Quirky
A New York invention platform that turned community-submitted ideas into products and sold them
- Founded
- 2009
- Closed
- 2015
- Lifespan
- 6 years
- Total funding
- $169.5 million
- Country
- United States
- City
- New York
- Sector
- Hardware
- Founders
- Ben Kaufman
- Investors
- Andreessen Horowitz, Kleiner Perkins Caufield & Byers, RRE Ventures, Norwest Venture Partners, General Electric
- Cause of closure
- Business model failed
What did it do?
Quirky was an invention platform that connected the ideas of inventors and community members with product development and manufacturing. Products proposed by the community were developed by the company and put on sale. In 2013 it formed a partnership with General Electric for connected home products; it also developed a smart home platform called Wink.
Why did it shut down?
According to The Verge, the model of making community-proposed products was not profitable, and the company tried to move away from it towards partnerships with big companies such as GE. According to the same report, the company was badly run and burning quickly through its remaining funds. Announcing in July 2015 that it had run out of cash, Quirky laid off 111 people and founder Ben Kaufman stepped down as CEO. On 22 September 2015 it filed for Chapter 11 bankruptcy. Wink was sold to Flextronics for USD 15 million, and Quirky's remaining assets were sold to Q Holdings for USD 4.7 million despite GE's objections.
The story
In 2011 the Sundance Channel began airing a reality series set in a start-up's office. The show bore the company's name: Quirky. Founded by Ben Kaufman in New York in 2009, the company quickly became a media darling with its promise to turn ordinary people's invention ideas into products.
Quirky's idea was to democratise invention. Community members proposed product ideas, and the company developed, manufactured and sold them. In 2012 CNN presented Quirky as a company bringing invention to the masses. Investors were interested too: USD 6.5 million arrived in April 2010 in a round led by RRE Ventures, USD 16 million in August 2011 led by Norwest Venture Partners, and USD 68 million in September 2012 led by Andreessen Horowitz and Kleiner Perkins. Of the USD 79 million Series D in November 2013, USD 30 million came from General Electric, and the deal also covered jointly developing 30 connected home products over five years. The company also developed a smart home platform called Wink. In 2014 AdWeek wrote that Quirky's advertising put the community, not the CEO, in the spotlight.
A total of USD 169.5 million in investment did not make the model profitable. According to a 2015 report by The Verge, the model of making community-proposed products was losing money, and the company was trying to move away from it towards partnerships with big companies. According to the same report, the company was badly run and spending its remaining funds fast. In July 2015 Quirky announced it had run out of cash, laid off 111 people, and Kaufman stepped down as CEO; the company's chief financial officer took his place.
On 22 September 2015 the company filed for bankruptcy under Chapter 11. Wink was sold to Flextronics for USD 15 million in November 2015. Quirky's website and most of its products passed to Q Holdings for USD 4.7 million with court approval, despite GE's objections; The Wall Street Journal reported GE as saying that its reputation had been damaged by Quirky. The brand relaunched in 2016 with new owners and new funding, but the original company's story had ended in 2015.
Quirky shows that community excitement does not answer the fundamental question of a manufacturing business: whether each product covers its own costs.
Lessons for founders
- In a model where every product needs its own design, tooling and stock, prove that a single product is profitable before increasing the number of products.
- Community excitement and media visibility do not cover the cost of low-volume products; validate the sales channel before the product idea.
- A deal with a big corporate partner is not a lifeline; reflect in the contract that you are putting the partner's reputation at risk too.
Sources
- Quirky (company) (Wikipedia)
- Quirky files for bankruptcy and announces plans to sell Wink (The Verge, 2015-09-22)
- Quirky, an Invention Start-Up, Files for Bankruptcy (The New York Times, 2015-09-22)
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