Clinkle

What did it do?

Clinkle was a start-up that set out to enable mobile payments using ultrasonic signals emitted by smartphones. After abandoning that approach because of technical problems, the company turned in 2014 to an app offering a prepaid debit card and a way to send money to friends. On every seventh payment, users received a reward they could send to a friend.

Why did it shut down?

In 2013 the company raised what was then the largest seed round in Silicon Valley's history, but the ultrasonic payment technology was abandoned because of technical hurdles it could not overcome. Until September 2014 the app only let people join a waiting list, and the prepaid card product that followed failed to take off. A quarter of the staff were laid off in December 2013, seven key employees resigned in 2015, and the team shrank from 70 people to 12 at most. In January 2016 Forbes reported that investors, seeing no product on the market, wanted their money back. The company closed in 2016.

The story

In June 2013 the most talked-about start-up in Silicon Valley was a mobile payments app that did not yet have a single customer. Clinkle had just closed a USD 25 million round, the largest seed round in the region's history up to that point. Its founder, Lucas Duplan, had started the company in 2011 as a computer science student at Stanford.

The idea was to pay using ultrasonic sounds emitted by smartphones: at the till, ultrasonic signals from the phone would take the place of a card or cash. Duplan won over Accel partner Jim Breyer, whom he had met through VMware co-founder Diane Greene, at their first meeting and product demo. Greene, Andreessen Horowitz, Intel Capital, Intuit, Peter Thiel and Salesforce CEO Marc Benioff also joined the round. The company said the product would also help merchants run targeted campaigns by giving them information about their customers.

But the product never arrived. A quarter of the staff were laid off in December 2013. Until September 2014 the app offered users nothing more than the chance to join a waiting list. The ultrasonic technology was abandoned because of technical problems that could not be overcome, and in 2014 the company turned to a prepaid debit card. The app that finally launched was built around sending money to friends and earning rewards when paying with the Clinkle Card; on every seventh payment, users got a “Treat” they could send to a friend. Reporting the launch, TechCrunch called the company the laughing stock of the mobile wallet world.

In 2015 seven key employees resigned, in protest at the CEO according to TechCrunch, and a team that had once numbered 70 shrank to 12 at most. There were reports that the company had tried to sell itself to Apple. In January 2016 Forbes wrote that investors, seeing no product on the market, had run out of patience and wanted their money back. The same month it was announced that Richard Branson had invested in the company and become an adviser to Duplan. By May 2016 Clinkle had closed.

Clinkle shows that a large sum raised before there is a working product is not an advantage but an expectation that has to be met. When the technology did not work as promised, the record round only made the fall more visible.

Lessons for founders

• A big seed round is no substitute for a working product; prove that the technology works in real conditions before you take the money.
• Spending years with a waiting list and no product wears out the patience of both the team and investors; ship early with a small version that works.
• If your core technology fails, ask yourself honestly whether you have a real edge in the new direction before you pivot.

Sources

1. Clinkle (Wikipedia)
2. Clinkle Raises Celebrity-Filled $25M Round As It Gears Up To Eliminate The Physical Wallet (TechCrunch, 2013-06-27)
3. Clinkle Up In Smoke As Investors Want Their Money Back (Forbes, 2016-01-22)
4. Clinkle Implodes As Employees Quit In Protest Of CEO (TechCrunch, 2015-05-16)

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