Light Harmonic, LH Labs, & Indiegogo

Jon Iverson reports elsewhere on Light Harmonic's cost-no-object Sire DAC. But the bigger buzz at the 2014 CES was the LH Labs Geek Pulse, a desktop DAC and headphone amplifier. Except that this product does not yet exist!

LH Labs is a subsidiary of Light Harmonic, formed to produce affordable digital products with the help of crowdfunding sites. Stephen Mejias reported on LH Labs' collaboration with Kickstarter in the January issue's "As We See It" and "Entry Level" columns, which produced the $249 Geek Out USB DAC, which made its debut at CES. But for the Geek Pulse, LH Labs collaborated with Indiegogo to raise more than $1.1 million by the time the funding ended on December 27, 2013.

At a 7:30am press conference the first morning of the show, titled "How Indiegogo Will Help Save an Old Dying Industry," LH Lab's Gavin Fish (left), introduced a panel of, from left to right) Light Harmonic's Larry Ho, Hardware Marketing Director for Indiegogo, Kate Drane, HeadFi's Jude Mansilla, and Cookie Marenco of Blue Coast Records. All were enthused by the idea of the social network aspects of crowdfunding, which was realized by the Geek Force forum for funders. The Geek Pulse will be a "consumer-designed product," said Fish, with LH Labs benefiting by being able to bring to market a product that is not only pre-sold but will have exactly the features its owners find most desirable.

Unlike KickStarter, where the company being funded doesn't receive a dollar until the goal is reached, with Indiegogo the donors' credit cards are charged and the money credited to the company when they make the pledge, regardless of the goal. LH Labs will therefore have the use of that $1.1m until they start shipping the Geek Pulse.

"So what?" you might ask. But this is a huge benefit to LH Labs. I was reminded of the UK's Luncheon Vouchers. These are vouchers given to employees of other companies that they can use to purchase meals. The employer pays face value for each voucher that are then redeemed by the employee for the same amount. How, then, does the Luncheon Vouchers company make any money? Because there is a delay of days or even weeks between the vouchers being purchased and redeemed, LV has the use of that money for that time, which can generate a significant return from short-term investments.

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COMMENTS
Robert Deutsch's picture

I love this picture!  It looks like the future of audio.

VandyMan's picture

Your claim that LH will make significant returns on the 1.1 million is not well thought out. First of all, they have to purchase parts, case work, etc to build some 6,000 DACs that they pre-sold. They also have to pay for design, labor, testing, and more. All of these expenses will be incurred before the first DAC ships. Secondly, they can not responsibly invest this money in anything risky. If they lose the capital, they would not have the money to deliver and might well be guilty of fraud. Iif you know how to make good returns off a short-term safe investment, you are in the wrong field. :-)

LH will make a few percent at very best. While that is nothing to sneeze at, it would not buy them a single one of their Davinci DACs, let alone the new model.

John Atkinson's picture

VandyMan wrote:
LH will make a few percent at very best. While that is nothing to sneeze at, it would not buy them a single one of their Davinci DACs, let alone the new model.

My point was that whereas a typical audio company "grows out of its checkbook," ie, the investment in parts, tooling, R&D, etc, that you mentioned, is funded out of current revenue, LH Labs is getting their use of the funds not just for free but actually as a an extra source of income. In the limit - and I am not making any comment about LH Labs here - a company that funds its new product through crowdsourcing could decide after, say, 6 months, that the venture isn't viable. Even though they will return the funds to all the investors, they've had the use of that money, and the associated income, for the same 6 months.

John Atkinson

Editor, Stereophile

PS: Apologies for the slowness of our website the past 2 days. At times, the server is operating at a snail's pace because our site is being hammered by spambots.

VandyMan's picture

. In the limit - and I am not making any comment about LH Labs here - a company that funds its new product through crowdsourcing could decide after, say, 6 months, that the venture isn't viable. Even though they will return the funds to all the investors, they've had the use of that money, and the associated income, for the same 6 months

 

How is that different from a company that just takes pre-orders? The economics are the same and the results (company out of business most likely) would be the same.

corrective_unconscious's picture

If it's not viable they return the money? I guess it's not like a company just taking out a loan because they wouldn't return with interest...and because there's really less of a certainty of repayment in such an eventuality.

But it's really like a company taking out a loan otherwise, just completely unsecured. Oh well, the donors have their eyes open. Everyone on the internetz always does....

Bill Leebens's picture

That's not quite how Kickstarter and Indiegogo work, when it comes to paying out.

Kickstarter requires both that the goal is reached, and the project is closed. So, even if a project reaches its goal in its first day, nothing pays out to the project until it closes.

Indiegogo does NOT pay the project immediately, under any circumstances. The goal must be met--and whether that's on the 1st day or the 60th of a campaign, then and only then are funds made available to the project. But unlike Kickstarter, the campaign does not have to have come to an end before funds are available to the project.

There's no free lunch with either Kickstarter or Indiegogo.

John Atkinson's picture

Bill Leebens wrote:
Indiegogo does NOT pay the project immediately, under any circumstances. The goal must be met--and whether that's on the 1st day or the 60th of a campaign, then and only then are funds made available to the project.

My comment to the contrary was based on the answer to a question I put to Indiegogo's Kate Drane at the press conference. She was unequivocal.

John Atkinson

Editor, Stereophile

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