Arist-ed development: Controversial Kickstarter project endorsed by Hong Kong government slammed for empty promises, failed delivery

Backers are scrambling for refunds after Nbition Development’s smart coffee machine Arist misses shipment deadlines and media tests show it to be leaking water and performing poorly.

PUBLISHED : Wednesday, 02 December, 2015, 2:14pm
UPDATED : Wednesday, 02 December, 2015, 11:40pm

A Hong Kong start-up that has been hailed by the government as a shining example of innovation and raised nearly US$1 million on Kickstarter for its smart coffee machine is now embroiled in controversy amid repeated product delays and an accusation of copyright infringement.

Nbition Development, which won the Best ICT Start-up Grand Award, part of the government-backed Hong Kong ICT Awards in April, attracted HK$6.5 million (US$840,000) at the end of 2014 to produce its Arist coffee machine.

The product is operated by a dedicated app and promises high-quality, barista-grade coffee.

Yet several missed shipping deadlines and accusations by a Danish coffee machine company that the start-up copied its app design have tarred the project, leaving some backers demanding answers and refunds from founding brothers Nelson and Benson Chiu.

The Chius registered Nbition Development in July 2013 to develop mobile-based software including a coffee-ordering app called Garffee.

That app was later featured by Hong Kong’s financial secretary John Tsang Chun-wah in his 2015 budget speech as an example of the city’s growing start-up ecosystem. Garffee has not yet been commercially released.

Nbition is also one of a number of incubatees at the Hong Kong Science and Technology Park, which it originally entered as a software start-up. It later shifted over to join the park’s hardware incubation programme.

WATCH: The Chius demonstrate their smart coffee machine Arist

It receives a 50 per cent reduction in office rental from the park.

Yet trouble is brewing for the company and a number of backers have lodged complaints with local police amid fears they will lose their investments if the project is not completed. Many have demanded refunds.

Moreover, some people who attended the company’s launch party claim they were asked by the founders to back the Kickstarter campaign by making credit card pledges.

This was based on the understanding, they maintain, that the Chius would covertly reimburse them with the same cash amount later - an alleged ploy to drum up fake support for the campaign to make it look more successful and encourage more backers to sign up.

Such questions and allegations have spurred concern that the Hong Kong government may not be conducting enough due diligence and oversight of start-ups - especially those it officially or tacitly lends its support to - thus leaving investors at risk.

One complaint is that Nbition won the ICT award earlier this year without even having to demonstrate the Arist machine to judges, but organisers of the awards said this was normal operating procedure and in line with similar international competitions.

To qualify for the awards, Nbition provided shipping receipts from July to September 2014 showing that 1,000 customers had received the first-generation Arist machine, the organisers added.

Hong Kong technology lawmaker Charles Mok, who was following the development of Arist, later wrote to the government’s chief information officer seeking details on how the awards were evaluated.

“Providing incubation schemes and funding to start-ups is one of the methods to help foster a start-up ecosystem,” he said in an email to the Post.

“[But] integrity, transparency and accountability in the process is very important,” he added.

After coming under fire in May for missing deadlines and not providing regular updates to Kickstarter backers, Nbition is taking flak again for missing another shipping schedule in October. This has raised hackles among backers and triggered more refund demands.

The Chius said in an announcement to crowdfunding backers in October that they had secured series A funding worth US$3 million from an unnamed venture capital firm. They also said they had received requests for refunds from 98 people, or 5 per cent of backers.

Another statement from the company that same month laid out a manufacturing timeline, but did not give a fixed date for when customers would have their orders filled.

Raymond Stone, one of the backers who is trying to get his money back, said the company initially seemed keen to negotiate but later proved unresponsive.

“When Benson offered a partial refund, I was willing to accept a refund minus any associated fees,” he said.

“But no response was ever given to me through the Kickstarter campaign, or through the email which they requested that we [contact].”

He said the company demonstrated a version of the machine one year ago that it claimed was almost ready for production, but that a more recent demonstration had caused many to lose confidence in the project.

“The machine [was] unable to brew hot liquid. It was leaking water like a sieve - and what was left burned up after its first failed cup,” Stone said.

Nbition declined to be interviewed for this story and would not answer any questions by email.

Delays are not unusual for Kickstarter projects. A 2013 study by Ethan Mollick, assistant professor of management at The Wharton School of the University of Pennsylvania, found that 75 per cent of founders delivered products later than expected.

The Chius demonstrated an earlier version of the machine to a Post reporter in May. The machine brewed a hot espresso - but only after a few tweaks with a screwdriver and a pencil.

In recent months, some backers have raised concerns about a number of alleged irregularities in the crowdfunding campaign. The claims about the on-the-spot cash refunds to paint a false picture of the project’s popularity would, if proven true, represent a breach of Kickstarter’s rules and policy.

Those making the allegations said they used their credit cards to pledge US$300 – the retail cost of one unit of the machine – at a party in October 2014, and were immediately granted cash refunds.

“There was a laptop at the door and people were lining up to pay for Arist and then get paid back instantly,” said Kadence Fok, who attended the party in Hong Kong.

“Benson was asking people to pay for it online and [saying] they will give those people back the money in cash or some other form.”

Under Kickstarter rules, creators are not permitted to financially back their own projects or allow any “misrepresentation of support by self-pledging”.

After enjoying success on the same platform, Nbition now offers a crowdfunding consulting service. Its fee is set at 30 per cent of the total funds raised.

Nbition’s Kickstarter campaign almost didn’t make it out of the starting grid. The brakes were applied by administrators after a coffee machine maker in Denmark accused Arist of copying its existing coffee-ordering app.

“We made a copyright infringement claim, which protested that Arist had 100 per cent copied our app design and user experience or app flow,” said Frederik Vibe-Petersen, business development manager for Scanomat.

WATCH: Scanomat’s TopBrewer smartphone coffee experience - a tap and an app

His US$8,000 TopBrewer machine also makes drinks ordered through an app.

“In the end, they changed the design slightly,” he added.

Nelson Chiu contacted Scanomat twice in 2014 - in March and May - and identified himself as a representative of Nbition’s sister company ToSavour, according to Vibe-Petersen.

Chiu proposed becoming TopBrewer’s distributor in Hong Kong and China, Vibe-Petersen said, adding that he was unaware the two companies were linked until he was informed by the Post.

Some Kickstarter backers have questioned the claims made by Nbition about the machine’s capabilities and expected delivery date; others have expressed cynicism as to whether the Chius have registered the correct patents as they claimed.

An update from Nbition in August said it had applied for patents in China, as this was where the machines were being manufactured. However, the application number provided was found to contain 13 digits instead of the usual 12.

Despite assurances from the company that the patent number was correct and would be searchable in the coming months, it has not appeared on the website of China’s State Intellectual Property Office as of the first week of November 2015.

Nbition claims it shipped 1,000 coffee machines to barista testers over the summer of 2014. But two people who left the company in spring 2014 said that when they resigned the focus was very much on its Garffee app and another app for the popular Chinese game mahjong.

Speaking on condition of anonymity, they said they were not aware of any plans by the company to actually develop a coffee machine. At that time, Nbition only had a handful of staff, they said, making it unlikely they would not have heard of such plans.

Others have questioned how the company was able to attract so many testers without launching an affiliated marketing or social media campaign. Nbition only set up Facebook and Twitter accounts in September, but registered a website dedicated to the product back in August 2014.

Meanwhile, the global industry standard to develop smart hardware is 18-24 months, according to industry insiders. But Nbition promised to bring the product to market within a year.

To give an indication of how difficult and time-consuming this process usually is, the Danish coffee machine was in development for four years and was designed by a company with production experience in this industry, according to Vibe-Petersen.