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If I understand the sequence of events properly, the company entered acquisition negotiations and agreed not to solicit other bids during that time. When the ac

If I understand the sequence of events properly, the company entered acquisition negotiations and agreed not to solicit other bids during that time. When the acquisition fell apart, the company was out of money and had to stop operations. If that's correct, it seems to me like it's something they should have known in advance -- if they knew they would be out of money by the end of the year, why would they enter acquisition talks that were planned to last until then? Either they didn't know when they would run out of money, which is a pretty important thing to know about a startup company, or they decided to bet the company on the assumption that the acquisition would not fail, which was very irresponsible. An employee named Ben Havilland wrote a comment on the article that's worth reading.

mcny 9y ago
Thank you for pointing this out. For those reading, an archive now exists https://archive.fo/CJF9r https://archive.fo/CJF9r the original comment is at https://medium.com/@ben_73928/as-one-of-the-team-members-let-go-i-dont-share-the-same-gratitude-posted-by-some-of-the-team-4029737df4ea https://medium.com/@ben_73928/as-one-of-the-team-members-let...
- brucephillips 9y ago
  > CEO and investment team ignored the negative aspects of the $700 lock and didn’t see that the competition would be able to provide the same features (and more) at less than 1/2 the price. If Ben realized this, he should have never worked at this company in the first place. It sounds like it was a failure of a product strategy.
  - jjoonathan 9y ago
    A $700 lock is a product offering, not a product strategy. A strategy could have been "start with a $700 offering at the top of the market and work down," but that's not something they tell you on the way in, and even if they do, it's no guarantee that the execution will/won't work.
    - brucephillips 9y ago
      Whether you want to call it an offering or a strategy, Ben doesn't claim that the failure was due to any aspect of the business model other than a) price, and b) competitive risk. Both of these were risks that existed (I assume) at the time he joined the company. So he can't blame management for failing to assess these risks any more than he can blame himself.
    - wdewind 9y ago
      > A strategy could have been "start with a $700 offering at the top of the market and work down," but that's not something they tell you on the way in This is absolutely the kind of thing you should be asking about and they should be telling you on the way in. As an early stage startup employee you are basically an investor. You should deeply understand how the businesses you are joining are going to work, and if they wont tell you you should consider it a red flag.
      - bronson 9y ago
        I have been lied to on the way in. You hear about all this incredible stuff coming down the pipe that just needs a little more work. After a few months you figure out that that cashflow was 1/10th of what was implied and the pipe is dry.
- danso 9y ago
  Some tweets from Christmas Day : https://mobile.twitter.com/clickyspinny/status/945178843890851840 https://mobile.twitter.com/clickyspinny/status/9451788438908... > @joshelman do something. Help us. Two days notice before a holiday with no compensation for the fact that not a soul hires during these weeks. You have the $ to pay severance when you terminate 70 people. So you decided on letting us all get screwed. You need to help us.
  - ams6110 9y ago
    Okay, there's possibly some reason for sympathy here. But how much were these 70 people being paid? How much did they save? How many of them could have been in a position to have a month or more of cash saved as an emergency fund? It's smart in any situation to save for a rainy day but especially so when you're working for a startup.
    - brucephillips 9y ago
      It's unlikely any of the employees are truly broke, they're just (rightfully) complaining about not getting a reasonable severance.
      - sillysaurus3 9y ago
        It's likely that several of these employees are legitimately broke (for reasons beyond their control, not because they're bad at adulting), but they conceal it. Signs of weakness harm your negotiating position.
        brucephillips 9y ago
        Honest question: What normal circumstances would lead to anyone making six figures being broke that doesn't involve bad adulting?
        deleted 9y ago
        [deleted]
taway20171214 9y ago
people only get backed into corners (i.e., exclusivity, compelled actions, or some kind of limitation on funding, bad pricing) when they're desperate. protip: never be desperate. easier said than done, sort of like "eliminate refined carbs from your diet" or "save enough for retirement" or "stop looking for love in all the wrong places"
- mark-r 9y ago
  The post didn't say this directly, but it could be that they had no other options. He said that they had started fundraising efforts and were resistant to an acquisition - reading between the lines, their attempts for another round of funding were shot down cold.
ricardobeat 9y ago
Those were exactly my thoughts upon reading it. “Four weeks from generating revenue” and then sudden death because of a failed acquisition sounds like awful planning for a well-funded startup. Also, it’s a damn internet-connected door lock with Bluetooth. Do you really need $45M and designing new mechanical systems from scratch to make it work? I’m sure their team did amazing work but all of it sounds incredibly head-in-the-clouds.
- coldtea 9y ago
  >Also, it’s a damn internet-connected door lock with Bluetooth. Do you really need $45M and designing new mechanical systems from scratch to make it work? If you don't intend on making just a "damn internet-connected door lock with Bluetooth", of which there are many, but a great one, then very possibly yes.
  - zemvpferreira 9y ago
    Many great hardware products and companies have been built on budgets a fraction of $45M. Even the Apple 1 was an ugly hodge-podge of parts. If you want to build pyramids, it's best figure out how to build sand castles before.
    - deleted 9y ago
      [deleted]
  - ryanbrunner 9y ago
    The thing is, the definition of a great product is one that solves a user's need. While people may have problems with the internet-connected door locks they have now, I'm pretty confident their issue isn't with the deadbolt mechanism, which is as close to a solved problem as you can get. The market for people who care that their door locking mechanism is as precise as a Swiss watch is so vanishingly small, it feels almost self-evident that there's not a viable business there.
- twblalock 9y ago
  It reminds me of Juicero. The mechanism was total overkill -- it was actually very well engineered and machined as though cost was no object. They would have taken a loss selling them even at $699. The mechanism of a deadbolt is pretty simple. Other smart lock companies do fine with simple mechanisms. The way to differentiate a product in that space is ease of use and battery life, not by needlessly over-complicating a part that the users won't see.
greenleafjacob 9y ago
I wonder what, if anything, the agreement to proscribe other fundraising was traded for? Why would the management enter that deal without something in return (i.e. a cancellation penalty payment)? It seems negligent at best.
bambax 9y ago
Yes. Also, the video about the product https://www.youtube.com/watch?v=UsT5xvoaHBo https://www.youtube.com/watch?v=UsT5xvoaHBo was kind of disturbing, talking about "those we love". To the people you love, you don't send a code or some app or procedure. You greet them at the door. If you need to send people a code to enter your property, you're not loving them, you're running a business. Which is fine -- just don't pretend it has anything to do with "love". Or if you truly love everyone... then you don't need a lock.
- Casseres 9y ago
  Love ≠ Trust For example if I love a junkie, I wouldn't want to enable that person to easily enter my house to steal something to pawn for drugs.
  - bambax 9y ago
    Love == Trust -- or we really disagree about love, so much in fact, we might as well use different words.
    - 35bge57dtjku 9y ago
      That might be why there are 2 different words for those 2 things.
    - anonfunction 9y ago
      That’s an interesting definition of love. May I ask if you have kids? For me, love is multi-faceted and can’t be defined as a single attribute like trust. People love food that literally kills them. You don’t always get to choose whom or what you love.
      - bambax 9y ago
        > May I ask if you have kids? Yes you may. I have 3 (8-9-12). I don't "trust" them to not eat candy that I said they shouldn't eat, but I do trust them not to kill me in my sleep -- which is what trust is about (IMHO). In fact I think I trust them more than I love them, and I love them a lot. But sometimes I'm upset with them. Being upset or angry doesn't affect trust. Trust is a kind of binary quality that is either on or off; it may be too strong to say that love == trust, but I really can't imagine how I could love someone without trusting them.
adamweld 9y ago
From the blog post: >I define startups as companies that don’t have control of their own destiny because they rely on investor cash infusions to operate. When asked, “How’s business?”, I always replied “I don’t have a business yet, we’re still a startup.” I despise this definition. I have grown my hardware startup sustainably while pursuing an engineering degree and maintaining full control of the company. I may soon look for VC funding, I may continue to use revenues and personal savings, but nothing will change my responsibility for my business' future. The fact that you've had money invested into your startup means you have increased control of your destiny, not the opposite. Use that money shrewdly and build a product people want, and you will succeed. That Otto was able to burn through $45 Million in funding without shipping a product makes me believe that poor management and product strategy is behind their failure, not bad luck as the article would ask you to believe.
- dfcowell 9y ago
  Why is what you have not a "small business?" Is that phrase just not sexy enough? Being a stable bootstrapped small business is more worthy of respect than being an unstable underfunded startup, in my opinion.
  - rickycook 9y ago
    certainly more respect than an unstable, overfunded startup too!
  - adamweld 9y ago
    Late response, but I often times do use the term small business when talking to people about it. But it's also a startup, which is why I responded so strongly to that bit of the blog post.
- ClassyJacket 9y ago
  > I have grown my hardware startup sustainably while pursuing an engineering degree and maintaining full control of the company. Can I ask how you had time? And what was your source of income and funding while you were doing that? And engineering degree alone is a huge workload, no?
_aarti 9y ago
The employee never worked on the actual product. He joined as a contractor 1 month before launch to work in the IT department on the website. He had been with the company only 3 months. So, I disagree with his comments about the product. His points about management should be taken into consideration. The shutdown was mismanaged. The core engineering team had folks with 3+ years working on Mechanical, Electrical, Firmware, iOS, Android and Backend engineering. This was not an easy feat to pull given the small team and that the manufacturing was in China on the same lines that build Apple's iPhone with the same level of quality.
- twblalock 9y ago
  So what if he wasn’t there the entire time? Why are you trying to attack his credibility?
  - _aarti 9y ago
    I mean - think about, would you listen to someone who had given 3+ years of blood/sweat to a company and product vs 3 months. The shutdown was mishandled, we all felt the pain. Most of all the contractors and I wish I could pay them. I would if I had the money. But I am also looking for a job.
    - twblalock 9y ago
      > I mean - think about, would you listen to someone who had given 3+ years of blood/sweat to a company and product vs 3 months. I think both people would be worth listening to. The one who was there for three months would probably have a very different perspective on the corporate culture and management, by virtue of not having worked there long enough for those things to seem normal. This is the same reason some companies get value from bringing in outside consultants -- their different perspective enables them to recognize aspects of the business that have not occurred to the long-term insiders.
      - _aarti 9y ago
        Right, and I would agree with you - we had outside consultants who worked alongside us, in iOS, in Firmware, in Cloud, in EE, in Security. We all worked as a team to put the last finishes on the product. Also, there were a lot of new employees as well. The whole SW QA team was hired this year. We did not know about insolvency - no one did - except the leadership team, or many would have raised concerns or left. Maybe this was the fear. Who wants to acquire a company where people are jumping ship. We wanted the product in people's hands. Heck, it's on my door at home. I also would say that this employee has the right air his grievances. I disagree with his criticism of the product and the company's mission and vision. I believe - there was no malice. There was mismanagement.
mathattack 9y ago
Our signed agreement restricted our ability to solicit other bids or fundraise and targeted a close on December 11th, 2017. Indeed, that was just poor management. Did they have a board that accepted that too? It seems like having a sole bidder is the single worst way to get a good price. You only do that if there's no other choice. Sam was a general partner at Mohr Davidow, and a Managing Director at Internet Capital Group. He was a 12 year early employee at Microsoft. He had to know better.

mcny 9y ago

Thank you for pointing this out. For those reading, an archive now exists https://archive.fo/CJF9r https://archive.fo/CJF9r the original comment is at https://medium.com/@ben_73928/as-one-of-the-team-members-let-go-i-dont-share-the-same-gratitude-posted-by-some-of-the-team-4029737df4ea https://medium.com/@ben_73928/as-one-of-the-team-members-let...

brucephillips 9y ago
> CEO and investment team ignored the negative aspects of the $700 lock and didn’t see that the competition would be able to provide the same features (and more) at less than 1/2 the price. If Ben realized this, he should have never worked at this company in the first place. It sounds like it was a failure of a product strategy.
- jjoonathan 9y ago
  A $700 lock is a product offering, not a product strategy. A strategy could have been "start with a $700 offering at the top of the market and work down," but that's not something they tell you on the way in, and even if they do, it's no guarantee that the execution will/won't work.
  - brucephillips 9y ago
    Whether you want to call it an offering or a strategy, Ben doesn't claim that the failure was due to any aspect of the business model other than a) price, and b) competitive risk. Both of these were risks that existed (I assume) at the time he joined the company. So he can't blame management for failing to assess these risks any more than he can blame himself.
  - wdewind 9y ago
    > A strategy could have been "start with a $700 offering at the top of the market and work down," but that's not something they tell you on the way in This is absolutely the kind of thing you should be asking about and they should be telling you on the way in. As an early stage startup employee you are basically an investor. You should deeply understand how the businesses you are joining are going to work, and if they wont tell you you should consider it a red flag.
    - bronson 9y ago
      I have been lied to on the way in. You hear about all this incredible stuff coming down the pipe that just needs a little more work. After a few months you figure out that that cashflow was 1/10th of what was implied and the pipe is dry.
danso 9y ago
Some tweets from Christmas Day : https://mobile.twitter.com/clickyspinny/status/945178843890851840 https://mobile.twitter.com/clickyspinny/status/9451788438908... > @joshelman do something. Help us. Two days notice before a holiday with no compensation for the fact that not a soul hires during these weeks. You have the $ to pay severance when you terminate 70 people. So you decided on letting us all get screwed. You need to help us.
- ams6110 9y ago
  Okay, there's possibly some reason for sympathy here. But how much were these 70 people being paid? How much did they save? How many of them could have been in a position to have a month or more of cash saved as an emergency fund? It's smart in any situation to save for a rainy day but especially so when you're working for a startup.
  - brucephillips 9y ago
    It's unlikely any of the employees are truly broke, they're just (rightfully) complaining about not getting a reasonable severance.
    - sillysaurus3 9y ago
      It's likely that several of these employees are legitimately broke (for reasons beyond their control, not because they're bad at adulting), but they conceal it. Signs of weakness harm your negotiating position.
      - brucephillips 9y ago
        Honest question: What normal circumstances would lead to anyone making six figures being broke that doesn't involve bad adulting?
        deleted 9y ago
        [deleted]

taway20171214 9y ago

people only get backed into corners (i.e., exclusivity, compelled actions, or some kind of limitation on funding, bad pricing) when they're desperate. protip: never be desperate. easier said than done, sort of like "eliminate refined carbs from your diet" or "save enough for retirement" or "stop looking for love in all the wrong places"

mark-r 9y ago
The post didn't say this directly, but it could be that they had no other options. He said that they had started fundraising efforts and were resistant to an acquisition - reading between the lines, their attempts for another round of funding were shot down cold.

ricardobeat 9y ago

Those were exactly my thoughts upon reading it. “Four weeks from generating revenue” and then sudden death because of a failed acquisition sounds like awful planning for a well-funded startup. Also, it’s a damn internet-connected door lock with Bluetooth. Do you really need $45M and designing new mechanical systems from scratch to make it work? I’m sure their team did amazing work but all of it sounds incredibly head-in-the-clouds.

coldtea 9y ago
>Also, it’s a damn internet-connected door lock with Bluetooth. Do you really need $45M and designing new mechanical systems from scratch to make it work? If you don't intend on making just a "damn internet-connected door lock with Bluetooth", of which there are many, but a great one, then very possibly yes.
- zemvpferreira 9y ago
  Many great hardware products and companies have been built on budgets a fraction of $45M. Even the Apple 1 was an ugly hodge-podge of parts. If you want to build pyramids, it's best figure out how to build sand castles before.
  - deleted 9y ago
    [deleted]
- ryanbrunner 9y ago
  The thing is, the definition of a great product is one that solves a user's need. While people may have problems with the internet-connected door locks they have now, I'm pretty confident their issue isn't with the deadbolt mechanism, which is as close to a solved problem as you can get. The market for people who care that their door locking mechanism is as precise as a Swiss watch is so vanishingly small, it feels almost self-evident that there's not a viable business there.
twblalock 9y ago
It reminds me of Juicero. The mechanism was total overkill -- it was actually very well engineered and machined as though cost was no object. They would have taken a loss selling them even at $699. The mechanism of a deadbolt is pretty simple. Other smart lock companies do fine with simple mechanisms. The way to differentiate a product in that space is ease of use and battery life, not by needlessly over-complicating a part that the users won't see.

greenleafjacob 9y ago

I wonder what, if anything, the agreement to proscribe other fundraising was traded for? Why would the management enter that deal without something in return (i.e. a cancellation penalty payment)? It seems negligent at best.

bambax 9y ago

Yes. Also, the video about the product https://www.youtube.com/watch?v=UsT5xvoaHBo https://www.youtube.com/watch?v=UsT5xvoaHBo was kind of disturbing, talking about "those we love". To the people you love, you don't send a code or some app or procedure. You greet them at the door. If you need to send people a code to enter your property, you're not loving them, you're running a business. Which is fine -- just don't pretend it has anything to do with "love". Or if you truly love everyone... then you don't need a lock.

Casseres 9y ago
Love ≠ Trust For example if I love a junkie, I wouldn't want to enable that person to easily enter my house to steal something to pawn for drugs.
- bambax 9y ago
  Love == Trust -- or we really disagree about love, so much in fact, we might as well use different words.
  - 35bge57dtjku 9y ago
    That might be why there are 2 different words for those 2 things.
  - anonfunction 9y ago
    That’s an interesting definition of love. May I ask if you have kids? For me, love is multi-faceted and can’t be defined as a single attribute like trust. People love food that literally kills them. You don’t always get to choose whom or what you love.
    - bambax 9y ago
      > May I ask if you have kids? Yes you may. I have 3 (8-9-12). I don't "trust" them to not eat candy that I said they shouldn't eat, but I do trust them not to kill me in my sleep -- which is what trust is about (IMHO). In fact I think I trust them more than I love them, and I love them a lot. But sometimes I'm upset with them. Being upset or angry doesn't affect trust. Trust is a kind of binary quality that is either on or off; it may be too strong to say that love == trust, but I really can't imagine how I could love someone without trusting them.

adamweld 9y ago

From the blog post: >I define startups as companies that don’t have control of their own destiny because they rely on investor cash infusions to operate. When asked, “How’s business?”, I always replied “I don’t have a business yet, we’re still a startup.” I despise this definition. I have grown my hardware startup sustainably while pursuing an engineering degree and maintaining full control of the company. I may soon look for VC funding, I may continue to use revenues and personal savings, but nothing will change my responsibility for my business' future. The fact that you've had money invested into your startup means you have increased control of your destiny, not the opposite. Use that money shrewdly and build a product people want, and you will succeed. That Otto was able to burn through $45 Million in funding without shipping a product makes me believe that poor management and product strategy is behind their failure, not bad luck as the article would ask you to believe.

dfcowell 9y ago
Why is what you have not a "small business?" Is that phrase just not sexy enough? Being a stable bootstrapped small business is more worthy of respect than being an unstable underfunded startup, in my opinion.
- rickycook 9y ago
  certainly more respect than an unstable, overfunded startup too!
- adamweld 9y ago
  Late response, but I often times do use the term small business when talking to people about it. But it's also a startup, which is why I responded so strongly to that bit of the blog post.
ClassyJacket 9y ago
> I have grown my hardware startup sustainably while pursuing an engineering degree and maintaining full control of the company. Can I ask how you had time? And what was your source of income and funding while you were doing that? And engineering degree alone is a huge workload, no?

_aarti 9y ago

The employee never worked on the actual product. He joined as a contractor 1 month before launch to work in the IT department on the website. He had been with the company only 3 months. So, I disagree with his comments about the product. His points about management should be taken into consideration. The shutdown was mismanaged. The core engineering team had folks with 3+ years working on Mechanical, Electrical, Firmware, iOS, Android and Backend engineering. This was not an easy feat to pull given the small team and that the manufacturing was in China on the same lines that build Apple's iPhone with the same level of quality.

twblalock 9y ago
So what if he wasn’t there the entire time? Why are you trying to attack his credibility?
- _aarti 9y ago
  I mean - think about, would you listen to someone who had given 3+ years of blood/sweat to a company and product vs 3 months. The shutdown was mishandled, we all felt the pain. Most of all the contractors and I wish I could pay them. I would if I had the money. But I am also looking for a job.
  - twblalock 9y ago
    > I mean - think about, would you listen to someone who had given 3+ years of blood/sweat to a company and product vs 3 months. I think both people would be worth listening to. The one who was there for three months would probably have a very different perspective on the corporate culture and management, by virtue of not having worked there long enough for those things to seem normal. This is the same reason some companies get value from bringing in outside consultants -- their different perspective enables them to recognize aspects of the business that have not occurred to the long-term insiders.
    - _aarti 9y ago
      Right, and I would agree with you - we had outside consultants who worked alongside us, in iOS, in Firmware, in Cloud, in EE, in Security. We all worked as a team to put the last finishes on the product. Also, there were a lot of new employees as well. The whole SW QA team was hired this year. We did not know about insolvency - no one did - except the leadership team, or many would have raised concerns or left. Maybe this was the fear. Who wants to acquire a company where people are jumping ship. We wanted the product in people's hands. Heck, it's on my door at home. I also would say that this employee has the right air his grievances. I disagree with his criticism of the product and the company's mission and vision. I believe - there was no malice. There was mismanagement.

mathattack 9y ago

Our signed agreement restricted our ability to solicit other bids or fundraise and targeted a close on December 11th, 2017. Indeed, that was just poor management. Did they have a board that accepted that too? It seems like having a sole bidder is the single worst way to get a good price. You only do that if there's no other choice. Sam was a general partner at Mohr Davidow, and a Managing Director at Internet Capital Group. He was a 12 year early employee at Microsoft. He had to know better.