There’s suspicious silence about its failure — and already one lawsuit.

The rise and fall of Lily Robotics, a camera drone startup, follows a now-familiar script:

The company launched in mid-2015 with a promotional video of a breathtaking new gadget — in this case, a camera drone that automatically follows you around. It fetched millions of dollars worth of pre-orders, raised money from top-tier technology investors and hit unexpected snags leading to inevitable delays. Then, on Jan. 12, it announced it was shutting down before shipping a single device it sold.

“Over the past few months, we have tried to secure financing in order to unlock our manufacturing line and ship our first units — but have been unable to do this,” founders Antoine Balaresque and Henry Bradlow wrote in a blog post. “As a result, we are deeply saddened to say that we are planning to wind down the company and offer refunds to customers.”

What happened? And why wasn’t the more-than $34 million in pre-sales — and $15 million in investment — enough to get Lily off the ground?

Here’s what we know:

  • The company claims it really will be refunding pre-orders. The money was kept in “cold storage,” according to a source close to the company. (In a Dec. 2015 blog post, the company similarly said, “We have no plans to use a single cent of that money until your Lily Camera goes into final production.”)
  • Lily has been in the process of shutting down for several weeks. Employees were notified “several weeks ago,” according to a rep. This despite its last public tweets, posted on Dec. 12, 2016, still suggested drones would start shipping that month.

Meanwhile, those involved in running and funding the company have been unusually silent — suspiciously so — about the specific reasons for its unexpected collapse, which makes it seem like there could be more here than just a failed hardware startup.

And there is already one lawsuit, filed on Jan. 12 — the same day Lily announced it was shutting down — in the Superior Court of California in San Francisco, which makes some allegations public.

The suit, filed on behalf of the people of California, alleges the drone company intentionally misled customers with its promotional video that greatly exaggerated the drone’s smart, automated videography abilities — by shooting with a GoPro camera and a manually operated professional drone from rival DJI.

It also portrays a company that promised unreasonable ship-date estimates, violated rules around delays, and had no system in place to handle the international orders it was receiving.

Lily’s supposedly “false and misleading” video went viral, attracting more than $25 million in pre-order sales in just six weeks after it was released in May 2015, according to the lawsuit. (Lily initially sold for $499, but by 2016, the company was collecting $899 from customers hoping to receive one of its drones.) Lily never shipped a single drone it sold, yet continued to promise customers the flying robot they bought would soon come.

A spokesperson from the San Francisco District Attorney’s office told Recode the city has been investigating Lily for months, and multiple emails collected from the company are cited in its lawsuit.

These seem to expose the key problem: The jaw-dropping Lily footage purported in its promotional video wasn’t real.

In one of those emails, Lily CEO Balaresque wrote that the shots in the promotional video that are branded to come from a Lily drone would actually be captured with a “GoPro mounted to a Lily prototype.”

“However, we do not feel comfortable telling people that we shot

[View From Lily] scenes with a GoPro (because the whole thesis of our product is that you do not need a GoPro),” the email continued.

“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,” Balaresque wrote in another email to the producer of Lily’s promotional video.

It’s also alleged that at the time of shooting the video, “Lily Robotics did not have a single Lily Camera prototype that had all the features advertised.” Instead, it used some prototypes — “which looked good on the outside but were not fully functional” — for “beauty shots.” Others “had some functionality but did not look like the product being advertised.”

Lily declined to discuss the specifics behind its repeated delays. But in a Dec. 2015 blog post, it said cited redesigning its flight software, changes to its hardware components — including a waterproof sonar sensor for flight stability and a computer vision unit for better tracking and needing more time to test in extreme conditions.

Beyond the lawsuit’s allegations, industry sources also speculate to Recode that what Lily had proposed in the video was technically challenging, which may have led to its delays.

As one example, Lily’s video shows the drone dipping in water and flying itself out — a hefty promise, according to drone engineers. This would require a significant amount of power, especially considering the drone’s compact size and battery load.

Another potential hurdle related to user experience: The battery on Lily wasn’t detachable, so after 15 to 20 minutes of flying, the aircraft would need an hour or more to recharge. This doesn’t sound like a desirable experience; competing drones typically have flying times of 20 to 30 minutes and swappable batteries.

But investors and the media were mesmerized by the promise of Lily’s easy-to-fly ruggedness.

Lily raised its $15 million in funding from high profile venture capital firms, including Spark Capital, SV Angel, High Line Venture Partners, Slow Ventures and Sherpa Capital. One investor, Slow Capital’s Dave Morin, called the Lily “pure magic,” noting in a public Facebook post, “I’ve never seen anything like it.”

One of our favorite Slow Ventures companies Lily just came out of stealth. This drone+camera is pure magic. I’ve never seen anything like it. Check it out.

Posted by Dave Morin on Tuesday, May 12, 2015

The Wall Street Journal even featured the drone on the front page of the paper as one of the “gadgets that will define life in 2016.” Lily sold more than 60,000 drones before the product was ready.

By law, after shipping delays beyond 30 days, Lily was required to obtain customers’ consent to receive delayed products, or provide full refunds for those who didn’t consent to the delay or didn’t respond, according to the San Francisco suit. But Lily did not offer customers refunds when it announced delay after delay, according to the suit, while continuing to collect pre-order payments that steadily increased in price. Lily’s failure to comply with this rule “was willful, intentional, and corrupt corporate behavior,” the suit says.

Now Lily says it will refund those pre-orders over the next two months. But despite shipping several beta units — and pledging that shipments would actually happen just a month ago — it’s still not clear why the company couldn’t get its drone over the finish line, or raise enough capital from new or existing investors to continue development.

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Author: April Glaser

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