SAN FRANCISCO — Skully had all the makings of a smash hit. Fans said the startup’s high-tech smart motorcycle helmets would change the game for rider safety, investors poured in millions, and customers lined up with their wallets out.
But everything came crashing down this month when the 3-year-old company shut its doors, broke and awash in controversy. In a sense, Skully’s story — the dizzying ascent and sudden demise — is a quintessential Silicon Valley tale. It’s a classic example of both the revolutionary technology and the disasters that can come out of the startup ecosystem, where venture capitalists throw money at young, inexperienced entrepreneurs with lofty visions and often little interest in compromise.
“In a lot of cases, young entrepreneurs struggle with the day-to-day development of their innovation and the inherent lack of experience on the business development side,” said Matthew Bird, president of 1-800-PublicRelations and Skully’s former publicist. “(They) fall into what is commonly known as ‘founder syndrome,’ where CEOs are so attached to their creation that it overrides business logic.”
Speaking on the condition of anonymity, four people with knowledge of the company’s collapse described escalating tension between the founders and board members as Skully ran out of money, botched a potential acquisition deal and lost an 11th-hour round of funding. They say Skully didn’t have to end in disaster — the funding could have gone through and saved the company if the founding brothers had swallowed their pride and agreed to investors’ terms. Instead, the brothers, investors and customers — many of whom paid $1,500 to pre-order helmets they’ll never see — walked away with nothing.
The company now faces a pending bankruptcy, a lawsuit accusing the founders of spending company money on strippers, vacations and sports cars, and thousands of angry customers demanding refunds. It is also under investigation by the Securities and Exchange Commission for its use of funds, according to two sources familiar with the company who said they were told of the SEC probe.
Founders Marcus and Mitchell Weller declined to comment on what caused the company’s demise, and have said they will vigorously defend themselves against the lawsuit. But reached by phone this week, Mitchell Weller stressed that Skully was a passion project.
“We don’t have things to hide,” he said. “We built the company because we love motorcycling, we love the community — we really wanted to build something that was truly going to make the motorcycling community safer. We bled blood, sweat and tears to make it happen.”
Skully is just the latest Silicon Valley startup to be plagued by controversy. Blood-testing startup Theranos is reeling over accusations that it misled the public about the accuracy of its tests. Software company Zenefits earlier this year faced allegations that its employees were selling insurance without a license. And vegan food startup Hampton Creek came under fire this month over claims employees were buying up the company’s mayonnaise to boost sales numbers.
“A pattern may be emerging here, where we have a lot of these companies that are flying very close to the sun with not a lot of oversight,” said Michael Greeley, co-founder of Flare Capital Partners in Boston and former member of the executive committee of the National Venture Capital Association’s board. “Bad things can happen.”
Marcus Weller, who graduated from Detroit’s Wayne State University in 2012 with a Ph.D. in industrial psychology, founded Skully after he crashed his motorcycle while trying to read a street sign. The idea came to him in a dream following the accident — a GPS map floated in front of his face while he rode, according to the Skully website. Weller took that image and ran with it, creating a $1,500 augmented reality helmet with a GPS display built into the visor, a rearview camera, voice control and Bluetooth connectivity. He brought in his brother, Mitchell Weller, as vice president.
The idea took off, developing a cult following among some motorcycle riders. Skully’s Indiegogo campaign raised a staggering $2.4 million in 2014, making it one of the most successful in the crowdfunding platform’s history. The following year Skully raised $11 million from investors led by Intel Capital and Walden Riverwood Ventures.
But producing the complicated technology Marcus Weller envisioned proved a challenge. Pre-ordered helmets originally scheduled to ship in May 2015 were delayed month after month.
As customers who had paid for the helmets grew anxious, Skully was running out of money. A deal to sell the company for tens of millions of dollars to China-based eco-sports company LeSports fell through, according to three people familiar with the negotiations, leaving Skully scrambling to raise a last-minute round of funding this summer. Investors lost confidence in the Wellers, the people said, and both brothers resigned July 12.
But the Wellers couldn’t come to an agreement with the board about the terms of their resignation, initially refusing to sign off on certain items including a non-disparagement agreement that protected Skully, said three people familiar with those negotiations. Without those terms set in stone, VCs refused to contribute more money.
Then the Wellers’ former personal assistant dropped a bombshell. In a lawsuit filed July 27, she claimed the brothers treated Skully accounts like “their personal piggy banks,” blowing $2,000 at a strip club, buying two Dodge Vipers and an Audi R8, and taking extravagant vacations, all while misrepresenting the transactions as business expenses.
In an emailed statement, the brothers wrote, “We strongly believe we will be vindicated in the end … we look forward to the truth coming out and our day in court.”
Mitchell Weller appears to have his own view of how Skully’s last round of funding fell apart and who is to blame. In an Aug. 5 exchange with a customer over Facebook Messenger, Weller wrote that he and his brother resigned “right away” after being promised that investors would fund the company and helmets would continue shipping.
“I don’t know what’s going on,” he wrote, “because we were told to leave in exchange for the company living on and it sounds like they went back on that.”
With no funding, Skully shut down Aug. 5. The company had shipped about 200 helmets, said Carlos Rodriguez, Skully’s former vice president of sales and marketing. Another 3,000 paid-for products never made it to customers.
In the end, after paying $1,500 for a helmet, all Torerro Majors of Maryland got was a Skully shirt and hat.
“I felt scammed,” he said. “Robbed.”
San Francisco-based motorcycle rider Dav Yaginuma was one of the lucky few to receive a helmet.
“(It) gives me nearly 360-degree visibility without turning my head at all,” he said. “That’s game-changing. If I forget to charge it and the display is dead when I’m riding my motorcycle, now it feels dangerous to just use my mirrors.”
Yaginuma picked up the helmet during a barbecue at Skully’s San Francisco office this summer, where attendees relaxed with beer and wine, and Marcus Weller gave a speech. “There was no sign whatsoever” that the company was on the brink of collapse, Yaginuma said.
It’s possible another company will buy and resurrect Skully’s technology, now owned by one of the defunct startup’s creditors. Fusar, a New Jersey company that makes smart cameras and headsets for helmets, has expressed interest.
“I think there are a lot of people out there today who were excited about Skully’s product,” Fusar founder and CEO Ryan Shearman said. “For us to acquire some or all of their technology would open the door for us bringing it to market and making those customers whole.”
In the meantime, most features on the Skully helmets in customers’ hands still work. But the built-in GPS navigation is going dark.
Marisa Kendall covers startups and venture capital. Contact her at 408-920-5009 and follow her at Twitter.com/marisakendall.
