The smart-watch startup Wachterenterprises was declared bankrupt on January 24 2017. Watcherenterprises is the company behind the kidswatcher smartwatch (renamed to KiGO watch) and the Vlinder alarm for elderly people. The reason for the bankruptcy, according to a statement from management to backers, is disappointing sales of the Vlinder alarm, combined with higher than expected hardware development cost for the watch.
Watcher enterprises background
Watcher enterprises was founded in 2013 with the idea of creating a watch for small children (around 3 years – 8 years) so that children would never get lost. The watch, worn by the child, knows its location, sends it to the parent smart phone and allows the child and parent to call each other. The watch was initially called Kidswatcher but was later renamed to KiGO. The company was initially successful in raising crownfunding. They were also accepted in Startupbootcamp’s 2014 NFC class.
Hardware development is difficult
The main lesson from Kidswatcher seems to be that hardware development is difficult, expensive and takes more time than expected. The company needed more time for product development than initially planned. The company has raised crowdfunding on Symbid three times (185.000, 150.000 and 110.000). The watch was finally launched in November 2016. Dutch blog Sprout reviewed the watch and its overall verdict is positive: the product is finished and working as expected from a technical perspective. During the delayed development of the watch, the company used the same technology for a similar product in a different market. The Vlinder functions as an emergency button for the elderly. This product was easier to develop as it could be larger and heavier. The sales of the Vlinder however were slow, because of the complicated structure of the health/care market: To sell a product in this market you need to deal with many different parties, such as city councils, insurers and elderly homes.
Equity crowdfunding is risky
The demise of Watcher Enterprises illustrates the well known fact that investing in startups is risky. Especially in equity crowdfunding campaigns, the backers are investors whose capital is at risk. The last funding round was completed in August 2016, only 6 months before bankruptcy. The crowdfunding campaign page on Symbid, shown to the side here, optimistically calls this campaign a success and uses the word overfunding. In our view, the words ‘unsuccessful’ and ‘underfunding’ are more applicable. Underfunding especially seems to be a risk for Dutch startups: the average amounts raised by Dutch startups are typically in the hundreds of thousands (see our funding overview) are simply not enough for fully developing a hardware product.
At StartupJuncture we prefer to see startups succeed and report about their success. However we also value transparency so we do report bankruptcies and closures of startups that we covered previously. For people interested in estimating the risks of startup investing: Actual bankruptcy of Dutch crowdfunded startups is quite rare. In our archives, Watcherenterprise is only the third equity-crowdfunded Dutch startup that files for bankruptcy, after SellAnApp and Cityshare.
If a company is declared bankrupt, the management is no longer in charge and all decision are made by the executor (curator in Dutch). In this case the court appointed as executor mr. Carry Dullaart from Labre advocaten. The management statement to backers states that that the executor is hoping to accomplish a restart and is looking for a buyer that wants to continue the development of the product. Unlike other startups, Watcherenterprises has finished products that could be brought to market quickly. Let’s hope a buyer can be found and a restart is arranged.
Image credit: Camilla Carlstrom, cc via FLickr.