Why did Plastc and many others fail? An exploration into the failed smart card game.

You may remember that a while ago we were surprised with the announcement that Plastc was shutting down all of a sudden.  This came as a shock to all who had pre-ordered the device and were straight out of luck.  Though I am upset about the loose, I am more interested in why Plastc and so many others have fallen to their fate.   Why have they not been able to succeed?  I looked into it even more and found out that at least five companies have either sold what was remaining of their assets or declared bankruptcy. All of these companies were trying to do the same basic thing.  They all tried to replace your wallet with one device that would be capable of re-writing its magnet strip in a split second to any of your credit or debit cards for you to use.  The idea of this tech is not new and can be done in many different scenarios.  So this does not answer my question.  What were they all not able to do?  While this question does not have a single, easy to digest answer, here is my take on the whole thing.  There are various reasons why a tech startup can fail.  First up is the sheer cost of actually producing a physical device in large volume to ship to people.  This is expensive and most manufactures require capital to be posted up front.  This is to ensure that the manufacture does not loose out in a bankrupy case.  For Plastc this could have been as much as 4 million.  To front this money a startup must prove to investors that they will not only be able to take that up front capital and make the product as promised but also be able to generate adequate income to put the product on the shelves.  This can be a tall for order for any startup.  This is particularly hard because the money paid to the manufacture companies must be paid in cash.  This means that the investors have to be willing to hand over that cash at one time.  This also does not include any additional money required if something were to not go as planned.  Did I mention that the money paid to these manufactures is non refundable?  That is right, if something were to go wrong and the startup is no longer able to pay the additional fees the money paid stays with the manufacture.   A more minor note is that these manufactures tend to steal your idea and sell the planes to other manufactures who make your product for significantly less than you can and sell them under another name.  Second up is that most startups end up paying their founders too much out of the gate.  This results in capital being short towards the end of the line.  This also looks band when the startup begins to have a cash issue.  It never looks good to have given a large chunk of your initial capital to your founder and be struggling with cash at the end.  Most investors will pull out and let you die.  This seems to have happened with Plastc.  Lastly is the simple fact that it is hard to make a new device without the proper cash flow.  If Apple or Google were to venture into this world, we would be all using the product right now.  These large companies have cash like non other.  They also have a lot of weight and can be bullies when necessary.  Take Apple for example.  Apple is the worlds largest company.  They are worth well over 700 billion and have around 300 billion or so in cash.  They are well known for using this massive amount of weight to make manufactures keep their products a secrete and give them the best rates possible.  They have also caused the demise of many a manufacture who did not comply with their standards.  Small startups like Plastc can not do anything close to this.  They can sweet talk these manufactures at best.  Small startups are also not a high priority on the list to get their products manufactured.  In the end it comes down to this.  They all have great ideas.  They all have solid planes.  They all do not have the right amount of money.  They are over zealous in many areas.  They are all destined to fail before they even can try.  Does this mean that we will never see this type of product on the shelves in a real mass production situation?  No.  Eventually a startup will get the right stars to align and make history.  Until that day I will just have to carry various cards in my wallet and break my back in the process.  I really wish something would work, but realize that the old is hard to kill and the new can be even harder to make a reality.  We all must wait for the bigger giants to get on board and do the job the right way.  Until then I will stay this way.  Thanks for reading and as always, all products pictured or referenced to in this article are sole property of their owners.

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