E-scooter company goes bust after spending big on Facebook ads

They sold 350 scooters at $700 each. So just under $250k in sales. They decided, right before Christmas, that they would tell all those people their $700 has been thrown right in the trash.<p>The founder of this company is the founder of Tile, a VC-backed company worth $XXX million that has raised $104M+. If this person had any morals he would cash out $250k of his shares in Tile and pay back the people who ordered his scooters. Hell give them half back for $125k. That is chump change to a successful SV founder.<p>I know that legally he has no obligation, but how can he sleep at night? This wasn&#x27;t &quot;oh making hardware is way harder than we thought and we couldn&#x27;t afford it&quot; this was &quot;well I figured if I couldn&#x27;t sell a million of these I&#x27;d rather just give up so I spent all the money on ads&quot;.<p>What a jerk. Merry Christmas from Silicon Valley.

It seems they &quot;only&quot; had $150,000 in funding, but as they were basically white labelling the Segway ES2[1] I&#x27;m surprised they didn&#x27;t just hold onto their sales revenue to purchase the product...<p>Interestingly enough, about 2 clicks around their site and you realise they didn&#x27;t even put the effort into setting up their Shopify site correctly... - <a href="https:&#x2F;&#x2F;unicornrides.com&#x2F;collections&#x2F;all" rel="nofollow">https:&#x2F;&#x2F;unicornrides.com&#x2F;collections&#x2F;all</a><p>[1] - <a href="https:&#x2F;&#x2F;unicornrides.com&#x2F;pages&#x2F;unicorn-shipping-update" rel="nofollow">https:&#x2F;&#x2F;unicornrides.com&#x2F;pages&#x2F;unicorn-shipping-update</a>

If you give $700 to a company that promises to deliver a scooter, and they spend that money on advertising, that’s fraud.<p>They have no plausible argument that they didn’t know they couldn’t deliver or refund customers after they started spending pre-order funds.<p>I hope customers get successful chargebacks and there’s a class action lawsuit. This wasn’t a crowdfunding campaign. Consumers were lied to, and the law should make clear that this is unacceptable business practice.

Hyped industry, sort of hyped name, wasting money on FB ads. It seems like they were “hacking” their way to quick success instead of focusing on delivering a proper product - exactly like Paul Graham described in his recent essay <a href="http:&#x2F;&#x2F;www.paulgraham.com&#x2F;lesson.html" rel="nofollow">http:&#x2F;&#x2F;www.paulgraham.com&#x2F;lesson.html</a>

Here&#x27;s my take: the company needed to raise $X to deliver their $700 scooters. They had raised $Y where $Y &lt; $X.<p>Since the only way for Unicorn to raise money is by preselling scooters They had to sell more scooters. Word of mouth wasn&#x27;t doing it so they tried advertising for customer acquisition. Nothing unusual here.<p>So when they say the as we expensive what they realty mean is customer acquisition was really expensive. To put it another way conversions were really low.<p>So they likely completely understood these costs. They may have been unrealistic. They may have been sold a bill of goods (as agencies are notorious for unrealistically optimistic CPA costs). They may have simply not budgeted enough or expected more organic sales.<p>So they may want to blame this on expensive ads butt what they realty mean is they screwed up and underestimated customer acquisition costs.

Snarky comment about LLCs being able to shirk responsibility by just going bankrupt...<p>But really this seems like a basic class-action fraud suit on what they hoped would be a bootstrapped ponzi-scheme. (Spend enough, fast enough to get enough customers to be able to actually deliver your product) but not keeping at least enough money in reserve to make minimum refunds is a major liability.

I feel horrible for the people who had to scrape together the $700 for a Christmas present for their kids, who won&#x27;t be getting their scooter (like the person in the article). For most middle class people, that&#x27;s a lot of money. I second the comments about successful chargebacks, because this will probably be ruining some kids Christmases out there otherwise. :(

What&#x27;s more insane about this is that they went broke after whitelabeling an off-the-shelf Ninebot&#x2F;Segway ES2, that retails on Amazon for $480, $220 less than what Unicorn was offering. All I can see that they offer on top of the scooter is &quot;UnicornCare,&quot; basically insurance for $1&#x2F;day on top of the $700 price.

Chamath Palihapitiya talked about this problem in an interview from 2018. Many tech startups spend 0.40c of every VC dollar with FB&#x2F;Google&#x2F;Amazon.<p>Here is the original interview: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=RwRZtZQoLtQ" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=RwRZtZQoLtQ</a>

I have read people say that a key difference in entrepreneurship in the US versus European countries is that European company founders are much more likely to be held responsible for their companies&#x27; debts and are therefore much less likely to experiment with new businesses at the rapid pace we see in the US.<p>Would that have been true here? If a German startup had raised $150k in venture capital and taken $250k in orders from consumers and shut down without sending any products to any customers, what would happen to the founder? Would he end up paying someone $250k--$400k out of pocket for a long time?

I find it interesting that the CEO - Nick Evans co-founded successful (?) start up Tile. <a href="https:&#x2F;&#x2F;www.linkedin.com&#x2F;in&#x2F;thenickevans" rel="nofollow">https:&#x2F;&#x2F;www.linkedin.com&#x2F;in&#x2F;thenickevans</a><p>From tile to scooters to blowing money on FB ads - seems like a bizarre path for an experienced (?) developer.

There seems to be two companies named Unicorn in the scooter business:<p>The failed one: <a href="https:&#x2F;&#x2F;unicornrides.com&#x2F;" rel="nofollow">https:&#x2F;&#x2F;unicornrides.com&#x2F;</a><p>The other one: <a href="https:&#x2F;&#x2F;www.unicornscooters.com&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.unicornscooters.com&#x2F;</a>

Facebook ads are way too expensive and tend to not convert that well. There are stories of fake likes and fake clicks. If your growth strategy involves buying click ads, find another strategy or business idea. Groupon is another company that overpaid on Facebook ads to build its email list. Disney and other multinationals are the only companies that should buying such ad.

I think the cost of Facebook and Google ads blindsides many founders who take them for granted as a distribution channel when planning their startups, particularly founders who have no experience with them, or (even worse) founders who used them several years ago when they far cheaper and are unaware of how the landscape has since changed.<p>You should assume they will simply not be available to you for planning purposes. Occasionally you might stumble across an untapped niche where it is still possible to run ads at a cost permitting reasonable ROI but in my experience that is now the exception rather than the rule. If you do find such a niche it is more likely to be on Google, since their keyword-based model permits such niches to theoretically exist, whereas Facebook is an all-out competition by all advertisers for the same newsfeed slots.

Oh the compound irony of a company LITERALLY NAMING THEMSELVES UNICORN coupled with someone actually being dumb enough to invest in said company, coupled with it failing.

Ouch - 150K in a seed funding round from Y Combinator

Assuming for a moment that there&#x27;s no fraud with this company, this is a great example of how you can quickly go broke selling a popular product. If the payment terms, product delivery logistics pipeline, etc. are more protracted than your suppliers&#x27;, you will get strangled by your accounts payable before your receivables can save you. This was the genius of Dell&#x27;s built-to-order system: they had (have?) a negative working capital position.<p>Of course it&#x27;s also a great example of how you can, if you&#x27;re not careful, light a pile of money on fire with performance ads. Please, people, please, test your advertising!

I just don&#x27;t understand people that shell out 700 for a non-existing product. What&#x27;s the rush? What would they be possibly missing out?<p>it is one thing to jumpstart a novel product for $25 but a scooter ... really?

Is &quot;But Facebook ate all my money&quot; the new &quot;But a dog ate by homework&quot; ?

Supposedly this company was profitable in March. From <a href="https:&#x2F;&#x2F;techcrunch.com&#x2F;2019&#x2F;03&#x2F;18&#x2F;here-are-the-85-startups-that-launched-today-at-y-combinators-w19-demo-day-1&#x2F;" rel="nofollow">https:&#x2F;&#x2F;techcrunch.com&#x2F;2019&#x2F;03&#x2F;18&#x2F;here-are-the-85-startups-t...</a><p>&quot;Unicorn rents scooters by the week or month and is already profitable&quot;<p>So what happened?

I don&#x27;t understand how companies like this think they are going to make money? Electric scooters are a solved problem. When there are too many companies in the same market it becomes a game of who has the biggest bank account to spend on marketing. Clearly they didn&#x27;t, and they lost the game.

I just can&#x27;t understand how someone can be so irresponsible. They knew exactly what their ad spend was and how many pre-orders they had in the pipeline. Since they only had several hundred pre-orders, they could have easily set that money aside for refunds, but they didn&#x27;t.

As a startup entrepreneur myself, I&#x27;ve bought into a few Kickstarter projects and I haven&#x27;t gotten hosed yet. However, I think this is because I&#x27;m pretty cautious. I look into the track records of the people, assess the viability&#x2F;difficulty of completing the project based on my experience and I tend to buy in quite late in the process.<p>There have been a lot I&#x27;ve passed on due to the fundamental uncertainty of manufacturing offshore hardware. I just bookmark them and buy it from Amazon when it&#x27;s actually shipping for real. Often it&#x27;s not much more than the Kickstarter price (and sometimes it&#x27;s less).

I count at least three scooter companies in the capital.<p>They are all startups funded by quick venture capital. Their scooters litter the street for blind people. They pollute the sound space of the street with battery charging sos sounds. Questionable. There is not much difference from one brand to another. The scooters last about 6 weeks until they need replacement. I question how good is this for the environment?

This is exactly the case. You should spend as little on Facebook and Google Ads as possible. And spend the money on anything else.

The fact that the company&#x27;s name is &quot;Unicorn&quot; makes this seem like a much bigger deal than it is. The company raised just $150k. And it sucks that they screwed over their customers who paid, someone should be accountable here. But it&#x27;s not like someone went and blew millions on ads only to realize it wasn&#x27;t sustainable.

Why &#x27;unicorn&#x27; companies don&#x27;t appreciate the &#x27;organic, non-fast foot, non-money-burning&#x27; way to do marketing? (e.g. word of mouth)<p>Why are them so keen on using investors&#x27; money to bump up &#x27;sales&#x27; as further investment into &#x27;cash flow&#x27;? Why are their primary goal be money-making?

A rotten offer will never sell no matter how many ads you buy. This thread says that the scooter is a whitelabeled product. The margin priced it out of the market. Most people comparison shop. What is really new to learn here that isn&#x27;t common sense?

This is relevant: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=NVVsdlHslfI&amp;feature=youtu.be" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=NVVsdlHslfI&amp;feature=youtu.be</a><p>Silicon valley Ponzi scheme

Only run Fb and Google Ads if you have a proven (not hypothetical CLV) positive business case. They deplete ressources so fast without building a lasting owned channel...

The CEO of this company was the co-founder to Tile. I&#x27;m sure he could have paid out refunds if he tried to plan this out more responsibly.

What? Surely go fund me style cash raises should go mostly towards the product and maybe a bit to salary

What a waste of a good startup name.

Ironic name of the company, comes off as a Onion article, sad that it&#x27;s true

Not everybody has the privilege to burn trucks of money like ie. Uber.

&gt; payments for loans<p>Yeah... that smells bad. There must be more to this story.

They were even called Unicorn. That&#x27;s just great.

The title is super misleading.<p>They have only 150k in funding. I wouldn&#x27;t attribute their bankruptcy to Google or FB.

took me a second to realize company&#x27;s name was unicorn.

reddit.com&#x2F;r&#x2F;shittykickstarters

Corporation gets taken advantage by another corporation.

There is a strict set of conditions that a Kickstarter donation should meet:<p>1. The product should require relatively large upfront costs such as design or tooling. If I&#x27;m ordering a pair of hand-knitted gloves there isn&#x27;t much fixed cost so it should not be a Kickstarter.<p>2. The <i>excess</i> value of the product to the donor should be more than the expected loss if the delivery fails.<p>3. The product should be on the &quot;bubble&quot; of being produced so that the donor&#x27;s contribution makes a material difference towards the product actually being produced.<p>4. The team should be qualified to deliver the specified product with the funds raised. Qualified teams can fail but unqualified teams will certainly fail.<p>5. The money should not be significantly impactful to the lifestyle of the donor.<p>6. The product’s market should be small enough that it will likely be produced in one “batch” with no opportunity to buy it on the open market afterwards with the execution risk removed.<p>An example of such a product for me would be a display platform for one bottle of Pilot Iroshizuku fountain pen ink, made out of Japanese cypress wood (hinoki). The ink bottle is beautiful and I&#x27;ve always thought it should have a hinoki stand (just a thin board of wood with a small depression routed out of it). The product would need some CAD and CNC design work, but not too much, there is not that big of a market for it, and I would be happy to pay $100 for such a thing even though it should only cost $5-10 to produce. Let&#x27;s say it sells for $30, I&#x27;d be expecting $70 of excess value so I could accept even a 50% likelihood of failure.

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Just wait until the scooter companies and operators get nailed with an injury class action lawsuit. A good friend was seriously injured on a rental scooter, going 2-3 mph, catapulted onto her face, ended up with brain damage and multiple facial fractures requiring reconstructive surgery. A high school physics student could work out that tiny wheels combined with a high center of gravity is a bad combination.