Startups often struggle to gain funding. But one startup has shown the challenges that can be experienced even when funding has been acquired -- failing to fulfill orders. Coolest LLC raised an incredible $13 million via Kickstarter. It was the second biggest crowdfunding campaign ever on the website, and people were set to gain discounted high-tech coolers for donating.
But Coolest has admitted that it is seeking an additional $15 million in funding to get the company off the ground, and this includes fulfilling orders for investors.
What went wrong?
The Coolest Cooler is the brainchild of the Coolest company. It’s a bright orange cooler that comes with an ice-crusher, blender, Bluetooth and outdoor speakers. The retail price is $499. Investors were able to get discounted coolers simply by putting their trust in the product.
It didn’t take long for problems to arise. Some investors received their cooler, but others are continuing to wait due to production issues.
The main issues boiled down to technical delays and glitches to hit production lines. The situation became even more critical when consumers discovered that the product was still available at full price on Amazon.
Lesson 1. Money does not equal success.
The first takeaway from this situation is that a large amount of funding doesn’t equal success. In the case of Coolest, the company failed to budget for major problems. They spent all their money based on the assumption that they would make it all back through a sales spike. This didn’t happen. Instead, problems hit -- earlier than expected -- the company was unable to cope, thus the new push for additional funding.
This demonstrates the need for good financial management. Without it, companies don’t have the solid foundation they need to get off the ground.
Lesson 2. Breaking promises.
Perhaps the biggest blow to Coolest is that its brand image has become mud because it broke promises. The company promised investors that they would receive their coolers in good time. This didn’t happen, and investors are -- rightly so -- furious.
It will take a long time for the company to repair its brand image. What makes it so difficult for Coolest is the fact that many people were following their progress closely due to how much funding they managed to garner. Many potential customers will have given up on them.
Would you trust someone who couldn’t get off the ground with $13 million?
Lesson 3. The need for scale testing.
Production glitches and delays can happen from time to time, but in the case of Coolest, it’s clear that they didn’t test well enough. They didn’t anticipate these potential problems before they scaled their product up. Previously, they created a number of prototypes and nothing more.
I have discussed the importance of testing with the coworking space Space Doejo before. The CEO, Phil Tadros, told me about the need for agile development. This is where testing happens much earlier in the process, and it enables companies to spot flaws and deficiencies early.
If Coolest had utilized agile development, they may have been able to rectify these glitches before they immediately scaled their product.
The fickleness of startups.
The biggest takeaway -- startups are always vulnerable. It’s good to have ambition, but startups have to plan for the future. They have to plan for the worst case scenario. It’s clear that Coolest could have done more to spot these issues from the start.
Related: 10 Deadly Startup Mistakes to Avoid
We can all agree that $13 million is an incredible amount of money for a startup to attract. A need for additional investment so soon demonstrates poor financial management and overly ambitious predictions. This story should be a wake-up call to startups.
Could Coolest have averted disaster?
In some ways, yes. The lack of immediate sales, which were expected, shows that they were overly optimistic and likely didn’t conduct enough market research. The cooler is a three-figure item, and high ticket items tend to sell in fewer numbers. Did the research team at Coolest take this into account?
After reading this story, what do you think is the biggest lesson that a startup can learn from this?