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Lying in general is a bad idea, but lying to your would-be customers is an especially awful thing to do. That’s the lesson allegedly being learned by Lily Robotics, which, at the end of January, was raided by San Francisco police as part of a potential criminal investigation.

Let’s back up. Why is the SFPD raiding the headquarters of a robotics company? It’s been a long, strange road, but let’s go back to the beginning.

What went wrong?

In 2016, Lily Robotics took more than 60,000 preorders for an upcoming product — preorders valued at more than $34 million. Naturally, these customers expected the product to be delivered within the specified time frame and to work as depicted in the company’s promotional videos.

Lily Drone had generated a wave of positive press because it promised to be a no-nonsense, easy-to-use drone that required little experience with technology and not much effort to set up. The drone was also eagerly anticipated due to a unique feature known as “auto-follow,” which is exactly what it sounds like: You could simply send the drone into the air, and it would follow you autonomously, shooting footage as you go. A small handheld tracker would continue to draw the drone toward you as you went about your activities.

The company also promised rugged construction, even going so far as to claim the drone would be waterproof, which would further set it apart from other commercially available drones. Between the waterproofing claims, auto-follow, and throw-and-go, which would have allowed customers to simply throw Lily Drone into the air to activate it, it was shaping up to be an intriguing product, even in the burgeoning Wild West atmosphere of the drone market.

Unfortunately, with waiting customers growing restless, on Jan. 12, 2017 things finally came to a head. Authorities raided Lily Drone’s San Francisco headquarters in preparation for a criminal investigation, alleging the company had lied to customers, in addition to slipping past the promised delivery date.

Why get police involved?

The story of Lily Drone turns tragic on two fronts. The first was a lack of funding. Despite raising about $34 million by taking preorders, the company was eventually forced to email customers with a notice that their money would be refunded. Manufacturing and shipping a product this complex is expensive, and the company simply ran out of money to do so.

That would have been a familiar story — we’ve all heard of failed startups and wildly successful crowdfunding campaigns that never get an actual product off the ground. However, the company is also accused of directly lying to customers about Lily Drone’s capabilities.

Allegedly, in the promotional video touting the drone’s unique capabilities, the company used footage shot not on Lily Drone prototypes, but on an existing product — a much pricier, camera-equipped drone from an unaffiliated company. The suit brought against Lily Drone alleges the company deliberately misled their customers. Company founders Antoine Balaresque and Henry Bradlow are supposed to have been present at the filming themselves. The two met at UC Berkeley as engineering students.

Moreover, the two were found to have discussed the problem well before the video shoot even took place: Emails had been exchanged between CEO Balaresque and the third-party filmmaker they’d tapped to help make the promotional film. The emails leave little to the imagination. Wrote Balaresque: “I am worried that a lens geek could study our images up close and detect the unique GoPro lens format … I think we should be extremely careful it we decide to lie publicly.”

An exciting concept wasted

When we hear about companies misleading their customers willingly — and take your pick, because this has been a common refrain lately, from Energy Transfer Partners to reportedly, Theranos to Wells Fargo and Volkswagen — it’s a disappointing thing. It’s slightly less common to hear this kind of story from smaller startups, but Lily Drone’s tale nonetheless is a reminder to always be on your guard, whether the company you’re dealing with is large or small.

Had it come to market, Lily Drone would have carried a price tag of between $499 and $899, depending on the type of drone preordered. That might sound like a lot, but it was supposed to be packing some fairly impressive technology on board its compact design.

The implications for the concept were definitely interesting and could have impacted a number of industries far beyond consumer tech. The drone was to be largely autonomous and nearly effortless to pilot, unlike remote control vehicles (RCVs), which require a great deal of training to do something as simple as extend their arms and manipulate objects. But Lily Drone could have followed human counterparts into dangerous surroundings and provided a constant link back to safety, all without a pilot or expensive and time-consuming pilot training.

Eventually, somebody else will get there. Lily Drone may have squandered its chance at delivering this exciting new type of drone technology, but it’s only a matter of time before one of its would-be competitors releases an auto-follow drone of their own to fill this rather distinctive niche.

Editor’s note Feb 14: We’ve updated the story to include a link to the WSJ’s Theranos report.

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