The Irish Sunday Business Post published an article about Steorn yesterday. It’s behind a paywall, so I’ll summarize it here. The short version is: it doesn’t look good.
According to the article, Steorn, which has raised 23 million euros from private investors so far, has told its shareholders that it is “out of cash and facing wind-up unless it raises yet more money.”
Last month, in a letter to shareholders, it told investors that it would be withdrawing from the sale of two consumer products it had launched before Christmas, the no-frills phone called the O-Phone (costing €480) and a USB charger called the O-Cube (costing €1,200).
A large proportion of the shipped products didn’t work, according to correspondence seen by The Sunday Business Post.
In fact, there are no known reports of shipped products that did work. The OPhones given to Steorn’s friends Rachel Wallace and Jennifer Roe were known to have failed, before reports on their progress abruptly ended. The OCube tested by Frank Acland failed, as did the OPhone internals sent to him after that. There were occasional comments left on Steorn’s Facebook page purporting to be from users whose products failed or who asked for a refund. The closest thing to a positive review of a Steorn product came before they began to ship, when Steorn investor Pat Corbett stated that an OCube had charged his phone repeatedly over the course of a month.
The article goes on:
The company admitted in the letter to shareholders that it “has, again, failed to meet the expectations that we have set with investors and we have, again, failed to effectively communicate with our investors”.
Management confessed in the letter that Steorn was “a prospect that has been oversold to its investors. . . based on a naive optimism on time frames for tasks to be completed”.
A more realistic time-frame for creating its battery technology would be seven to ten years from now, it told its investors.
These statements essentially put an end to any hope that Steorn will again attempt to ship a product in the near future, if ever. They concede that Steorn has acted in a way that shows incredible incompetence — developing, producing and even shipping a product before testing it well enough to find out that it is deeply flawed and incapable of working as designed in most, if not all, cases. Claiming that it would take seven to ten years to create the technology they were on the verge of shipping six months ago, seems tantamount to saying that they have nothing. By projecting such a long time frame, they may in effect be asking investors to give up on them and let the company fail. The main question that remains unanswered at this point is whether their behavior truly was driven by staggering ineptitude, or if this is just a cover story for the long con that so many of Steorn’s critics believe they’ve been engaging in all these years.
The article goes on to report that Shaun McCarthy is being replaced as CEO by Kilian McGrath, currently chief executive of Liquid Solutions, the e-cigarette company that Steorn had previously revealed that they were working with on an Orbo powered e-cigarette. McCarthy remains with the company as operations officer.
Steorn has also appointed James Meenan, a former vice president with Merrill Lynch, as their investor liason. McGrath and Meenan are expected to meet with shareholders in an attempt to raise the funds that Steorn will need to survive. This step of hiring someone with high level experience in investment banking seems to me to indicate that, despite the stated 7 to 10 year time frame, they may actually be making an honest attempt to raise more money, rather than giving up.
The article also has some interesting, and equally dispiriting, news about Steorn spin-off company HephaHeat. Last we had heard about them, they were said to have signed contracts worth 25 million euros per year with two of the biggest water heater manufacturers in the world. Now, HephaHeat has told its shareholders that “because of our company size we are challenged by [scarce] capital and human resources” and that it remained “dependent on support from its shareholders for its continued existence.” On a positive note, though down a few pegs from their former 25 million euro glory, HephaHeat “has joined up with Sony and celebrity chef Kevin Dundon to launch a sous vide cooker co-designed by Dundon, built to work in conjunction with an app designed by Sony for use on its Xperia phones. The app was launched at the Taste of Ireland food festival earlier this month.” (See 1, 2, neither of which mention HephaHeat.)
In my view, Steorn has long been a fascinating conundrum. They were either incompetent and deluded, nefarious con artists, or inventors of a revolutionary free energy source. None of these explanations seemed to fit all the facts. In the run up to their attempt to ship the OCube, the biggest reason I allowed myself some hope that they had what they said they had was the amount of confidence and reckless abandon with which they were working to bring it to market. If you see a car zooming toward a brick wall in a public performance, you’ve got to believe they’ve tested this car and know something non-obvious about that wall’s weakness, because the alternative is that they’re suicidal.
Then Steorn hit the metaphorical wall, in a spectacular, fiery blaze. The products that they explained as being so simple and reliable in their videos, the products that they paid to have thousands of Orbo powerpacks produced for and at least dozens of aluminum cases — these products turned out to contain increasingly complex multi-tiered setups involving 9 volt batteries and covered in epoxy goop, and they altogether failed to work. Somehow, Steorn had allowed themselves to spend lavish amounts of money designing, producing, promoting, and beginning to ship products that, it appears, were entirely useless. How could this have happened? It’s either a breathtaking degree of incompetence coupled with naive overconfidence, or outright criminal fraud.
At this point, I’m not closed to the possibility that they have something that works, or produces some unusual effect, but with the level of incompetence we’ve witnessed, I think the chance of that is very slim. More likely they’ve been seeing some sort of effect that through a combination of ignorance and starry-eyed optimism, they just don’t understand yet. It may be that one or more people at Steorn are engaging in fraud, but to my eyes it’s not likely that many of them are; there were just too many signs of them putting in an honest, confident effort in their run-up to launch. There are even some signs that strike me as indicating that Shaun McCarthy isn’t involved in fraud here; for example, the way he was forthright, chatty and casually confident on social media right up until around the time Frank Acland’s tests on his second device started failing. Then he disappeared from all social media, both company and personal. I may be wrong, but I interpret that as a sign that he was suddenly taken by surprise by the vast failure unfolding in front of him.
But these are just speculations, informed by what we’ve seen and by my own biases. In truth we still don’t know what’s going on with Steorn. I wonder if anyone does, even among those who work there. All we can do is continue to wait, and it’s looking more likely than ever that this story approaches its end.
(Edit 7/13/16: A reader pointed out that in the financial services world, the position of vice president is bestowed very liberally. Therefore Steorn’s new investor liason, James Meenan, probably did not hold a senior executive position with Merrill Lynch. His LinkedIn profile indicates that after 20 years with Merrill Lynch, he founded what appears to be a sort of consulting firm for investors. It’s likely in this capacity, rather than as an employee of Steorn, that he will be mediating between Steorn and its investors.)