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

bbc.com

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

#11

Post by vkou »

playing_colours wrote: post #7

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 http://www.paulgraham.com/lesson.html

> It seems like they were “hacking” their way to quick success instead of focusing on delivering a proper product

Generally - not specifically - speaking, in a world where your competitors can throw away millions of VC dollars into hacking their way to quick success and market share, this is a valid strategy. It may, in fact be the optimal strategy.

Of course, if you don't have said millions of VC dollars to throw into that game, then you're not going to meet much success by trying to play it.

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

#12

Post by mherdeg »

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' debts and are therefore much less likely to experiment with new businesses at the rapid pace we see in the US.

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?

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

#13

Post by bransonf »

If you give $700 to a company that promises to deliver a scooter, and they spend that money on advertising, that’s fraud.

They have no plausible argument that they didn’t know they couldn’t deliver or refund customers after they started spending pre-order funds.

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.

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

#14

Post by braythwayt »

mattlondon wrote: post #10
xenospn wrote: post #2

I just can'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't.

As others have pointed out it is obvious at the outset what ads cost, and you can set budgets. None of this should have come as a surprise or a "opps we spend 150K in one day" kinda thing. I am assuming their line of thought was: 1 - make some sales 2 - spend income from step 1 on more ads to drive traffic to site 3 - go to 1 Kinda like they put themselves into their own recursive ad-pyramid-scheme or something. Cond…

Another possibility is that their reasoning was:

1. Raise some money.

2. Spend it on sales, even if their COS exceeds the margin on each scooter.

3. Rack up some "engagement" and "traction."

4. Raise another round.

That's basically what WeWork was doing: Spend so much on commissions that they were losing money acquiring tenants, but raise money based on various BS "metrics."

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

#16

Post by newfangle »

mherdeg wrote: post #12

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' debts and are therefore much less likely to experiment with new businesses at the rapid pace we see in the US. Would that have been true here? If a German startup had raised $150k in venture capital and taken $250k in or…

The founders of this company likely broke the law in the US

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

#17

Post by Someone1234 »

bransonf wrote: post #13

If you give $700 to a company that promises to deliver a scooter, and they spend that money on advertising, that’s fraud. They have no plausible argument that they didn’t know they couldn’t deliver or refund customers after they started spending pre-order funds. 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 shou…

A class action lawsuit against who? You cannot sue a company that no longer exists. It is unlikely consumers would be able to defeat limited liability, particularly with the argument that "the company should have allocated resources differently."

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

#19

Post by nugget »

mattlondon wrote: post #10
xenospn wrote: post #2

I just can'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't.

As others have pointed out it is obvious at the outset what ads cost, and you can set budgets. None of this should have come as a surprise or a "opps we spend 150K in one day" kinda thing. I am assuming their line of thought was: 1 - make some sales 2 - spend income from step 1 on more ads to drive traffic to site 3 - go to 1 Kinda like they put themselves into their own recursive ad-pyramid-scheme or something. Cond…

Digital advertising can be as addictive (and dangerous) as heroin. You give FB some money and customers start to show up - it feels like you suddenly have a real business. If your analytics are off or you don’t even have the right KPIs to start with, you can kill a business very fast, even while the intoxication of traffic distracts an inexperienced team until the very end.

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

#20

Post by Someone1234 »

davidweatherall wrote: post #5

It seems they "only" had $150,000 in funding, but as they were basically white labelling the Segway ES2[1] I'm surprised they didn't just hold onto their sales revenue to purchase the product... Interestingly enough, about 2 clicks around their site and you realise they didn't even put the effort into setting up their Shopify site correctly... - https://unicornrides.com/collections/all [1] - https://unicornrides.com/…

Playing devil's advocate here but the Shopify issue is because they removed the only products they sold on Shopify (that's why it 404s at /products/unicorn-scooter-product), that results in the collection being empty and that page showing up.

So their Shopify was likely fine until the business went under. Then they quite correctly stopped letting people make additional orders.

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