We have uploaded all our invoices of transactions between Kreyos and Viewcooper. You can find an archive of all our invoices in the Dropbox link below:
We paid Viewcooper a total of $1,692,575.95 USD from the start of the project until the delivery of the products you currently have. Here is our trial balance used for 2013 tax filings.
The publicized amount of money we raised through our crowd-funding campaign on Indiegogo, as you know, is in the neighborhood of $1,500,000. In reality, after the IGG fees, credit card processing fees, Paypal fees, and the amount we spent on PR and Marketing, we were only left with around $1.2M USD.
With every painful delay we announce, we saw a spike in the number of refund requests from backers who understandably grew impatient. The total number of refunds we processed from the start of the projects up to this day amounts to around $500,000++. If youre following, the cash left from the Indiegogo campaign is now down to around $800,000. This amount excludes pre-orders from our own web store.
Ive personally invested a total of $370,000 in Kreyos as well. Also in order to keep Kreyos operations running until we ship, Ive borrowed loans from angel investors, friends and family who forked out a total of $750,000 USD. Unfortunately most of that money is in the pockets of Viewcooper.
Theres also monthly operational overhead, employee salaries, marketing costs, ongoing refunds etc. The more we pushed back our launch date, the worse it got for us. If Viewcooper ends up delaying production and shipment by 8 months, it means we have to go 8 months without substantial income and revenue, and still have to pay all our monthly operational expenses and honoring refunds at the same time.
A total of $750,000 USD of loans from angel investors, friends and family:
1) $100, 000 USD on the 20th Dec 2012
2) $100, 000 USD on the 11th Jun 2013
3) $150, 000 USD on the 13th Aug 2013
4) $200, 000 USD on the 24th Feb 2014
5) $100, 000 USD on the 18th Mar 2014
6) $100, 000 USD on the 19th Jun 2014
EARLY 2012: HOW IT ALL BEGAN
During one of my trips to China in 2012, Pro invited me for dinner and showed me a hardware prototype geared towards competing against popular big-name action cameras. I was quite impressed by the product and the price he says hes able to manufacture and ultimately sell them but Pro made it clear that he will only be focused on doing ODM and not branding or marketing. For us, we are able to buy it OEM, slap on our own brand and market it as our own, which a friend and I were extremely interested in doing. Fortuitously, before he was able to get it out to the market, GoPro came up with its celebrated Black version which completely made his product uncompetitive specs-wise and resulted in him shelving the product and go back to the drawing board.
Click here for the action cam specs: https://www.dropbox.com/s/8urjrsiugnfifc1/2012.08.24.Action%20Cam.C001.Introduction.MW.pdf?dl=0
One day, Pro emailed me and sent me the link to Pebbles widely successful Kickstarter page. He told me that Pebble is having manufacturing issues and bragged about how they are seeking his ODM company (VIEWCOOPER) in helping resolve the manufacturing issues. He said this is a very easy product to manufacture and Pebble didnt know anything about manufacturing. I regretfully bought that and thought maybe through working with Viewcooper, people like myself who have limited tech and manufacturing experience can launch a viable consumer electronics product.
So fast forward a few weeks, he emailed me and proposed he will do a ODM project for us, for a much better smart watch and we can use our own brand. In short we buy a complete ODM product from from Pros solutions companyViewcooper. All we needed to do was provide them with our brand, watch industrial design, packaging design, App UI design, and they will take care of all the rest. So I thought it shouldnt be too hard, as I wont have to work on the software, hardware, firmware and focus on building a good brand instead. He said he would charge a fixed ODM profit of $15 USD per unit for the (at the time unnamed) smart watch, and assured us he wont take on any other smartwatch projects
DEC 2012 -> JUN 2013
So Viewcooper invited me to visit his solutions companys office, and also sent us a PDF, with the suggested specs and price which I have described below. Before everything started, Viewcooper promised to sell the Kreyos Meteor at BOM +$15 USD, of which $50 is the BOM (bill of materials) cost from the factory. After the success of the IGG campaign we were initially supposed to pay him 20,000 * $65 USD for 20k units of the Meteor.
Since I very limited technical knowledge as far as consumer electronics would go, we relied on his company to define the specs. After all, Pro made himself to be an expert in this industry. He suggested that we add a Microphone, Speaker and ANT+ connectivity in order for us to differentiate ourselves from the 1st Gen of smart watches that were out in the market at that time. I thought it made perfect sense. Click on the below to download the PDFs. Im keeping the original file names that was sent to us.
ii) 2012.11.05.SmartWatch.Customer Development Guildline.pdf
iii) 20121.12.25.Smart Watch APP and Gadgets.pdf
iv) 2013.05.31.Smart Watch SDK.Proposal.pdf
My marketing team and I brainstormed a few brand names and settled on KREYOS. We started with the ID design with a designer, and also booked a small amount of Sharp LCDS for the Kreyos campaign. We initially ordered only 3150 pcs of Sharp LCDs at $15 USD each. Prior to the campaign we already paid almost $200K USD to Pros company for the moldings, LCDs and samples. I have been working in online marketing and branding for almost 10 years, so we know which resources to use and how to launch and package a new product (SEO, PPC, Media buy, FB campaigns, Retargeting etc). This is our initial design of the Meteor which originally was very thin but Viewcooper was not capable enough to execute on this design. Click on the below to download the PDF.
The fact of the matter is when Kreyos launched the product on Indiegogo, All we had was a small marketing team of 4 people including myself and some outsourced providers. We also hired 3 part-time customer support personnel from oDesk and thats it. In the beginning we did a wonderful job handling the campaign launch, emails, social media and pretty much everything else. After the campaign period we considered our part done. At that juncture, the ball was on Viewcoopers court and to manufacture the product based on the agreed upon specifications. Weve already provided everything they required on our end: App UI designs, watchs UI, packaging, etc.
Our original goal was $100K, we did 15X more. When our small team and I launched the Kreyos project, and hit a $1.5MM project, we were all so happy, and we thought it was the beginning of a successful startup. We had no way of knowing that the person that would cause all of this misery, delays and issues would be the person who brought me into this industry.
Since we were able to launch an extremely successful campaign, and pushed for more competitive pricing ($149), we negotiated with Viewcooper on dropping their price by $15. Pro countered that offer and suggested that we give VIEWCOOPER equity in return for them dropping the price. It sounded like a good deal to join forces with them and merge our companies, become co-founders and work with his team in order to augment our weakness: hardware and FW, software R&D. If they are able to sell to us at cost price, we should be able to drop our price from $169 to $149.
In exchange for selling the Meteors at cost to us, Pro was given a 30% stake in Kreyos. 30% is given to him to distribute to key members of his company/team. He claimed that he will spread the equity around in his own discretion. We later found out that he never shared any of these details with his team, whom we learned, wanted to join Kreyos too.
So far so good. We buy at actual cost price, our solutions company Viewcooper becomes our partner, so we can be more competitive price-wise and we get his whole team to join. Whats strange and something that shouldve raised a red flag at that time was we were never given access to his team, but only communicated with Alex and Pro himself. As things slowly progressed, they finally gave in to allowing us to contact their FW and Hardware engineers.
Take note that they only allowed us to do this towards the latter part of the manufacturing run, whereby his staff started resigning/stopped working as few claimed they didnt see any hope in Viewcooper and the project as there were only few people working on a project this big. We started digging and found out that the at-cost price which we were supposedly getting the Meteors for from Pro and view cooper was not $50.
The at-cost price is only $30 and Pro was already earning around $22 USD from selling us at $52. His total PURE PROFIT per unit is around $37 USD(if including the $15). And to make things worse, the LCDs cost which he misled us into buying huge batches of, was not $15, but only around $5 USD each.
All R&D, firmware, hardware, software App personnel are from Pros solutions company Viewcooper Corp. As you guys know, we only had a goal of $100K USD when we launched the campaign, we had no way of knowing that we would sell $1.5MM USD in such a short period. So after the campaign ended, we had to immediately pay 50% ($52*20000)/2=$520,000 USD, part of which was $150,000 worth of LCDs that been already been paid for) of the invoice to Pros company VIEWCOOPER to begin manufacturing.
During this period of time, Pro and Alex constantly made us believe that the SHARPs LCD of the watch is always out of stock, as Pebble and Nike is booking up the entire Sharps manufacturing line. They claim that there is only 1 line that manufactures the small Sharp LCDs, and the other lines manufacture LCD TVs. They also told us that the LCDs booking time is usually 46 months just for the 2nd batch of LCDs to arrive unless we order and stock now. So we became worried because this will be a major problem if we start scaling. Judging from how well we did on Indiegogo, we expected our marketing team to be selling it very well on our own web channels as well. So we placed our 2nd order of LCDs for 20k Units and followed by 44,000 units of LCDs, for a total of 64150 pieces of LCDs, of which we paid a total of $966250. Now with all we were are sitting on 44,000 pcs of LCDs$660,000 of worthless LCD inventory. )
MID AUGUST 2013
We spent a good amount of money to hire a design firm to design the Kreyos homepage to make sure we properly communicate our key features to the public. We outsourced all our web development work to a Philippine software company to build our store.
They kinda screwed up as it wasnt ready when the Indiegogo campaign ended, so I rushed over to the Philippines to see what the hell is going on. We were losing so much potential sales after we completed our IGG campaign and the web store is still not ready. I had no idea that the time I flew was the worst time of the year to fly to Philippines. The moment I arrived, one of the worst typhoons hit the Philippines. I got stranded in Manila for a few days as we were not able to travel due to the mass flooding all over the city.
We had to risk our lives to drive 3 hours all the way to Subic (a province in the Philippines) where we encountered heavy floods and broken bridges along the way. We reached our destination to find the developers cramped in a small, almost inhumane working space still working on the site.
Upon returning to Manila, I got to meet another Singaporean friend who has a small team of programmers and customer support personnel to manage his business in a shared office. After figuring out the costs in Philippines is WAY cheaper compared to the US, I decided to share a new office space with my friend and setup a small team of Customer support reps in Philippines -Manila. This is how we came to setup our Philippine office.