In their non-defense, they also promised accountability and transparency. If you are one signature away from bankruptcy, you may want to be transparent about that, before taking un-refundable preorders.

Or you could do the responsible thing and keep preorder money in escrow.

Madoff was also only a few signatures from having his Ponzi scheme staying afloat.

Don't judge them until you walk a mile in their shoes. When you worked on something for years, you still maintain hope, and you're wrestling with doubt every day being "transparent" isn't so easy. You literally can't say "hey, we might go out of business" and then walk into a VC office and make a pitch. Having to wrestle with this was the hardest part of my job at RethinkDB, and any time I hear of someone who had to deal with it I want to wrap them in a blanket and buy them hot cocoa (laced with bourbon).

>being "transparent" isn't so easy

It isn't about being easy. It's about doing what is right. I don't care that it's not easy. Why would I, if I was a backer and you took my money?

Do you really need to burn people and go bankrupt before you can call out other people for doing so?

I get what you are saying, but not taking pre-orders while they are teetering on the edge of going bust seems like the "decent" thing to do.

This reminds me of Paul Graham's talk/essay about how (as a startup) not to die. Relevant portion:

When we were visiting Yahoo to talk about being acquired, we had to interrupt everything and borrow one of their conference rooms to talk down an investor who was about to back out of a new funding round we needed to stay alive. So even in the middle of getting rich we were fighting off the grim reaper.

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

There are alternatives to what they've done. They could have opted to not use the pre-order money to fund their operations (Until more funding could be secured). They could have protected it, as soon as they realized that they are in deep financial trouble. Compare this story to that of Lily - where when the party ended, it seems like the company has plans to give customers partial refunds. [1]

Instead, from all external appearances, they did everything they could to do right by themselves - not their customers.

[1] https://www.recode.net/2017/2/28/14766780/failed-drone-lily-...

>They could have opted to not use the pre-order money to fund their operations

Exactly. Sequestering pre-order money - at least some fraction of it - should have been one of the first orders of business for any company who cares about integrity.

People talk about this as customers, but: surely the point of pre-order money in many cases is precisely to fund operations - to provide the working capital needed to do manufacturing?

If I have a hardware product that costs $80 to make (x10,000) and I'm selling it on Kickstarter for $100, are you saying that after taking in a million on kickstarter I should just sequester it and then find a spare $800k to do the actual manufacturing?

The key difference here is that the manufacturing never actually happened. They seem to have used preorder money to fund other steps in the process but never actually made the product beyond some initial devices.

Kickstarter to fund manufacturing should happen at the appropriate time in the process, if you're "doing it the right way."

Given the several month long lead times on hardware fabrication they must have known a long time ago that they couldn't deliver any time soon.