
Well, We Failed – Wattage is shutting down - divy
https://medium.com/inside-wattage/well-we-failed-77e795e16ecf
======
Animats
It's not about the pitch deck. It's about the product. How many people really
want a custom radio front panel?

There are other customized products in that space which might be more useful.

* Customized entertainment remotes. Tell us what gear you have, what you like to do with it, and we make a remote or remotes that makes it easier to use. You might have a simple "watch TV only" remote, and a tablet type "does everything" remote.

* Light your house and garden. Send us pictures of your house and garden, answer some questions about how you use them, and we'll design an outdoor lighting system for it and have an installer put it in. You get to see renders of what it looks like at night before you buy. (There are Autodesk tools for that.)

* Custom control panels for the aftermarket auto sound industry. Make cool stuff for LA rappers and wannabees.

* There are lots of industrial products which need heavy customization. Offer on-line ordering tools for such products as a service to industrial sellers.

Trying to hammer a customized product model into the web-based "order on line,
ship to customer, integration is someone else's problem, no customer service"
model wasn't going to work.

~~~
DevX101
> * There are lots of industrial products which need heavy customization.
> Offer on-line ordering tools for such products as a service to industrial
> sellers.

Yup. This definitely should have started out as a B2B play. Industry will pay
an arm and a leg for customization for lots of random parts. Use the cash to
build the foundation of the biz then go after the finicky consumer market
later.

~~~
Animats
Yes, and there's a business model. There are industrial companies that are
good at making things, but not so good at making web interfaces for ordering
complex products. So there's a niche for an online service. There are lots of
things a good online service could do that few industrial companies now offer.
Consider:

    
    
        * proper cross-checking of compatibility of items ordered
        * generate image of finished product
        * on-line generation of installation drawing/CAD file,
          including mounting holes and electrical connections.     
          Let users play with the options. Huge win for
          designers - "If we add option B, will it fit?"
          This, in fact, is the big win - let users try your
          options and see what works for them.
        * generate manufacturing data in format the seller's
          production system can use
        * provide cross-company integration.  If you need
          something that requires parts from several
          companies, and they're often used together, give
          the user help in getting everybody going in the
          same direction.
    

Most industrial sites have a big parts list and a "call for details" phone
number. Getting all the right pieces together is hard. The automation level in
this space is low, except for a few big companies.

------
jeremybell
There are some questions about the deal we secured to return our investors'
money. Without going into the specifics, I can say it was essentially an
acquihire. I'm going to another company, and part of that deal allows me to
repay our investors in full.

~~~
kamaal
Just wanted to ask how common is it to return money to VC's?

Or how is this any different than a bank loan, If the VC doesn't shoulder the
risks that come with these kind of projects I wonder what is the value they
add.

People might as well borrow the money on loan.

~~~
daenz
I'm astonished at the amount raised from "friends and family." If my network
of people I can ask is 250 people (a lot!), and my success rate for securing
some amount of money is 10%, the average amount contributed per person is
$10,000. Maybe it's my modest means speaking here, but that's an insane
amount.

~~~
billyhoffman
It's not "Friends and Family." It's "Friends and Family who qualify as
accredited investors." (at least in the US).

An accredited investor is "someone whose net worth exceeds $1M not including
their primary residence." The vast majority of people are not accredited
investors because they cannot use their house as part of their net worth.

This is not your extended family giving you a $500 or $1000 to pursue your
dream. These are wealthy people who know what they are doing, and are putting
in several thousand if not tens of thousands of dollars each.

~~~
Kranar
Friends and family are allowed to invest in a company without being an
accredited investor. The rule about accredited investors involves soliciting
investment from the general public. Rule 504 allows a company to raise upwards
of 1 million dollars over a 12 month period from non-accredited investors so
long as that money is raised from pre-existing contacts, that is no general
solicitation is made.

[http://www.sec.gov/answers/rule504.htm](http://www.sec.gov/answers/rule504.htm)

------
t1m
You may have failed, Wattage, but you certainly left the place in better shape
than you found it!

In a time where a good portion of the industry is helping us click on ads that
we would rather not see, you attempted something difficult, different, and
with less money than most VC backed start-ups spend on their espresso machine.

I am looking forward to your next venture.

~~~
grffn
Nailed it @t1m. Excited to see what these guys do next!

------
tptacek
That seems less like a pitch deck and more a professionally polished brochure
for a product, or maybe the introductory section of a prospectus. I don't see
how an investor evaluate the company in that deck; I can't see:

* Go-to-market, or even a price point (did I miss it?) or COGS estimates, or a plan for distribution

* Traction, up-front sales commitments, or a sketch of target customers

* Competitors and substitutes --- not having competitors is not usually a good thing.

* An "ask" and a use-of-proceeds summary; what is this deck actually raising?

* Why this particular team (also: the connections between the logos on the bottom and the people listed aren't clear)

If you look at the Mixpanel, Airbnb, and Buffer decks: _they 're not pretty_.
They're dry and factual and cut to the chase. Those decks probably work (to
the extent decks matter) because they do a good job of surfacing exactly the
facts investors care about when evaluating a deal.

I used to sweat decks the same way this designer did, and I'd get compliments
on them. Now I feel like I spend more time talking my friends down from
sending decks like these to prospects.

~~~
jeremybell
There are a few of things that I omitted from this version that were usually
included or shared in person. Use of proceeds and traction was always shared.
We also provided a breakdown of how the pricing worked (as it depended on what
you were building).

I usually spoke in more detail about who the team was when I met with someone.

~~~
tptacek
Thanks for replying! A question: did you ever wonder whether producing such
intricately designed collateral actually harmed you from a signaling
perspective, by tipping investors that you were focusing a lot on stuff that
didn't matter? I ask because I started telling myself that a few years ago
(not really so much re: investors, which I thankfully don't have, but other
business associates) and I found it very liberating to not have to worry so
much about design anymore.

------
downandout
I'm not sure how I feel about all of these companies shutting down prematurely
to return investor capital (the following example is not based on this
company, but it illustrates the point). If a $50M investment actually means
$10M in risk capital, and the $40M will be returned at the slightest sign of
failure, then entrepreneurs are giving up far too much equity because the
investor is actually only risking $10M. Further, the signal that a $50M
investment sends to the market about a company is far different than that of a
$10M investment.

Combine that with other things like preferred shares, and these large
investments wind up being horrible for entrepreneurs, unjustly rewarding for
the primary investors who are actually risking small sums in exchange for
large portions of equity, and unfair for others that invest based upon what
the "smart money" invested with a huge headline number.

~~~
jeremybell
We burned through all of our investors' money, and worked until we couldn't
meet payroll. Once it was clear that we were going to run out of cash, I took
a job and negotiated a deal that allowed me to make our investors whole.

~~~
downandout
As I said, my example didn't necessarily apply to your company. But just in
the last few days I have read about 4 different startups returning capital to
investors. Investors seem to be aggressively seeking the return of capital,
which takes the "risk" out of "risk capital". Decreased risk should also mean
decreased rewards.

If you chose to do it of your own volition, then that's a personal decision
(though one I don't recommend because your investors made a calculated wager
on you...sometimes wagers lose, and that's the nature of the game they have
chosen to play). But if you were asked or pressured into it, they shouldn't
have done that, and by doing it voluntarily, you are teaching those investors
to expect it of others.

------
copsarebastards
> 1,600 people signup for our email newsletters, and each of them received a
> personal message from me. I gave them my email address and phone number, and
> invited them to chat if they had any questions. I heard from 100's of them,
> and many shared “the thing” they wanted to create. The problem is many of
> them simply weren’t feasible with the current technology. I suspect we could
> have eventually delivered on most of them, but not in the foreseeable
> future.

I would love to see these emails (anonymized in some way).

------
jguimont
I built the Timbuk2.com bag customizer
([http://timbuk2.com/customizer](http://timbuk2.com/customizer)) and I would
say that 50% of their business is on the custom side. People are playing with
the product and often they surprise us. Timbuk2 ends up charging a premium for
the custom bag, but it a unique bag.

Same applies to Nikeid or adidas or converse or ... A lot of people are trying
to build custom products and let the consumer get access to their manufacture,
but it is not as simple as it sounds. There are, as in all things, a lot of
moving pieces and enough rope to hang yourself.

~~~
jakejake
Cool looking customizer - nice work! I created a super simple product
customizer that allowed users to slap their logo on promotional products
(similar to cafe press, but a few years before that). Even with that
ridiculously limited set of options it was a challenging project, so kudos to
you on the bag customizer.

------
amit_m
Wow, that mission statement is so ambitious it made me cringe. Reality check:
hardware startups are struggling to ship very simple products after obtaining
>$1m funding.

Choosing just one product for color/material customization is a good idea, but
I'm not sure that radio is the right choice. I venture a guess that the
founders were simply stuck on the concept of making customizable electronics.

Maybe a fashion accessory (e.g. headphones, skateboards) or home
decor/furniture of some sort could have been a better choice. People will pay
a lot of money to show off.

------
coldcode
It's always instructive to see how people failed and how they eventually
realized why.

In this case I would have told them up front this is too much to do to start
with. To get big wins eventually you have to start with small ones.

------
Lord_Zero
"Having previously raised $250,000 from friends & family"

I cant imagine any of my friends or family being able to give me a quarter
million.

~~~
ryanSrich
Right? I see this a lot and it's often an investors first response when asking
for small seed rounds: "Well have you considered raising money internally? Ask
around your friends and family".

If I had friends and family that could just toss me a $250k I don't think I'd
be in this position.

~~~
smackfu
But they have to ask, because if the answer is no, that's a huge red flag.
"You are willing to lose my money, but not your friends or family?"

~~~
patmcc
An investor should be willing to make a "10% chance for a 100X return" type
investment, but no, I wouldn't usually suggest that to my friends and family
unless the amount of money was not significant to them. I don't think that's a
red flag; investors have different risk tolerances for good reasons.

~~~
beambot
What you describe is a basic application of the Kelly Criterion:
[https://en.wikipedia.org/wiki/Kelly_criterion](https://en.wikipedia.org/wiki/Kelly_criterion)

It helps you determine how much of your bankroll you can wager depending on
(1) the odds, and (2) the size of your bankroll. It's the same reason why you
shouldn't (mathematically) play the lottery (when it's expected value is
actually positive) unless you're already filthy rich. The same math applies
for hyper-risky startup investing.

------
pcarolan
I'd say you were just too early, everyone will benefit from them having pushed
these ideas further.

~~~
rasz_pl
Early? Chumby was 10 years ago.

~~~
jeremybell
Chumby was an inspiration. As were things like LittleBits.

------
solve
> “Now That’s A Beautiful Pitch Deck”

Reminds me of this quote:

"As a designer, this is hard to admit: Extremely beautiful design is a
negative warning signal for startup success. (70%+ accuracy.)"

[https://twitter.com/dcurtis/status/571082598920925187](https://twitter.com/dcurtis/status/571082598920925187)

So, so true. Also, I've long noticed that startups who call themselves
beautiful on their front page seem 99% bound to fail. Noticeably higher
failure rate.

~~~
jeremybell
I would tend to agree with this, but it's usually a sign that the startup has
incorrectly focused their energies and money on design, instead of focusing on
the underlaying business itself.

In this case, I simply designed the deck myself. I'm flattered that everyone
thinks it looks nice, but my intention wasn't to make something with style
over substance.

~~~
pbhjpbhj
On the penultimate slide, p.24, what's the relevance of the company logos? It
appears to be an endorsement, in what way is that true or false. The
alternative interpretation is that the 70 years of product development has
been for the listed companies?

------
consultutah
That sucks. I really like that you were pushing boundaries and creating a
platform that had the potential to advance mankind - too few people are
building things that have that potential.

------
pbreit
One of the few postmortems that actually may be fairly accurate. Yes, the
pitch deck is easy on the eyes but terrible at piquing investor interest. I
still wasn't quite sure what the product was or why so much energy was being
spent trying to create a picture of 10 years from now.

Focusing on 1 (or 2) promising products was definitely the way to go. A
customizable wifi radio that plays a podcast, Pandora or Spotify sounds kinda
cool.

------
innocentoldguy
One of the most important take-aways from that article is the importance of
focus. I think if they had limited their priorities to, at the very most, two
things, they may have been successful. I find whenever I have more than two
priorities, I don't have any priorities at all. Some people argue that the
magic threshold is three, but for me it is two.

~~~
jeremybell
No arguments here.

------
shin_lao
The idea is interesting, but I think the technology isn't there for
scalability (need of better 3D printers like the OP said).

Just allowing me to customize a radio (do people still buy radios? I'm
curious) isn't of incredible value right now.

I'd wager that "custom drones" would have been a more successful start point,
but scalability would have been a problem.

~~~
VLM
I read the pitch deck. Reading between the lines they were planning to be a
far more advanced version of something like FPE.

[http://www.frontpanelexpress.com/](http://www.frontpanelexpress.com/)

Or maybe seeed studios is reminiscent of what they're aiming for.

The more advanced part being assembly and the like, plus coupling with
suppliers.

I can only imagine how entertaining the customer support would be for
something like that. FPE has it easy, whip out the digital dial calipers and
is there, or is there not a 2.54 mm hole there or not, customer support is
just simple yes no QA work, whereas debugging someone else's electronics
design is not for the faint of heart.

Think of it like print on demand for books. Somebody PODs a "Complete
genealogy of the Towne family in colonial Massachusetts" and puts it in the
background photo of the pitch deck and the point isn't that almost nobody is
interested in that topic, but that everyone who isn't hopelessly boring has
something to make, whatever it is.

------
orionblastar
As part of a business plan you have to research your target market. I highly
doubt the average person wants to customize their own electronics, much less a
radio in the 21st century were people have smart phones with music streaming
apps.

Hardware is hard to sell, look at the OUYA project and how it is struggling
and trying to sell itself to save itself. They too had quality issues, they
too raised a lot of money but had a hard time selling units. Most people just
play video games on their smart phones these days, they don't need to buy a
video game console that runs Android.

Good research and a good business plan would have saved them from these
mistakes. Instead of making a radio, maybe they could have made wireless
Bluetooth speakers for smart phones to play music in the house/apartment for
the average person. I'm sure that would have sold better than an AM/FM radio.

------
Animats
There's a minor industry devoted to customized imagery and colors for consumer
product. There are startups set up to serve that market, with online design
tools.[1][2]. Custom shoes and sports equipment are doing reasonably well. The
T-shirt industry has been doing this for at least half a century. Bain, the
consulting firm, has an article on what works in product customization.[3]
Basically, let the user tweak minor stuff, but not change much.

None of these companies actually let the user affect product function much.
It's all decorative, or sizing-related. Autodesk has gone further, with
Autodesk Homestyler, which is a free CAD system for home interiors.[4] This is
a descendant of Autodesk Kitchen Designer, which was for sizing kitchen
cabinets to fit a kitchen space. This lets you lay out a house, existing or
planned, add commercial furniture, and view the house in 3D. Available for
desktop, browser, and mobile. Despite being an impressive tool, it's never
caught on. Probably because most people are terrified of starting with a blank
screen and designing their house.

Carl Bass, the CEO of Autodesk, thinks that user design mods and product
customization will be important, but aren't here yet. Autodesk has come out
with a range of low-end CAD products. They now have their own 3D printer, and
there are things like their 123Catch, for turning sets of pictures into 3D
models. The technology is doing fine. But designing your own stuff isn't an
instant-gratification thing.

[1] [http://www.dogma.com](http://www.dogma.com) [2]
[http://www.fluid.com](http://www.fluid.com) [3]
[http://www.bain.com/publications/articles/making-it-
personal...](http://www.bain.com/publications/articles/making-it-personal-
rules-for-success-in-product-customization.aspx) [4]
[http://www.homestyler.com/floorplan/](http://www.homestyler.com/floorplan/)

~~~
brc
Remember the original business model for Pixar was for it to be a home
animation studio, in the same way that people use photoshop to do their own
graphics.

I think they had terrible takeup on that and started producing shorts to show
how good the technology was.

I think it's the same point - if you can't get instant gratification with
something, then the consumer takeup is low.

------
danielvinson
Mirror for the pitch deck? Looks like Dropbox is 429'ing it.

~~~
bhagman
fixed - it's on Google Drive now

~~~
pbhjpbhj
I wonder if somewhere a Dropbox engineer is crying over that comment!?

------
antoniuschan99
I would like to know how far you got with the product. Even if it's
incomplete, I think I would rather judge this on how far completed to beta
launch you guys were.

I signed up a few weeks back and was interested in seeing what the product
would look like.

~~~
jeremybell
We have a fully working version of the creation tools, which would output all
of the files required for fabrication. We had created all of the custom
electronics, and were able to produce a number of functioning prototypes.

The beta was intended to do a few things:

1\. Measure interest in the platform and generate traction for investors. 2\.
User-test and see what was/wasn't working 3\. Get a sense of what parts and
materials were most popular, to ensure we properly handled inventory.

------
fl0wenol
Should have focused on a specific sub-market at first, used it to proof-out
internal tools and design->front door delivery processes, show the potential.

Something boutique-ish but simple, maybe a few internal configurables, that
could use customization. Like headphone amplifiers (since headphones are
becoming like fashion accessories).

Or e-ink pens.

~~~
wasd
It's really easy to say this is why someone failed and this is what they
should have done instead but take a moment to walk in their shoes. Do you
really think it never occurred to them? Every decision has incredible amount
of weight to it and only they had to the bear the consequences of the those
decisions.

~~~
joslin01
You sound defensive. He's just voicing his opinion.

------
kriro
"""We were targeting software developers, as we believed we could offer them
an entirely new outlet for their creative efforts. But this narrative wasn’t
big enough. Investors want to hear a story about changing the world."""

I disagree with this. I think focusing on software developers and making the
"hardware side easier" is a viable enough hypothesis. It's better to focus on
one segment and understand it well. Have a vague notion of the other potential
customers but leave the dreams of hockey sticks to the VCs instead of feeding
them imo. Rather focus on whatever segment you identify as a good entry point
and validate that is true. I think a smart VS prefers someone that is laser
focused on a segment vs someone that dreams too big early but I might be
wrong.

------
BillyParadise
That really IS a nice pitch deck.

~~~
myth_buster
That deck is really pretty but I'm really curious whether investors would
spend their time going through so much text. Here is a pitch deck that buffer
used.

[http://www.slideshare.net/Bufferapp/buffer-
seedrounddeck](http://www.slideshare.net/Bufferapp/buffer-seedrounddeck)

~~~
jeremybell
I felt I needed to tell a richer story about what we were trying to achieve,
mainly because we were created an entirely new market. I couldn't point to
another company and say "we're like them, but 10x better." I didn't exactly
have market numbers to use as a method of framing the investment potential. I
felt

I needed to paint a picture about a future we were trying to create... but you
may very well be correct.

~~~
myth_buster
I'm with you on having a narrative and conveying the drive. Did you find that
some investors understood that and made decisions based on it or was it that
you found them to be speaking a different language?

Btw, I respect the effort and thought that went into analyzing the reasons for
failure and the courage required to be open about it. Hope things work out in
your next attempt.

------
pistle
Thanks for the mostly transparent insight into your experience.

How does one enter a deal to pay back investors with a shuttered operation?
Does that mean make them whole or just pay something back? It seems like
someone is holding onto a bag - THE bag?

~~~
jeremybell
Nobody is holding a bag of money. I only wish it played out that way. It was
essentially an acquihire, so I'll be going to another company, and part of
that deal allows me to make our investors whole.

------
1123581321
How did Wattage secure a deal to return its investors money? Presumably they
had spent it. Did they arrange a loan on terms that would give the original
investors liquidation preferences?

~~~
suitcase
They probably stopped spending their remaining funds once the next round
didn't come through.

------
Grue3
I think the product (radio) is totally non-viable but you would've made a
killing on Kickstarter (see Coolest Cooler etc.)

------
noteloop
Sorry to hear things didn't work out. I am curious to know more about your
thoughts on VCs in Toronto versus those south of the border. Canadian VCs have
this rep of being quite conservative, only wanting to invest at later stages
when there is very little risk. Does your experience agree with this
characterization?

------
advertising
Really hard to start something you have to educate people about in the first
place, before selling them.

Case in point: it was not quite clear to me what they wanted to do (for a
layman like myself in this space) after reading the post-mortem. I felt like I
was filling in the blanks in my head and making assumptions.

~~~
carrotleads
This is one of our pain points as well, educating our customers/users

------
alaskamiller
This is like making a McDonalds because everyone says they want it their way
but deep down the truth is we just want an In-N-Out menu of 5 things. And the
McDonald's way is bloated, slow, expensive, and dying.

~~~
aaron-lebo
One of my favorite Jobs stories is how he took Apple's late-90s lineup of
numerous products and simplified it in a 2x2 matrix.

(Maybe not the best link, but it shows what I'm talking about.)

[http://www.slopefillers.com/steve-jobs-product-
matrix/](http://www.slopefillers.com/steve-jobs-product-matrix/)

~~~
jeremybell
That strategy worked because Apple was dying and Jobs needed to focus their
efforts. But that all changed once they found their footing. Consider the iPod
and all the sizes and colours they offered, or what Apple is now doing with
the Watch. There are many many customization options, and I suspect these
options are only going to grow.

~~~
marincounty
I don't know you, but you seem stuck on customization? A lot of us out here
just want a functional product with a decent half life. I think Apple is
making a big mistake putting form over function? I cringe when I hear I need a
heat gun in order to open their sleek products. If a product is well made, and
does what it's suspose to do, I don't see the need for a bunch of aesthetic
nonsense. The best watchmakers don't vary their designs much-- Rolex, Patek,
and Omega vary their styles so little, I mistake some older models for new. I
glad you have a new job. I'm just more mystified over VC funding/hiring than
before I came here today.

------
lurkinggrue
Not clear who this was and what they were selling.

------
lectrick
I really wanted that customized joystick. Damn...

------
Chanie
Sorry to hear you couldn't give birth to your own unicorn but thanks for
sharing the story, a good read.

------
frozenport
I could see this working if it were marketed towards kids, as a kind of `Build
a Bear` workshop.

------
sciencesama
its not just about the pitch deck, also about the vision and the usage, how
many people working daily and returning from work to home want to play with
the radio that has a touch screen with a customization buttons/themes !!

------
chrionsr
Thanks for sharing your story!

------
retreatguru
Thanks for the post mortem. Did you do much customer development?

------
OliviaGrey
Does that mean Medium.com is shutting down?

------
shirazi
Thanks for sharing.

------
jkrejci
POP!

------
jkestner
The good news is the vision of mass-customized electronics is a huge deal. The
bad news is, Apple proved it in 2007-2008 with the iPhone + App Store.

The points that you could've focused on a specific object are good. It
would've made you think like your intended customer, the designer. You
would've been forced to answer the question "Who wants this?" instead of
planning layers of abstraction.

You should've taken a smaller slice not only so that a small team could
execute it well, but also to make the concept much more graspable to
customers. That's the true brilliance of the App Store.

~~~
pjc50
? The iPhone is less customisable hardware than the old Nokia candy bar
phones.

~~~
jkestner
The customization people actually want is met by the software layer. With a
responsive touch screen and apps, you can satisfactorily reproduce physical
interfaces, and more importantly, their functions.

~~~
pjc50
People expect total plasticity of software. But that cannot satisfactorily
reproduce all physical interfaces - people cannot operate a touchscreen
without looking at it. Despite this they seem to be becoming popular in cars
where they cannot be safely operated by the driver.

The rise of smartwatches suggests that people want another kind of interface.
The complaints over screen size are another aspect. You can't have a screen
that's both small (easily carried) and large (easily read) at the same time.

Finally there's an aesthetic argument. People _like_ the appearance and heft
of twiddly knobs and clicky buttons. This is why Roberts DAB radios are so
popular.

People customise the external appearance of their featureless iPhones with
flip or shell cases. People like to be visibly a bit different.

------
rasz_pl
Whole business model was around selling box that can be replaced with fancy
tablet case/stand? Wow, wonder why it failed.

