Lily drone
From Invertopedia, the encyclopedia of how things fail
Lily was a camera drone you could toss into the air to follow and film you. It took about $34 million in preorders[2][4] but never shipped, and on January 12, 2017 the company told customers it was shutting down[2]. The same day, the San Francisco District Attorney sued Lily Robotics for false advertising and unfair business practices, alleging among other things that its launch video was shot with other companies' drones and cameras[5][7].
Contents
The bet
A flying camera simple enough for anyone: throw it, and it tracks a band on your wrist and films you skiing or kayaking, with no pilot[1][2]. A launch video would sell it, and preorders taken on Lily's own site, not through a crowdfunding platform, would prove the demand[1][7].
Lily told buyers it was "a privately funded company, not a crowd-funded project" and that "Every pre-order dollar we've received has been placed in cold storage," to be used only once the camera went into final production[8].
What happened
| May 2015 | Lily unveils the drone with a promotional video and opens preorders at $499.[2][3] |
|---|---|
| Dec 17, 2015 | Shipping slips from February to summer 2016 because of flight-software problems. Lily says it has made 200 units and raised $15 million from investors led by Spark Capital.[1][2][8] |
| End of 2015 | Preorders reach $34 million and 60,000 units.[4] |
| 2016 | Shipping slips again, to early 2017, while preorder prices rise as high as $899.[2][5] |
| Jan 11, 2017 | The District Attorney's office tells Lily a lawsuit is coming.[7] |
| Jan 12, 2017 | Lily emails customers that it could not raise the money to start production and will refund preorders within 60 days.[2] |
| Jan 12, 2017 | The DA files suit, alleging false advertising and violations of the FTC's Mail Order Rule, and seeks a temporary restraining order freezing Lily's assets.[5][7] |
| Feb 27, 2017 | Lily Robotics files for Chapter 11 in Delaware. On March 13 it asks the court to approve a refund process.[9] |
| 2017 | Mota Group buys the Lily brand for $300,000.[6] |
The kill shot
Lily sold the video before it had the drone. It never got the product working at a price it could fund, and the DA alleged that even the video was not shot by a Lily.
Seven months after the video, Lily had built 200 units and was redesigning core parts of its flight software[8]. A year after that it still could not raise the money to start manufacturing[2]. Meanwhile follow-me drones from DJI, Zero Zero Robotics and Yuneec reached the market[2].
The complaint alleged that the video showed "aspirational dramatizations," with shots labelled "Lily Shot" placed right after people using a Lily, though a Lily had not filmed them[3]. It alleged the aerial footage came from a DJI Inspire and that prototypes were fitted with GoPro cameras[5][7], and it quoted an email it attributed to Balaresque: "I think we should be extremely careful if we decide to lie publicly."[7] These are allegations from the DA's complaint as reported; Lily told TechCrunch its wind-down had already been planned for that week[7].
Red flags ignored
- A store for something that did not exist. The DA argued that preorders on Lily's own site were internet sales, covered by the Mail Order Rule's delay and refund duties, unlike a Kickstarter pledge.[3][7]
- Prices up while the date slipped. Through 2016, as shipping was pushed back, preorder prices kept rising.[5]
- The cold-storage promise. Lily said preorder money would sit untouched[8]; the DA alleged it was used to get a $4 million bank loan.[10]
- Rivals shipped first. Similar follow-me drones from DJI, Zero Zero Robotics and Yuneec reached the market while Lily's shipping date kept slipping.[2]
The cost
About $34 million in preorders to refund[2], and the $15 million raised from investors[1][10] had not been enough to start production[2]. The DA sought refunds plus civil penalties of $2,500 per violation of four subsections of California's Business and Professions Code, which Fortune estimated would come to at least $150 million[5].
The inversion
Don't take preorders on a product you haven't made ten of. Show buyers only footage the product itself shot, and if you take their money, treat a slipped date as a refund you owe.
What survived
The name. After the shutdown, Mota Group bought the Lily brand for $300,000, beating a $250,000 bid from GoPro, and LR Acquisitions bought the patents and prototypes[6]. Mota's Lily Next-Gen, expected to list at $799, appeared to drop the toss-to-launch feature, and its specs said nothing about waterproofing[6].
Customers were told refunds would come through a process the bankruptcy court had to approve[9]. The case became a warning to hardware startups that preorders carry consumer-protection duties a crowdfunding pledge may not[3].
References
- ^ “Drone Maker Lily Announces a Product Delay and New Funding”. The New York Times, December 17, 2015. Founders, San Francisco base, the preorder (not crowdfunded) model, the delay to summer 2016, $15 million led by Spark Capital, 200 units, flight-software problems.
- ^ “Drone company Lily shuts down owing $34m”. BBC News, January 12, 2017. Shutdown, $34 million in preorders, the failed fundraise and 60-day refunds, the May 2015 video's 12 million views, $499 launch price, 60,000 customers, delays, rival drones.
- ^ “Lily Case Highlights Compliance Obligations Under the Mail Order Sales Rule”. Olshan Frome Wolosky advertising law blog (Andrew B. Lustigman), February 13, 2017. The complaint as filed: the May 2015 video released with preorders, "aspirational dramatizations" and "Lily Shot" labels, and the preorders-as-internet-sales theory under the Mail Order Rule.
- ^ “Lily, a camera drone that automatically follows you, pulls in a mountainous $34 million in pre-orders”. TechCrunch, January 8, 2016. $34 million in preorders and 60,000 units by the end of 2015.
- ^ “Is Lily Robotics the Theranos of the Drone World?”. Fortune (Jeremy Quittner), January 17, 2017. The suit filed January 12; GoPro and DJI Inspire; Mail Order Rule; $499 to $899 prices; penalties and the $150 million estimate.
- ^ “With new owners and major changes, the Lily drone might fly after all”. Digital Trends, September 5, 2017. Mota Group's $300,000 brand purchase, GoPro's $250,000 bid, LR Acquisitions, the Next-Gen's price and missing features.
- ^ “San Francisco District Attorney files lawsuit against drone maker Lily for false advertising”. TechCrunch, January 12, 2017. The DA's suit, the DJI Inspire footage, the Balaresque email, the Mail Order Rule claim, the asset freeze, Lily's response that the wind-down was planned.
- ^ “Shipping and fundraising update”. Lily blog, December 2015, archived January 2016. "Cold storage" promise, 200 units, flight-software redesign, $15 million.
- ^ “Lily Drone bankruptcy: claim your cash”. sUAS News, March 2017. Chapter 11 filing February 27, 2017 in Delaware and the March 13 refund motion, quoting Lily's customer notice.
- ^ “Lily Drone Sued, Accused of 'Luring' Customers with Faked Promo Video”. PetaPixel, January 13, 2017. $15 million private funding; the DA's $4 million bank loan allegation.