Tiko Finally Admits Defeat, But M3D Comes to Backers’ Rescue: CEO Michael Armani Tells Us What’s Going Wrong with All These 3D Printer Kickstarters

Perhaps you’ve noticed a worrying trend lately – there seem to be more and more Kickstarter campaigns that succeed fantastically, raising funds that far surpass their goals and gathering a base of excited backers, only to burn out even more fantastically, either towards the end of the campaign or after it’s already closed. Suddenly, the company that launched the campaign finds that they can’t deliver on their promises, leaving backers disappointed and angry at having invested their money for no reward in a cold reminder that a crowdfunding pledge is not the same as buying a product in a store.

Anyone who backed the Tiko 3D printer back in 2015 is likely feeling more than a bit frustrated right now. It’s become quite a saga – the Kickstarter introduced a $179 3D printer that promised to deliver the quality and reliability of a much higher-cost machine. Backers swarmed, pledging a total of $2.9 million, but then it all fell apart. Delivery was delayed – and then delayed again. Mistakes were made, money was lost, backers fumed, and now, nearly two full years after the launch of the campaign, Tiko has admitted defeat.

In an update posted on the Kickstarter page, the Tiko team explains the mistakes that led them to their final decision to shut operations down. Staff has been laid off, operations have all but stopped, and the company is now in what the update describes as “hibernation mode” – not dead, but…dormant. Pre-orders have been canceled as the team figures out what to do next to see if the company can have a future. They’re speaking with investors, and will keep everyone updated.

It’s obvious that Tiko is well aware of how many people have been let down, especially as they’re unable to give any refunds. As it turns out, backers don’t have to walk away completely empty-handed, however, thanks to another Kickstarter-launched company – one that succeeded.

In 2014, M3D arrived on the scene with one of the most successful Kickstarter campaigns in history. The Micro 3D printer reached its funding goal in minutes and went on to bring in over $3 million – and unlike Tiko, the company maintained their success, introducing their second printer through another Kickstarter that raised more than four times its goal. Now, M3D wants to help out the people who supported Tiko by offering them a chance to purchase a Micro 3D printer for only $199. If you’re a Tiko backer, simply fill out the form M3D has provided and they’ll email you with a discount code once they’ve verified your backer status.

Michael Armani

I spoke to Michael Armani, CEO of M3D, about the Tiko situation and the recent rash of Kickstarter disasters in the 3D printing world. Having run two successful campaigns himself, Armani has continued to closely follow the world of crowdfunding, and is currently in final negotiations with Xmachines, another Kickstarter smash success that has been unable to deliver, for a bailout plan that would involve M3D taking over, finishing printer assembly, and fulfilling rewards to backers. I asked him for his thoughts on why so many campaigns – particularly 3D printing campaigns – have been collapsing.

“It’s just this sad story that keeps repeating…people launch a product in order to try and get their first market awareness, and in order to do that, they just give away huge amounts of value,” he told me. “In the case of XMachines and Tiko, people like me who know the cost of goods saw that on day one and said, wait a minute, the cost of goods is 60% of the price they’re asking for on Kickstarter. You just can’t run a company that way…it’s not feasible.

So when I saw the failure of Xmachines, it was right on the heels of NexD1, which raised half a million dollars for a super high resolution color inkjet printer, that turned out to be a scam…Kickstarter found out and pulled the plug, luckily, right at the end. But when it comes to companies like XMachines and Tiko – the very platform that made (M3D) who we are is basically saying, you know…we’re monitoring the situation, we’re well aware of it, but this failure fits into our current trend. It’s never gone beyond a 9% failure rate, it’s par for the course.

The way backers see that is, well, come on, you guys are taking a five percent fee for this and doing nothing. What was once a really beautiful platform for people to come together, especially in the tech field, has now become this Wild West discount platform…Basically, you pay money to get access to the platform, and then you’re just totally on your own. And it’s really a shame because the knowledge needed to have a successful company is there…but when it came down to it, these guys did not have the knowledge and experience needed to scale up a business operation. And that’s really the big missing piece.”

He believes that the majority of companies who promise big things and fail to deliver are well-meaning but overconfident. It’s almost too easy to develop a product and launch it through a crowdfunding campaign – the hard part comes after the initial success.

“I think we live in a time where there’s never been such equal access to three things: the advertising platform, the ability to go to China or someplace that knows manufacturing pretty well, like an Alibaba, and say, ‘Hey, I’m trying to build this thing, can you help?’ – there’s a much better connection there, especially in the last five years – and the crowdfunding aspect itself,” he explained. “I think a lot of people say, I have a good idea, it looks pretty easy to build, it looks like crowdfunding’s the way to get money, it looks like I can get in on that. What they’re missing is the real cost of the business…So are they trying to make a quick buck and scam the system? No, I think they’re genuine in their attempts, but I don’t think they’ve really thought through the calculations, the math of how they’re going to survive after the campaign. Plus, tech is an extremely hard field.”

While it’s easy, and understandable, to get angry at a company like Tiko 3D for promising what they couldn’t deliver, Armani believes that the fault lies also with Kickstarter and other similar crowdfunding platforms themselves. Sure, Tiko 3D made mistakes, and to their credit, they realized and admitted to them in their letter to backers, but the fault doesn’t lie entirely with them.

“A lot of companies take money and don’t know what to do with it. In the case of Tiko, it may not have been totally viable,” Armani continued. “For them to take $3 million and already have to commit almost $2 million of it just to cost of goods and fees, it basically means that they would have had to have a completed project of 100% scalable design ready to go, and still not have a lot of money for salaries, advertising. So in their case, they should have taken…investments pretty much on day one when they had the maximum hype. That’s a big mistake on their part.

I would say hubris, overconfidence, is definitely an issue in this industry. We had some of it ourselves, but we’re lucky we were able to pull out of it…but I really think that the problem is the platform itself. What Kickstarter or some new platform needs to do is to investigate the feasibility of the technology as it’s presented. Kickstarter’s really divorced itself of being a judge. They need to investigate the credibility of the creators themselves. When the projects fail, they should show some sort of good will, even if it’s just refunding the 5%. It’s not a matter of getting back five dollars out of a hundred, it’s the intent. Kickstarter’s saying, well, we don’t care about you. People are really picking up on that feeling. I’ve got a list of hundreds of comments where people are saying ‘I backed 39 projects, but I’m just done. Kickstarter doesn’t care about me, so why should I continue to support this platform?'”

One suggestion, he says, is a tiered system in which a backer could commit, for example, $100, but only a percentage would go to the company until they proved they had hit some sort of milestone, at which point an additional percentage would be released, and so on – much like the system that venture capitalists use.

“That way there’s less risk to the backers,” he explained. “Another thing the platforms could do is take all of the different people in the same weight class, all of the different creators who have raised between $200,000 and $1 million, and have them talk to each other in a behind the scenes forum and pick each other’s brains.

There’s really no support. This is something we see with tech – maybe a little bit with design and game projects, but it doesn’t seem to be anywhere near as pervasive in the other categories, so it really looks more like a lack with Kickstarter and Indiegogo as a platform to be able to cater to tech….The complexity of a tech product, especially a 3D printer, is so extreme, and it’s so competitive on top of that, that someone needs to be able to evaluate these guys differently.”

Does that mean a crowdfunding platform should exist solely for tech projects? Possibly, Armani says – the niche is there for it, and he’s interested in exploring the idea himself in the future. As someone who knows crowdfunding inside and out, and who has seen so much success from it, he wants to take on a larger role in the field, advising young companies who are trying to build viable businesses. He’s currently writing a book called Death Valley Curve, which refers to the period of time between when a startup receives initial investments and when it actually starts generating revenue. Many, many startups fail during that time, and there’s a serious lack of advice out there on how to navigate that tricky period, Armani says.

“98% of the content out there is about how to get crowdfunding money, or how to launch a campaign, or how to do a prototype of your idea, and then nobody talks about what to do once you finally have money,” he told me.

“I think it’s important for (M3D) to try to fill out that void of leadership that 3D printing is seeing… There was a hype bubble that was driven in 2014, and that hype bubble has now returned to an underlying trend. The underlying trend is people who are creative thinkers, people that have great ideas, who want to start businesses, are buying printers and using them for as many applications as there are buyers. That market is still continuing, growing, but…all the MakerBot-style layoffs and CEO firings that we’ve seen have really taken away from the heartbeat and the mojo of this field. So hopefully in the next few months we can become a leader and start re-engaging and exciting people.”

Experiences like Armani’s are an undervalued commodity in a field rich with startups, which could seriously benefit from the voice of success. Kickstarter – and all crowdfunding platforms – remain something of a Wild West in the tech sector, and backing any campaign is never a guarantee for either the company nor the backer. With initiatives like M3D’s ‘backer rescue’ in this case, we also see that the community can come together to bail one another out, showing that the heart of the maker movement is still beating. Discuss in the Tiko M3D forum at 3DPB.com.