Learn how to validate your startup idea by pre-selling it, for only $80 (includes a free 1-hour consultancy call).

Quirky

Community-led invention platform
Startup Cemetery
GENERAL INFORMATION
Category:
Finances
Country:
United States
Started:
2009
BUSINESS FAILURE
Outcome:
Bankruptcy
Cause:
Multiple Reasons
Closed:
2015
FOUNDERS & EMPLOYEES
Number of Founders:
1
Name of Founders:
Ben Kaufman
Number of Employees:
50-100
FUNDING
Number of Funding Rounds:
9
Total Funding Amount:
$185.3M
Number of Investors:
12

Ad

Vanta Logo White

Compliance doesn’t have to be complicated. In fact, with Vanta it can be super simple. Vanta automates the pricey, time-consuming process of prepping for SOC 2, ISO 27001, HIPAA, and more. Attend a demo and lunch is on Vanta!

Looking back at the rise and fall of a $180m startup

One of the best ways to learn and grow is through mistakes, but not necessarily your own. So let’s explore the interesting case of Quirky.

The once-beloved invention platform had, as many would argue, all the needed factors for a huge success. An ambitious and charismatic founder; a huge user base that was loving the product; a practical mission to optimize the tough process of inventing and patenting physical products; a massive back of renowned investors like Andreessen Horowitz, Kleiner Perkins, and General Electric, to name a few.

Still, despite this amazing foundation, Quirky didn’t sell enough products, managed to burn through $185m in venture capital, and was forced to file for bankruptcy 6 years after opening its doors.

Let’s explore what led to Quirky’s unfortunate faith.

What was Quirky?

Quirky was founded in 2009 by the ambitious Ben Kaufman, who was only 22 at the time. Despite his young age, Kaufman had already worked on two other companies called Kluster and Mophie, which seemed a lot like preceding versions of Quirky.

The start-up was a community-based platform for inventors. Any amateur inventor could pitch their product ideas that were voted on by the community. The winning products were then designed, patented, manufactured, marketed, and sold by the company to retailers like Walmart and Amazon, big-box stores like Bed Bath & Beyond, and others. The inventor, on other hand, was getting recognition and about 10% of the profits.

Smart, right? Or so it seemed.

The company was loved both by investors and users alike. In the span of a few funding rounds, Quirky managed to gain nearly $200m from notable investors like Andreessen Horowitz and Kleiner Perkins.

The website was receiving thousands of inventors’ ideas weekly and grew a base of over 1.1 million users. One of the biggest drivers behind this huge interest was the community-based approach of the firm. Anyone could join, propose ideas and participate in workshops. Community is one of the most sought-after things in the start-up realm because it spawns loyalty and identity. It makes the users feel like they belong to something bigger. Moreover, the fact that inventors could see their faces and names displayed on the products was also quite appealing.

Another big factor for the growth of the platform was the recession, as people were pushed to look for alternative sources of income. Some of the inventors indeed made good money.

Such an example is Garthen Leslie – a 63-year-old IT consultant who had the idea to make a smart air conditioner. Based on his idea, one of the brightest gems in Quirky’s crown was created – Aros, produced in partnership with General Electric.

Quirky's Aros
Aros – one of Quirky’s premier products

Quirky was betting hard on the diversification of its products. The company was manufacturing anything from a wireless speaker with a built-in charging station to a smart egg tray linked to an app that alarmed when you were running out of eggs (yes, this thing existed, and it cost around $80),or these doggy drinking fountains which didn’t involve any sort of complicated tech.

As already mentioned, users, investors, and even the press were all loving the business model. The Sundance Channel even produced a short reality show on the firm in 2011.

Despite its seemingly great success, Quirky ran out of money, Kaufman officially stepped down as a CEO, and the firm filed for bankruptcy.

Its smart-home subsidiary called Wink was sold to Flextronics for $15m.

Then, in 2017 Quirky was raised from the dead, this time with different owners and a different business model. After its relaunch, Quirky is still an innovation platform focused on consumer products in the electronics, toys, and home goods verticals, but instead of trying to find “winning” inventions on their own, it uses a licensing model through which it partners with companies like HSN, Shopify and Viatek

Why did Quirky shut down?

The first red flag that things were not so rosy came in the summer of 2015. Kaufman admitted that Quirky was out of money during a Fortune Brainstorm conference in July, followed by a major layoff of almost the entire staff in NYC. The company didn’t manage to get any more funding, and closed doors for good in August, laying off all of its remaining employees. There were many factors for the unfortunate downfall of the once-beloved company, so let’s explore the main ones.

Quirky was too democratic

A lot of ink was spilled in the forums on whether the community voting system was efficient or too democratic. Sure, there is some fundamental truth that people with diverse backgrounds and from different walks of life can bring a more well-rounded perspective than a room full of experts from the same field. That’s why focus groups are an industry staple.

Nevertheless, when it comes to business models and monetization, expertise is vital. Having an army of amateurs to approve hundreds of solutions that were often unscalable and lacked clear product-market fit unsurprisingly turned out to be a bad idea. Even though Kaufman has stated that the final decision on green-lighting certain products was in the hands of his highly professional crew, the fact remains that countless ideas were realized without necessarily satisfying clear market needs.

Yes, there were some successful products like Arson, but they were rather exceptional. Most of the products were never sold and the firm had negative margins. After all, handling the entire production and marketing process is proven to be highly expensive. This brings us to the next big misstep.

It lacked focus

Speaking of countless ideas, we previously mentioned the broad diversification of Quirky’s product line. Quirky would build more than 50 products a year. Until its final shut down the company produced a total of around 400 significantly different products.

Everything in Quirky was designed for speed, and its priority was quantity over quality. After they launched a hardware product, they would hardly make any iterations even when there was a huge potential and room for improvement. The firm would simply move on to the next big thing.

Iteration is vital for all product companies, but in the start-up context, its absence equals a death sentence. This may sound exaggerated, but achieving PMF without adjusting your offering based on market feedback is almost impossible. That’s why the best startups usually make very few products and work hard to make them truly valuable for the customers.

After all, finding the right PMF is as tough as it’s important, and having focus is one of the main requirements to achieve it.

Quirky had branding trouble

The lack of focus had another crucial effect. Quirky’s website looked like a catalog for all kinds of random products, so whenever someone landed on their page they could not help but wonder what exactly Quirky stands for. The company had a confusing brand identity, which is a big problem for building brand loyalty and finding repeat customers.

In Quirky’s case, the branding strategy was built around the inventors rather than the products. Even though the idea was disruptive and sounded great, it turned out that customers were more interested in purchasing valuable products rather than the touching story of the people behind them. 

The All-In-One Newsletter for Startup Founders

Every week, I’ll send you Failory’s latest interviews and articles and 3 curated resources for founders. Join +20,000 other startup founders!