Startup shutdown: In a case of crowdfunding disaster, Kanoa shuts after startup taking customers’ money 2


Kanoa, a Silicon Valley based startup promised a crowdfunded campaign to give music lovers state-of-the-art wireless earphones. However, it is shutting shop, joining the ranks of crowd-funded companies that took customers’ money and shut down without shipping a product.

A photo, of wireless earphones, emailed to Kanoa customers last year

The company posted the following statement (link) on its website.

Over the past 2 years you have joined KANOA on this journey to create something special. Despite the many challenges and setbacks, you have continued to support us, and for that we are forever grateful.

Unfortunately, we have come to a roadblock. We’ve summarized a chain of events to explain how we got here and what it means for you.

The company tried to explain the situation

Capital funding is essential for ramping up production. Unlike on typical crowdfunding platforms we allowed backers to ask for refunds at any time. This policy kept us honest, but also added vulnerability once we had made major financial commitments. Setbacks and some bad publicity, like reviews of non-shippable beta units, stirred our audience. Most significantly and to our unpleasant surprise, our investors recently backed out of our funding round. We do not blame them, but this was a pivotal setback since capital was essential for ramping up production.

One brutal review brings down the startup? According to media reports, here is the ‘brutal’ review on YouTube that brought down the house of cards.

Cody Crouch was one of a number of reviewers and backers who received headphones earlier this month, says Fortune.

Crouch’s review video is like a horrific car crash — hard to watch, but impossible to turn away from. It chronicles his Sisyphean struggle to get the headphones, which were planned to retail for $300, to perform basic functions like connecting to his phone. Kanoa’s promised pass-through feature produced unlistenable feedback, and they didn’t reliably connect when Crouch had his phone in his rear pocket. The fancy charging case, stunningly, wouldn’t charge the headphones while plugged in.

According to Crouch, a Kanoa representative sent him a long email detailing the headphone’s features, which concluded with: “I know that you’re busy and your time is valuable, so if you can get a good review, or a good video, out by Sunday, we’ll give you $500.”

Visibly incensed by the offer of a bribe, Crouch offered a pointed summary of Kanoa and its product:

“This is trash. You don’t want to have these. This is not a company that you want to deal with.”

Within four days, Kanoa was finished. The company even alluded to the review in its shutdown announcement, saying that “reviews of non-shippable beta units” led to customer complaints and, more dramatically, the loss of promised investments.

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