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Jawbone's demise a case of 'death by overfunding'
- paulpauper 9y agosounds like a pretty lame excuse. It failed because the market is saturated, the growth slowed, and the margins are low . It was badly managed company, a poor product, and a bad marketplace. There are many major successful web 2.0 companies are over-funded but didn't fail.
- Analemma_ 9y agoThese aren’t contradictory: all of those problems are harder to notice when you’re overfunded.
- paulpauper 9y agothe business would have likely failed anyway, the only difference being it would not have taken so much money with it
- sulam 9y ago48% margins.
- DustinOfDenver 9y agoI agree... they once had a nice product, but failed to skate to where the puck was going, became a me too company... with no differentiating vision. Go-Pro already pretty far down the same path.
- maxxxxx 9y agoAre there any examples of companies that have taken hundreds of millions in investment that eventually became profitable businesses?
- paulpauper 9y agoIt depends how you define profitable. Many unicorns and tech companies have a lot of debt and funding but are cashflow positive.
- maxxxxx 9y agoWith profitable I mean a company that can sustain itself through its own operations and doesn't need more money to keep going.
- paulpauper 9y agovery few companies can do that. external capital is an essential part of entrepreneurship
- frankydp 9y agoExternal capital(the current VC kind) is not essential to entrepreneurship, it is a tool for defining/researching market capacity more quickly. The catch is that market capacity is something that both investors and entrepreneurs are pretty poor at predicting, especially at scale. That detail can be seen in the difference between lenders and investors, amount wise. In that lenders are more risk averse, generally, with regards to market capacity.
- maxxxxx 9y agoWhat? They may need short term loans but almost every business in the real world funds itself through its own operations. They may take out loans but then they pay them off.
- yellowstuff 9y agoAmazon
- elmar 9y agoAmazon even if you adjust for inflation had very little funding. https://www.crunchbase.com/organization/amazon#/entity https://www.crunchbase.com/organization/amazon#/entity
- pimterry 9y agoA relatively similar story to Pebble too, no? Interesting to see two well-known 'successful' startups implode like this in the same space.
- paulpauper 9y agounless you're apple or tesla, hardware is a really tough business
- andruby 9y agoI think hardware is a tough business, even for apple and tesla.
- jonknee 9y agoTesla is really great at losing money and blowing deadlines, hardware is a tough business no matter who you are.
- paulpauper 9y agobut they are great at raising money and their car business is cashflow positive. Tesla certainly did a lot better than other attempts at electric cars
- onetokeoverthe 9y agoBetter than Leaf or Prius?
- robotresearcher 9y agoWould you rather own a Tesla, Leaf or Prius? Would you rather have bought stock in Tesla, Nissan or Toyota ten years ago?
- bllguo 9y ago
- m777z 9y agoSo, what exactly is the mechanism that makes overfunding lead to a company's failure? I didn't actually find a clear answer to this. The article mentions that less funding would've implied a lower valuation, letting the company get acquired...but then wouldn't the acquiring entity have gotten left with a failing Jawbone anyway?
- JumpCrisscross 9y ago> what exactly is the mechanism that makes overfunding lead to a company's failure It covers up problems until it's too late. Remember Color, the social network that spent like $500,000 on domain names [1]? Now imagine those kinds of decisions being made by every C-level executive. That's Jawbone. Production issues, market-fit issues, et cetera could all be dismissed by management to shareholders and management to themselves on account of the massive, unaccountable cash pile. "Overfunding" means investors shifted too much control to management too early. (By contrast, well-funded teams know they will have to periodically check in with investors for future funding rounds. That motivates explicable behaviour.) [1] https://techcrunch.com/2011/03/24/color-com-was-acquired-for-350000-the-domain-name-that-is/ https://techcrunch.com/2011/03/24/color-com-was-acquired-for...
- ajross 9y agoThe whole point of an acquisition is that the acquirer can realize value from the acquired firm that it couldn't get in the open market (e.g. via synergy with its own offerings, or by denying its competitors access to the technology, or just as an "aquihire" where the team is the thing being acquired and not the product). It's routine to see companies acquired that don't have a stable revenue stream, or even an obvious path to one. Think Google acquiring Android for a good example.
- Brakenshire 9y agoPerhaps the company operates in a market niche which doesn't have that much room for dramatic expansion. They could continue as a smaller, profitable company, but they get investment which expects a higher level of growth. So they try to radically break out of their speciality, but over-extend and go belly up.
- 9y ago
- baybal2 9y agoI believe their failure was that nobody was buying their stuff
- intoverflow2 9y agoIs anyone buying any smartwatch stuff? Wasn't Apple even lumping their Watch sales figures into the "Other" category along with the Apple TV out of embarrassment.
- frankydp 9y agoI had a calculator watch when I was 12-13. It was amazing tech, mind blowingly cool. I wore it for like a month. The utility and usability research for the smartwatch type niche was done in the 80s as far as I am concerned, and it was pretty conclusive. Although trackers are an inherently different tool.
- onetokeoverthe 9y agoLooks like people are smart enough to ask the question, "why PAY to be tracked?".
- virtualized 9y agoI remember the weird company name due to frequent TV ads. I don't remember the product. Only the weird name and the confusion about the unclear product stuck.
- DustinOfDenver 9y agoLove this quote: "They can also be a false signal to investors, who often look at how much money a company has raised as a signal of its success, when "in fact, it's the opposite,"... I think this is definitely true of a physical product company... without a subscription model of some other way to generate MRR.
- deleted 9y ago[deleted]
- mirimir 9y agoOK, so I wasn't paying attention. But back in the day, I recall loving the Jawbone cellphone headset. Especially for noisy and windy environments. Did it just get too greedy?
- cptskippy 9y agoIMO it seems like they just lacked focus and abandoned their core competency to follow trends in markets where they couldn't compete. They started out as a military contractor and pivoted that tech into fantastic bluetooth headsets. From there they went on to make great bluetooth speakers. At some point they acquired a medical devices company and hopped on the fitness tracker bandwagon, it's that point they seemed to have lost their way. After a string of crappy fitness trackers, and completely ignoring their headsets and speakers, they failed.
- mirimir 9y agoSad. So does anyone sell a bone-conduction microphone now? I see bone-conduction headphones, but they seem to come with regular microphones.
- thebiglebrewski 9y agoI completely agree with you. Their bluetooth products were amazing and so well designed with great UX! If they had just stuck with those and continued...the possibilities were endless. Spotify integration out of the box like with Amazon Echo? Whole-house audio solutions? You name it. The Jambox and mini jambox are still the best and only bluetooth based speakers that I own.
- Bartweiss 9y agoThere's something funny about the line "Startup failures are not uncommon, but a billion-dollar company that has raised huge pools of money going belly up remains a rarity." Jawbone raised ~$900 million. It's a bit strange to talk about companies as unicorns when their post valuation is so heavily dependent on other people's money. Like GroupOn and a few others, actually running a business seems to have gone worse than just sitting on the stack of cash would have.
- projectramo 9y agoI don't know if I buy this "explanation" of why they failed, but then I don't have a good explanation. See, even if a company is "over funded", as long as they have operating margins, they can survive forever by cutting overhead and just keep selling the product. This company had inventory. Unless you have debt. The interest payments could sink you. So it wasn't the "overfunding" that was the problem, it was the form of the funding that was the problem. $900 million in equity would have been fine. $400 million in debt was not fine. You see, I am one of the people who think this is the best tracker on the market by far because of its sleep tracking. It was an early, accurate, detailed sleep tracker. It tells you your REM sleep, and I suspect it is dead on. I stock up on the old products on clearance because they don't make them anymore.
- beilabs 9y ago> I stock up on the old products on clearance because they don't make them anymore. I often think about this when a company goes under, especially hardware focused ones. I assume it's only a matter of time that their servers will no longer accepting requests, APIs will no longer function and your device will suddenly become useless. Personally, I feel that this is a perfect use case where open source can shine by liberating locked down devices.
- projectramo 9y agoThat is a great point. One I had buried in my subconscious. I wonder what my options are.
- ghaff 9y agoFor sleep tracking specifically, Apple bought Beddit. It's a strip that you lie on which may be better or worse depending upon your situation than something you wear. I have a review copy I got. It seems to work OK although I don't really get any insights from the data. Fitbit is, of course, another option.
- hboon 9y ago
- onetokeoverthe 9y agoHow about death of the Earth by overfunding? How many social network apps does the world need? This whole structure of VCs is ridiculous. It's just a cover for the ones that are gov sponsored and will win out in the end, anyway. All these VC millions (and billions) could be invested in schools, farming, roads, hospitals, parks, free sauce.
- bcit-cst 9y agomore like death by snu snu. Am I right.
- Overtonwindow 9y agoI still question why Jawbone felt the need to go beyond their core products. The Bluetooth earpiece worked very, very well, and I loved it so much I've lost four of them. Did Jawbone really need to expand into other products?