After a year of manufacturing issues and legal woes, Palate Home, the maker of the Cinder smart grill, is shutting down and filing for Chapter 7 bankruptcy. Palate Home Co-Founder and CEO, Eric Norman, posted the news on Indiegogo, where nearly a thousand people had crowdfunded Cinder, giving it more than $550,000 in total.
We kind of saw this coming when we uncovered last month that a San Mateo court had ordered Palate Home to repay a $250,000 convertible note plus interest to Tony Fadell’s Future Shape investment firm. The court issued a summary judgment, which indicated that Palate Home didn’t even provide a defense in the case.
In yesterday’s update, Norman said the lawsuit was the “proverbial straw that broke the camel’s back,” but also said that “the root cause of this is that the company was simply not able to sell enough product, or produce that product consistently and economically.”
Chapter 7 bankruptcy means that Palate Home’s assets will be sold off to pay its creditors. What this means for the future of the technology behind Cinder is unclear. Will the underlying IP be acquired and baked into a different product? Those who used the Cinder (our own Mike Wolf included), really liked the countertop precision cooking device.
This means that the vast majority of those who backed the project will not be getting their Cinder grills, joining the sad chorus of crowdfunding failures which includes HOPii and BrewBot. In previous Indiegogo updates, Norman indicated that there were hundreds of Cinder smart grills in a warehouse in China. The fate of those devices is unclear, or how they will work if the app is no longer being supported.
We’ve reached out to Norman for comment, and will update if we hear more. Here’s the full text of the update he left on Indiegogo yesterday:
Today I write you with a heavy heart. Our final attempt at negotiating a settlement was not accepted and I have instructed our attorney to file for a Ch. 7 bankruptcy. Unfortunately, this means the company will not be able to ship any more perks. I never expected this to happen, but I do take responsibility for it and I am very sorry this is how things turned out.
We made a generous offer to which the rational response would be to accept, but unfortunately I cannot control the other party. Had that offer been accepted, I believe we would have been able to deliver all perks and continue supporting the product. At this point I have exhausted our options and there is no way to continue operating the business.
While it would be simplest to blame the other party, and I admit that I have felt anger and depression during this trying process, it ultimately comes down to my responsibility as CEO to take in what the world presents and turn it into a viable business. I was unable to make that happen and some promises are left unfulfilled and I feel terrible about that. I’m sure many of you will be angry, and I can’t blame you for that. All I can say is that I am very sorry and I hope that you can accept my apology.
While this lawsuit was the proverbial straw that broke the camel’s back, the root cause of this is that the company was simply not able to sell enough product, or produce that product consistently and economically. Many people thought that if only the product could be explained better, to more people, it would become a smash success, which is why we launched this campaign. We were so excited at the support and were on track to deliver perks and close out. Along the way, we experienced death by a thousand cuts which ultimately prevented that from happening (production was slower and at lower quality than expected, we sold less than expected, and the lawsuit reduced available resources, etc.).
I will monitor the comments for the rest of the day, so post if you have any questions or suggestions.
P.S. If you’re an entrepreneur, I recommend being wary of convertible notes. Brad Feld mentions in Venture Deals in passing that there can be problems like this, and it has caused enough difficulty that YC created a funding method that does not mature. If you’re like me and you love building product and making it something people love, then any time spent on things like legal matters is agony – you can avoid any chance of this happening by simply not using this type of funding.