Crowdfunding is a great way for startups to get seed capital. But it can also be a very risky business. Just ask the investors of Ouya, an Android-based gaming device. Or the iBackback, the Skarp Laser Razor, or thousands of other great (and not so great) ideas that ultimately met their premature demise.

Now another startup has dashed the hopes of its investors. The company is called Ossic, and according to its campaign on crowdfunding site Kickstarter, its product, the OSSIC X, was to be the world's first headphone that "instantly calibrates to your anatomy for the most accurate and immersive 3-D audio." The idea was to match 3-D sound -- particularly for gaming and music --  with virtual reality headsets to "acoustically recreate" the way we hear the world every day.

Although it's not exactly an investment that I would make, tens of thousands of gaming and virtual reality enthusiasts loved the idea. They chipped in their money with the hopes of getting a pair of headphones (or at least a thank you card) from the company. Gizmodo reports that through January 2017 the company received more than 22,000 orders for its headphones, and a few months ago it announced the shipment of about 80 units, with plans to enter "mass production by late Spring 2018."

Unfortunately, things didn't turn out that way.

The team at Ossic, in a Kickstarter update this past weekend, said it was out of money. Although about $3 million was raised through a combination of crowdfunding sites (there were also angel investments), the product was never able to reach its full production capabilities, and the founders failed to raise more cash.  "We are extremely sorry that we cannot deliver your product," the team wrote, "...and want you to know that the team has done everything possible, including investing our own savings and working without salary, to exhaust all possibilities."

The company had ambitious plans and, in their defense, offered up very detailed information to would-be investors on their crowdfunding pages and website, including product designs, timetables, risks, and frequent updates on their blog. But as TechCrunch columnist Lucas Matney points out, "Ossic appears to have been misguided from the start, and even with $3.2 million in crowdfunding and seed funding, they were left unable to begin large-scale manufacturing." 

According to the same TechCrunch article, a bunch of disgruntled investors have formed a Facebook group and are reportedly considering legal action. Do the investors have a case? Aren't these the risks of the crowdfunding game?

Published on: May 22, 2018