Author Topic: $3.2 million OSSIC 3D Headphone flop  (Read 4029 times)

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Offline NorthGuy

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #50 on: June 08, 2018, 02:13:47 pm »
Backers typically pay a lower price than the final retail price. This works out because the makers accept lower profitability for the chance of developing the product. It also allows them to avoid lending money at a non significant interest rate. Even if you make no profit, you still come out on top with a product to sell.

But what do they gain from the campaign then? Say, they spent X amount of money on R&D and then you produce a number of unit and ship them at cost, or even at loss (don't forget about 10% of Kikstarter + processing fees). You could as well skip the campaign, spend X amount on R&D and be in exactly the same position with much less effort. What is the benefit of the campaign? Publicity?

What if you don't have the X amount of money for R&D? The campaign may only help you if backers pay more than you spend on the production/delivery/fees (or, of course, if you don't deliver anything). Otherwise, you still have to borrow for R&D, and if you fail to borrow you won't be able to deliver products to backers.
 

Offline Mr. Scram

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #51 on: June 08, 2018, 03:33:29 pm »
But what do they gain from the campaign then? Say, they spent X amount of money on R&D and then you produce a number of unit and ship them at cost, or even at loss (don't forget about 10% of Kikstarter + processing fees). You could as well skip the campaign, spend X amount on R&D and be in exactly the same position with much less effort. What is the benefit of the campaign? Publicity?

What if you don't have the X amount of money for R&D? The campaign may only help you if backers pay more than you spend on the production/delivery/fees (or, of course, if you don't deliver anything). Otherwise, you still have to borrow for R&D, and if you fail to borrow you won't be able to deliver products to backers.
What's not to understand? You want to develop a product, so you need money. No money, no product. So you ask people that like the product to help you. Added bonus is that you have real world feedback on whether people actually like your idea to begin with. Doing all the work up front and then finding out nobody's interested isn't a lot of fun and a real risk.

I touched upon the second part in my previous post. You give up part of your profit for the ability to develop your product. Companies don't typically sell products at cost. They're in it to make a profit. Normally you'd use part of that to develop further products, but when you haven't started yet that becomes a chicken and the egg problem. So you ask people to help you and get your "profit" up front so you can get going.

Of course, there's a spectrum of possibilities. You can eat up your whole profit for R&D or even end up taking a loss, not earning back the full cost of R&D. In the latter case you amortize the cost over future sales too. After all, it only matters that you make back R&D and then some over the lifetime of the product. You don't need to do that right away, unless it means going out of business. Or maybe the success of the Kickstarter campaign allows you to borrow money from traditional sources more cheaply, or at all. Traditional forms of financing aren't fond of risks and having something tangible can make a huge difference.
 

Offline thermistor-guy

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #52 on: June 08, 2018, 04:39:27 pm »
But what do they gain from the campaign then? Say, they spent X amount of money on R&D and then you produce a number of unit and ship them at cost, or even at loss (don't forget about 10% of Kikstarter + processing fees). You could as well skip the campaign, spend X amount on R&D and be in exactly the same position with much less effort. What is the benefit of the campaign? Publicity?

What if you don't have the X amount of money for R&D? The campaign may only help you if backers pay more than you spend on the production/delivery/fees (or, of course, if you don't deliver anything). Otherwise, you still have to borrow for R&D, and if you fail to borrow you won't be able to deliver products to backers.
...Added bonus is that you have real world feedback on whether people actually like your idea to begin with. Doing all the work up front and then finding out nobody's interested isn't a lot of fun and a real risk.

... Traditional forms of financing aren't fond of risks and having something tangible can make a huge difference.

As alluded to by Mr. Scram, there are two aspects to design:

* Does your design solve the problem you have in mind?
* Is the problem you have in mind, the right problem to solve?

Early real world feedback will prove whether you got both questions right. This is very important before you commit your life, and life savings, to taking it further.

I would change "can make a huge difference" to "DOES make a huge difference".
 

Offline edy

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #53 on: June 08, 2018, 11:32:48 pm »
What's not to understand? You want to develop a product, so you need money. No money, no product. So you ask people that like the product to help you. Added bonus is that you have real world feedback on whether people actually like your idea to begin with. Doing all the work up front and then finding out nobody's interested isn't a lot of fun and a real risk.

Yes, I think the point here is that you ultimately make little to no profit on the first batch. Say something costs $100 retail at which $25 will be BOM and $25 will be all the other costs associated (including R&D, advertising, etc.)... so that $50 will be pure profit eventually once you are in mass production. However, you sell your first batch at $50 which is supposed to cover everything but profit, to get a fully-scaled company going. Along the way you build up interest and gauge the marketplace, line up potentional corporate partners or VC's, etc...

Ideally you should price your Kickstarter project and set your minimum funding level so that you have enough money to deliver what you promised. If the target is too low, I would be skeptical. Otherwise, people get their project funded, grab the money and then realize a few months in that they need 10x more money to actually deliver.

I laugh at these campaigns that want to make some gadget "X" that have campaign goals of $50,000 to get funded, when they will realistically probably require a minimum $500,000 capital (after factoring in all manufacturing costs) to just break even with a certain quantity of goods. This is exactly what happened with these guys, they had product ready and people paid, they still came up short so they got VC money, then they still came up short, then couldn't raise any more capital to deliver the remainder.

Ossic X had asked for a $100,000 goal to get started.... Seriously?  :-DD  And if they had reached that amount, would they have actually started on the project or returned everyone's money? They should have asked for $2,000,000 up front.... They ended up getting to $2.7 million on Kickstarter and got a pile more money from VC's (who obviously were encouraged by the fact that they already proved there was a huge amount of interest from Kickstarter on this project). However, they did not estimate their costs accurately from the beginning and together with feature creep, started eating up too much of their money.

I believe these guys were genuinely trying hard to make it happen, but what did they expect to deliver for $100,000 if they had met that goal only? Or maybe $200,000? Or maybe $500,000? Would they have taken the money and folded exactly the same way? Would they have been more careful and become more frugal and not allowed feature creep to set in? Did all that money that landed in their hands (many many times more than what they initially asked for) caused them to lose their minds and get caught up in the whole thing?  :-//
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Offline NorthGuy

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #54 on: June 09, 2018, 12:18:07 am »
What's not to understand? You want to develop a product, so you need money. No money, no product. So you ask people that like the product to help you.

So, your viewpoint is that the campaign should lure the backers with cheap "prices" even though the received money are clearly not enough to develop/produce the product. Therefore, the success of the campaign would be contingent upon external sources of financing, and if they failed to raise extra money the backers wouldn't receive anything. Almost like you're not raising money from backers, but rather borrow the money (with very low risk because there's no legal obligation to deliver). This sounds contrary to the initial idea that the companies which don't have other means of raising money can do so through the crowd funding.

Added bonus is that you have real world feedback on whether people actually like your idea to begin with. Doing all the work up front and then finding out nobody's interested isn't a lot of fun and a real risk.

But it all depends on the price point. For example, Apple's Next workstations failed not because they were bad, but because they were too expensive. If you offer something really cheap, you may attract lots of backers, but when you go to real-world business with real prices, there may be no demand at all. On the other hand, if you offer real "prices" during the campaign, the success will be a good indication of the viability of your idea.

If companies keep luring backers with lower "prices", the "prices" will go lower and lower and thus the rate of success will be getting lower and lower, which will increase the perceived risks forcing the backers to look for even lower "prices". In the end, only the companies with substantial external funding will be able to participate. May be this is already happening ...

 

Offline edy

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #55 on: June 09, 2018, 12:49:09 am »
If companies keep luring backers with lower "prices", the "prices" will go lower and lower and thus the rate of success will be getting lower and lower, which will increase the perceived risks forcing the backers to look for even lower "prices". In the end, only the companies with substantial external funding will be able to participate. May be this is already happening ...


It's a vicious circle... Correct, the low prices and low goals are only creating an environment that leads to failure, or requires last-minute "save the day" partnership funding from VC's who are needed to keep the campaign going. The crowd-funding people are then basically used as a "carrot" to market to investors (who see there is interest and money already flowing in a project) to get "top up" funding, but it is they who ultimately hold the legal power whereas crowd-funding backers have no recourse and take the risk fully for failure.

On the other hand, you would probably not get too many people backing a project if the cost was MORE than the final retail would be. Although technically, these initial backers should be footing the bill not only for the product but also significant R&D costs, even if the project makers are taking no profit, that may still lead to costs higher than what the final mass-production retail competitive market price settles at. The only benefit then to the crowd-funding backers is that they would get to be FIRST to have the product, or perhaps exclusivity to the product or some specific design that recognizes them as limited edition (like Pebble I think had inscribed on the back of their Kickstarter watches).

However, given a more realistic price, and realistic target goal, you would probably improve the likelihood that these campaigns would actually deliver. But I imagine then the number of crowd-funding campaigns that actually get funded will plummet significantly.... Most people are buying in because they can get it cheaper than the final retail, not because they want it FIRST or have some SPECIAL/LIMITED edition. With regular higher pricing, but also recognizing the support of backers with the special edition, that may act as added incentive and also give you an idea how the product will do at the price you believe it needs to be to keep your company sustainable.
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Offline nathanielcustom

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #56 on: June 28, 2018, 10:04:59 pm »
You all have probably moved on from this topic, but I wanted to provide an additional take on this project as one who had backed it, has personally moved on, but still participates (and is ignorantly hopeful) in the facebook group "Ossic X Class Action Lawsuit".

:: Assess the Product ::
The Ossic X was touted as a product that solved the problem of making 3D audio more natural by addressing the uniqiue differences in each users' anatomy. The team spoke of utilizing sensors that would measure head size & ear structure and would process the audio to reflect delays and pitch changes based on that anatomy. The claim was a more natural sound that didn't reside in your headscape, but in the field around you.

The team was comprised of two former Logitech employees, a company with a reputation in quality computer peripherals. Jason Riggs and Joy Lyons appeared to be seasoned in the audio field each, with additional digging, some patents, while at Logitech, to their names. Though it was largely unclear, I assumed their time at Logitech ought to have exposed them to enough experiences essential to building a small company to produce a product

In the project, a product was presented as near completion. They provided...
- a chart that claimed actual, in-ear measurements
- a chart with spatial accuracy tests with a number of participants
- photos of "the latest design" (against Kickstarter policy to show renders)
- photos of development that brought them to this current stage


== Now some of you may be seeing red flags. I didn't. And of course, I may have been blinded by my excitment for the technology as I had spent much of my own time and resources pursuing developing my own 3D audio headset. I also know, hindsight is 20/20.


:: Post Campaign ::
Kickstarter is an interesting avenue. Backers are not investors, but according to Kickstarter's terms and conditions there are some obligations put onto the creators of projects.

- Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer’s request for a refund unless the Project Creator is unable or unwilling to fulfill the reward.
- Project Creators are required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill.

In addition their are obligations in terms of communication which I can't find at this time.

To keep it short and sweet... Ossic released periodic updates indicating no signs of struggle other than the side effects of feature creep pushing back the production date.
- Jan 2018; developer units shipped (at least two people have confirmed that they recieved the units)
- Feb 2018; software update pushed out
- May 2018; doors close

One backer had reached out to Ossic in April 2018 and recieved a semi-canned response that production was still on for spring.
Throughout the post-campaign period many backers asked for refunds, but were denied as funds were commited to production.

Besides not being transparent about any financial troubles (as claimed by the May update) there was no effort put forth by Ossic to survey the backers and find a way to satisfy the rewards.


:: Not Just Kickstarter ::
But, this goes beyond Kickstarter. Yes, Indiegogo was another avenue that Ossic raised funds, but also their own website - taking pre-orders.
On each of these platforms the product was presented as soon-to-be-complete. Imagine the suprise of the individuals who pre-ordered that they found out they won't be recieving their product (or refund) after reading it in the headlines on their favorite tech blog.


:: Money ::
The obvious outrage is, "where did all the money go?" Some expense sheets have been circulating that were used by Ossic to raise additional funds through investors and it is clear that a large percentage of their money was spent on marketing. Flying around, doing trade shows, hyping the product.


:: Developer Units ::
So far, I've seen two people speak up about ownership of a developer unit. They both claim that the solution works amazingly well, but that the software is still very buggy.


:: Theories ::
Many theories are floating around out there, but not much is available to prove any of them...
- Inflated idea of their abilities to run a company
- Shell to obtain patents for later use
- Just a regular ol' con

What I can tell from reading screen captures of peoples emails with Ossic and the campaign updates themselves that there was lying going on.
 

Offline Dave3

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #57 on: July 15, 2018, 06:49:58 am »
== Now some of you may be seeing red flags. I didn't. And of course, I may have been blinded by my excitment for the technology as I had spent much of my own time and resources pursuing developing my own 3D audio headset. I also know, hindsight is 20/20.

Sorry you lost your money here. This was an interesting sales pitch.

It seems the founders raised over $6m and blew nearly $5m in "sales & admin". The tiny remaining R&D budget combined with expanding iOS & Android ambitions was an obvious train wreck for you and your fellow Kickstarter "investors".

One might fear that the founders had little interest in the Kickstarter headphones from the start. But were focused on selling the core technology to a large tech firm. One might go so far to claim that Kickstarter enabled the founders to run an unrelated, and risky, global marketing campaign and to keep the intellectual property. Good trick!
 

Offline Sudo_apt-get_install_yum

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Re: $3.2 million OSSIC 3D Headphone flop
« Reply #58 on: July 18, 2018, 06:54:11 pm »
Indiegogo and Kickstarter are not web shops but it does suck that so many campaigns fail. It’s a double edged sword that anybody with an idea can create anything and promote it on Kickstarter. It seems like most people underestimate the difficulty and work when creating/managing a project of this magnitude.
 


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