Ben Kaufman's Quirky Is Officially Out of Money
The co-founder and CEO says he needs to find funds fast. His team is 'working to figure things out.'
This story originally appeared on Fortune Magazine
Quirky, a startup that develops products for others, has no money left and is trying to raise money for its Wink platform for automating lights, locks and other home controls, said Ben Kaufman, Quirky's CEO, said at Fortune's Brainstorm Tech conference in Aspen on Tuesday. Sources have told me that the company has hired bankers to sell the Wink platform.
When asked about Quirky's finances Kaufman said the company ran out of money "weeks ago," but said he has a great team and they were working to figure things out. The emergency plan involves raising some money, if possible.
"On the Wink side, it doesn't make any money and it became complicated, and complicated stories are hard to get financed," he said.
It's been a rocky year for Quirky. In February, the company stopped making physical products and shifted to signing partnerships with large companies such as Harmon-Kardon, Mattel, Amazon and GE to help them innovate.Fortune reported on the troubles and Kaufman's quest for capital earlier this year. It was clear that Kaufman hated making a distinction between using the Quirky community to develop and manufacture new products and using the Quirky community to help come up with ideas for big companies.
"We don't take the inventory and working capital risk anymore," was how he put it. From his perspective the shift was a reasonable—if late—effort to handle an impossible retail sales situation.
Kaufman said there's a new type of invention that's emerging where companies have to tap into communities that have expertise and ideas. Quirky can act as a connective tissue of sorts between them. It's analogous to how companies build apps today using application programming interfaces (APIs) to access different services from different vendors. In Quirky's case it is the API.
In describing one of the company's problems, Kaufman said that retailers demanded terms that left Quirky with an inability to make money on the product it produced for them. As the products became connected as part of the Wink smart home line up, the Quirky brand didn't seem to carry the weight it needed to with consumers buying the pricier gadgets.
"When we started making $350 air conditioner, they wanted a good one. That works," Kaufman said. "The brand couldn't stretch."
Yet despite investing more than $20 million in Wink, Kaufman is most proud of creating the connected home platform. People buy a Wink hub and then add connected devices that range from $15 light bulbs to the $350 air conditioners. Perhaps because he's still hoping to find funding, Kaufman touted the dominance of the Wink platform. He said it is in 300,000 homes and sells devices in 700 to 1,000 new homes daily.
Kaufman said he expects Wink to have $25 million in sales this year. Those are solid numbers for the connected home business, where venture capital is flowing. But it isn't clear how the companies operating in the space are going to make profits. Selling consumer hardware is tough, and Wink has sold its hubs at a loss. Even Kaufman, who is proud of Wink, said: "I wouldn't do that again. I wouldn't start a start a startup within a startup. We should have handled Wink differently and spun it out."
For Wink, the best hope seems to be that Quirky will fail and Wink will then be able to find a buyer. But Kaufman isn't giving up yet, and so far his creditors, his community and his company seem to be willing to follow him as he tries to make the best of a messy situation.
Meanwhile, he assured me backstage that my Wink hub would continue to work.