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"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

"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 10y ago
Is there criminal investigation happening? This smells very bad. Yes. https://www.forbes.com/sites/ryanmac/2017/01/31/failed-drone-startup-lily-robotics-raided-for-possible-criminal-investigation-says-source/#7a1b6ea96d0f https://www.forbes.com/sites/ryanmac/2017/01/31/failed-drone...
- zatkin 10y 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 10y 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!
samfisher83 10y 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-cancelled-32m-in-orders/ http://www.droningon.co/2017/01/12/lily-drone-project-cancel... Apparently their original footage was from a DJI inspire.
- ionwake 10y 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 ?
  - samfisher83 10y ago
    Supposedly all fake: http://www.droningon.co/2017/01/15/san-francisco-superior-court-pursue-lily-drone-legal-battle/ http://www.droningon.co/2017/01/15/san-francisco-superior-co...
  - pmarreck 10y ago
    Well, DJI drones have "follow" features as well, so
- basseq 10y 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.
- microtherion 10y 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-A0D229D2-FCF6-11E6-9996-3326DBA93163 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 10y ago
"Please don't use uppercase for emphasis." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
NDizzle 10y 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...
jerryr 10y 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.

mikeryan 10y ago

Is there criminal investigation happening? This smells very bad. Yes. https://www.forbes.com/sites/ryanmac/2017/01/31/failed-drone-startup-lily-robotics-raided-for-possible-criminal-investigation-says-source/#7a1b6ea96d0f https://www.forbes.com/sites/ryanmac/2017/01/31/failed-drone...

zatkin 10y 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 10y 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!

samfisher83 10y 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-cancelled-32m-in-orders/ http://www.droningon.co/2017/01/12/lily-drone-project-cancel... Apparently their original footage was from a DJI inspire.

ionwake 10y 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 ?
- samfisher83 10y ago
  Supposedly all fake: http://www.droningon.co/2017/01/15/san-francisco-superior-court-pursue-lily-drone-legal-battle/ http://www.droningon.co/2017/01/15/san-francisco-superior-co...
- pmarreck 10y ago
  Well, DJI drones have "follow" features as well, so
basseq 10y 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.
microtherion 10y 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-A0D229D2-FCF6-11E6-9996-3326DBA93163 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 10y ago

"Please don't use uppercase for emphasis." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

NDizzle 10y 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...

jerryr 10y 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.