Plastc folds after raking in millions

High-profile S.F. startup closing after failing to ship pre-ordered credit cards

SAN FRANCISCO — Another crowdfunded Bay Area startup has closed its doors without shipping customers the products they paid for, a failure that raises fresh concerns about risky online pre-order campaigns.

San Francisco-based digital payments startup Plastc shut down Thursday, saying it’s considering filing for bankruptcy after failing to raise the cash it needed to mass produce and ship its smart credit cards. The 3-year-old company raised millions through pre-orders of its $155 Plastc Card, but failed to ship a single order — and its demise leaves behind scores of angry customers.

“We are disappointed and emotionally distraught,” the company wrote in a farewell note posted on its website, “and while we know this is extremely disappointing for you, we want our backers to know that we did everything we could to make Plastc Card a reality.”

A company representative could not be reached for comment.

Plastc is at least the third such high-profile flame-out Silicon Valley has seen in recent

months, as more startups turn to online pre-orders to raise the cash they need to get off the ground. Crowdfunding proponents argue those campaigns, often launched on platforms like Kickstarter and Indiegogo, democratize fundraising by allowing anyone to be part of a startup’s founding. But they are inherently risky as they ask customers to pay for products that aren’t yet developed and may never work.

San Francisco-based flying camera startup Lily Robotics filed for bankruptcy in February, after shutting down without shipping more than 60,000 pre-orders.

The company is selling its assets and has promised to refund customers. Skully, another San Francisco startup, went belly up last summer after failing to deliver 3,000 smart motorcycle helmets backers had pre-ordered for $1,500 each.

Plastc promised a gadget that looked and acted like a regular credit card — users could swipe it at an ATM or a store’s credit card reader — but it could hold up to 20 credit, debit, loyalty and gift cards in one place. The surface of the device was a touch screen that allowed users to swipe through their different cards and choose the one they wanted.

To raise funds, Plastc eschewed traditional crowdfunding platforms in favor of launching a self-starter campaign, Founder and CEO Ryan Marquis said in a video interview for the online series “Behind the Brand.” It was a hit — the company raised more than $5 million in pre-orders in the first week, he said.

“The day we went live, we literally exploded the shopping cart server that we were using at the time,” Marquis said in the interview.

But the startup struggled to fill its pre-orders. The company delayed its ship date multiple times, according to angry posts from customers on social media. And Plastc was forced to remove features it had promised when they proved too complicated to pull off in a timely manner, Marquis said during the “Behind the Brand” interview.

Plastc also launched an equity crowdfunding campaign on Fundable, the online platform confirmed, though a representative wouldn’t say how much Plastc raised, and the campaign had been taken offline Friday.

Plastc has produced cards that work, the company wrote on its website, but needed additional cash to get them to market. The team was expecting to close a $3.5 million round of funding in February, but after the lead investing group postponed its contribution, the entire round eventually fell apart.

Plastc found another investor willing to shell out $6.75 million, and the deal was expected to close last week. That deal was “one signature away” from closing when the investor backed out at the last minute, Plastc wrote.

The company said it won’t be able to ship any pre-orders and made no mention of refunds.

Don Butler, managing director of Thomvest Ventures, wondered whether startups might shut down more gracefully if they were venture capital backed instead of crowdfunded. If VC investors were sitting on the company’s board, he said, they might have made sure a company paid off its debts and refunded its customers.

Plastc also was part of a troubled industry. Coin, a similar smart card maker, shut down earlier this year.

Butler, whose firm had considered investing in the space, said he questioned the viability of the concept.

“That’s one reason we didn’t invest,” he said. “I see the consumer benefit, but it also felt a little bit like a half-step between a wallet today and just having all of those cards sitting in your phone.”