pick a few companies I saw each year that, in retrospect, I wish I had invested in. A sample personal anti-portfolio of sorts. In almost all instances it’s too early to tell if, in fact, these companies will be “winners” but the ones below appear to be on a path to success. With each I tried to give a quick synopsis of why I passed, just like Bessemer has done with their anti-portfolio, along with the latest fact suggesting that issue is long past.

I did this for all years except 2013 because there’s just not enough data from that year to really tell what companies are on an upward trajectory.

2009:

  • 2U
    • Had trouble believing that top schools ever agree to put full degree programs online.
    • Now in use at UNC, Emory, Wake Forest, Washington University in St. Louis, etc.
  • CustomMade
    • Couldn’t see how a hundred million dollar or greater revenue business could be built in the custom category given the limited number of makers and buyers.
    • As of July had 12,000 makers and 100,000 buyers with an average project price of $1,000. You do the math.
  • Venmo
    • Had trouble seeing how the p2p money transfer network would ever get scale given the friction of entering a credit card number, depositing money, etc.
    • Reportedly was on pace to process $250M in 2012 before their acquisition by Braintree.

2010:

  • Betterment
    • Customer acquisition costs for consumer investment products are expensive so how a startup could scale without significant advertising dollars.
    • Last year was increasing assets under management 500% per year and accelerating.
  • Cloudflare
    • Won’t Akamai, a 1000lbs gorilla with a directly competing product, win this space?
    • Today has more than 1 million customers and is adding 10,000 more… a week.
  • Dataminr
    • How big could a company that sells a tool to traders (of which there are maybe 400,000 of in the world) at a price the fraction of what Bloomberg charges ever get?
    • The company has continued to execute well in the financial services space but has a new, large, fast-growing business group focused on government sales.
  • Kickstarter
    • Crowdfunded films? Feels niche.
    • $1B pledged, 5.5M backers. Pretty much the opposite of niche.

2011:

  • DraftKings
    • Sure, it’s “legal” but will people really feel comfortable betting like this online and will the regulators allow them to?
    • From August to November of this year alone tripled its customer base, with year-over-year revenue growth of 10x.
  • GrabCAD
    • Could a network of 3D designers really be built or are these people all professionals with little time for “community” work?
    • Announced 1M members last week.

2012:

  • Behance
  • Blue Apron
    • Won’t this just work in New York City and nowhere else thanks to consumer behavior and logistics?
    • Live (successfully) in California, Oregon, Washington, Idaho, Nevada, and various select markets in Utah, Arizona, Colorado, Wyoming and New Mexico.
  • SigFig
    • A leadgen business for financial services products? Will anyone buy this?
    • 500,000 users, $40B of assets being tracked. Yes, yes they will.

So that’s 2013. What will the next 12 months bring? I, for one, can’t wait to find out!

Why software is the razor blade of hardware companies

This post originally appeared on VentureBeat.

The most successful hardware companies are the ones that look a lot like Gillette. Consider Dropcam, for example. While the company’s new $199 Dropcam HDis a great wireless camera, it’s infinitely more useful with the optional $10 per-month subscription, which offers seven days of archived recording.

According to Dropcam, 39 percent of their users attach the subscription service and, by simple math, that means that in the first year of ownership, each Dropcam buyer is worth closer to $240, rather than just $200. And that’s just for one year of subscribing.

By laying in software subscriptions into hardware products, companies are able to dramatically increase the lifetime value of each customer. They can take a $199 camera, for example, and turn it into $199 camera with a monthly fee.

In many ways, using software to supplement the revenue profile of hardware companies is the latest take on a business model evolution started about a century ago

See, back then razor companies realized that if they could price razors cheap enough to get consumers to buy the handles, they could charge more for the blades themselves and come out on top given the number of blades purchased.

Credited to Gillette, variations of the model have built huge businesses in categories like cell phones (get the phone for cheap, pay for the monthly service) and printers (get the printer for cheap, pay through the teeth for the ink).

In this sense, “hardware as software”is a modern-day interpretation of “Give ‘em the razor; sell ‘em the blades.”

And that’s a great way to escape what I call the” hardware treadmill.”

What’s wrong with hardware for hardware’s sake?

The hardware treadmill works like this: Define a new product, develop it, manufacture it, sell it — and then repeat.

Here’s how it looks.

Razor Figure 1

The process, from start to finish, used to take us about 12 months, meaning that as soon as we got the product on a BestBuy shelf, we had 12 months to get the next one out there. Why a loop? Because after 12-24 months, our product would go stale and consumers would be looking for the next thing. A good thing, too, because by the time our next product would come out, we’d be looking for new sales to hit our revenue targets.

Hardware businesses that operate like this are all around you — just look at MacBooks, for example — and businesses on the treadmill can become exciting ones. But that’s not easy to pull off.

Why hardware as software makes sense

The alternative to jogging on the hardware treadmill is clear:  Figure out a business model that turns hardware from a one-time revenue event to a recurring one. Some hardware companies do this with maintenance fees. Others do it with built-in obsolesce. Increasingly, however, hardware startups — like Dropcam, as I’ve mentioned above — are turning to software to create that lasting revenue stream.

So now we’re working with something like this.

Razor Figure 2

Before the hardware layer got abstracted away by complex operating systems, developing for hardware meant firmware and assembly code. Now,  developing for hardware can just as easily mean developing for software and services, too.

Anatomy of a Kickstarter Failure

At this point it’s no surprise that hardware Kickstarter projects fail to deliver on time. Report after report suggests this is the case - the reality with the crowdfunding model applied to something that is, well, hard. I thought it would be telling to share the anatomy of one such project I’m a backer of: the iFetch. Let me preface this post by saying that I’m using iFetch simply as a case-study in crowdfunded hardware delays; I do not, by any means, intend to disparage iFetch or call them out specifically, I’m just using them to illustrate the point. First some background.

I have a dog, Beast, who is 8.5lbs of amazing. I’d do anything for the mutt. One of his absolute favorite things in the world is playing ball. I’d even call him ball obsessed - it’s almost like the fetch/retrieve part of his brain is defective, forcing him to constantly want to play. So when iFetch came to Kickstarter I obviously had to get one. I was an early backer; $60 was a small price to pay for Beast’s eternal gratitude. As far as delivery goes, the page closed with: “If iFetch gets funded… we will work very hard to meet our estimated delivery date of November 2013.” The campaign funded 7/17 with 1,271 backers, raising $88,221.

All’s Well

Between the closing on 7/17 and 8/17, the iFetch team did a good job keeping backers posted with what was going on behind the curtain. They had won Best New Product at SuperZoo (?) and on August 17th proclaimed “Manufacturing on Schedule.” The first two lines of the post? “Hello iFetch friends! Just wanted to let you know that we have released iFetch to manufacturing and are beginning to cut steel for the molds on Monday! This means we are still on schedule for shipping your iFetch units in November!”

Trouble

The first sign of trouble hit 9/20 in a post titled “iFetch Manufacturing Update.” The highlight of the post: “Having said that, it looks now as if we will not hit our hoped for shipment of your iFetch units in November but are focusing all efforts on ensuring that you will receive them before Christmas. We will try to give you an update every two weeks between now and then to keep you close to our progress.”

I give the iFetch team tons of credit for identifying an issue early. They didn’t share too much information, just that the product would be delayed, so hard to know what to attribute it to but at least there was a head’s up 2 months prior to the estimated ship date. And they also committed to bi-weekly updates (also great). They did make one mistake, however: they set new shipping expectations to “before Christmas.”

Unrest

Backers were more-or-less agreeable to the delay, which amounted to around 1 month, until a post two weeks later. On 10/4 the iFetch team posted an update on a contest they had entered. A small but vocal set of backers complained that instead of focusing on contests they should focus on shipping units. The first comment on the update captures the spirit: “I think it is time for us to get a substantive update on what you’ve been doing besides entering contests.”

In my mind, those backers were right and wrong: production should be the core focus of the business but it’s not unreasonable to expect a PR person, who can’t add much value in getting product into production, to continue to generate interest. I digress some but interesting to see the polarizing reaction.

Hints at More Trouble

On a post on 10/11 another sign of trouble appeared. Titled “Typhoon in China,” the iFetch team updated backers letting them know that a typhoon had knocked power out of their factory south of Shanghai for 5 days. The update ended “We think we will still be on track to be ‘in time for the holidays’ but will update you again when we know more.”

Failure to Deliver (so far)

10/25, in a post “iFetch Shipping Update,” the team concedes “We are not going to be able to have your units to your homes before the holidays as we had hoped.” They attribute the failure to deliver to a tight timeline and a typhoon delay. As for when to expect units, the team is now sufficiently vague only indicating “we will advise new buyers that delivery will only occur in January or later.” 

The explanation around the most recent delay is hard for me to believe. Having built millions of products in China, a factory delay due to disaster should be limited to a day-to-day slip, meaning even if they planned to finish and ship 12/15 they should now be pushed out to 12/20 not into “January or later.”

Instead I believe that team had not fully appreciated the amount of work to take a prototype device and put it into mass production; the typhoon is a good excuse but remains just that, an excuse.

Epilogue

I’ll plan to occasionally update this post with relevant information to continue the diagnosis. In the meantime it’s worth pointing out that iFetch is absolutely not the only hardware project to push back delivery. Other high profile examples include Pebble, Oculus Rift, Scanadu and Form 1. This is a symptom of the fact that hardware is hard. 

Unfortunately, Kickstarter, IndieGoGo and the other crowdfunding sites have trained consumers that this is normal. As one commenter on the iFetch project says “after funding over 100 Kickstarter Projects I never expect the project to come in on time… so now I add at least six months to the estimated delivery date…what I do not understand is why people purposing new projects do not review past projects to get a better idea of reality of manufacturing a new product.”

I agree. And that’s one of the reasons Flybridge backed Dragon Innovation. Consumers should expect better (even if we don’t today).