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The tech community likes to imagine that Pebble would still be going strong if they stuck to their early product vision, but I'm not so sure that would have hel

The tech community likes to imagine that Pebble would still be going strong if they stuck to their early product vision, but I'm not so sure that would have helped: > Sales for our version 2.0 (Pebble Time) in 2015 didn’t hit forecasts and the oversupply in inventory put us into a major cash crunch (targeted ~$100m in sales, we did $82m). That $82m in sales is still 8X higher than their 1st kickstarter sales and 4X higher than the 2nd kickstarter. They actually did ramp up sales and sell a lot, but they built and spent as if they were going to sell even more than they actually did. The unclear half-pivot into different spaces didn't help, but I don't see how they would have done better if they had ignored the fitness space altogether. The market for people who want lo-fidelity hackable wristwatches is going to saturate quickly.

nemothekid 5y ago
That's what I noticed as well. If they had targeted 50M in sales, would they still be around today? I'm not sure what to take away from this except hardware startups are hard - you can make a wildly successful product and get bankrupted because you failed at supply chain management.
- bsder 5y ago
  The problem is that $50M in sales is only about 500K units. That's the consumer electronics Valley of Death. You have enough units to get all the downsides of volume but not enough units to get the discounts of volume. Electronics volume discounts really don't kick in until about 1M units. So, it looks like Pebble stretched for the 1M mark, fell short, and died. It's honestly hard to see what they should have done instead. Scaling organically in consumer electronics from 100K to 1M is just absolute murder.
  - erohead 5y ago
    naw that's not true. The valley of death is >1k units but <10k. Not enough money to pay back your hw tooling. There are no real discounts in volume for consumer electronics. Just look at the supply chain crunch, sometimes it's actually harder to buy components in bulk and you end up dual sourcing chips just to meet demand.
    - bsder 5y ago
      Tooling for injected plastic crosses over somewhere about 50K units. Before that you have to think hard about whether you can use advanced 3D printing to get where you need to go. > There are no real discounts in volume for consumer electronics. My FAEs and sales reps beg to disagree even in this mess. The first useful discount on microcontrollers I can get hold of generally starts at about 250K units annually (generally that's the first point where I can even get manufacturer attention--and even that's not great) and normally increases until about 1M units annually. The discounts increase from 1M to 10M annually but very slowly. > Just look at the supply chain crunch, sometimes it's actually harder to buy components in bulk and you end up dual sourcing chips just to meet demand. Right now is very different from when Pebble was producing product. Right now, I've actually had pricing revoked on me. However, that is not normal behavior in the semiconductor business.
rtpg 5y ago
honestly my impression even at the time before the sale was that Pebble hired _loads_ of people. I honestly think that there was an alternate universe where they slowed down, paid people "normal" salaries, really tried to not scale up... I dunno. They had a perfect spot in the market where they could rely on older tech, but every company wants to become the biggest company controlling everything all the time. There are companies that survive without having 100% of the market share in something, or even 20%. Selling products at retail are hard and you have way thinner margins in theory. But it felt like there was a sweet spot they could have stayed in for a long time
- twobitshifter 5y ago
  Yes, the article identified the scaling issue. Since they received minimal VC they were perfectly positioned for “organic growth”, but being part of YC, may have led them to follow the pack and try to hire their way into 10x growth. The original model was made in a garage and then they took on a large staff which burdened the company to produce a higher volume of products. They could have chased more VC money or debt to keep the lights on, but facing up against the Apple Watch behemoth isn’t such an attractive proposition.

nemothekid 5y ago

That's what I noticed as well. If they had targeted 50M in sales, would they still be around today? I'm not sure what to take away from this except hardware startups are hard - you can make a wildly successful product and get bankrupted because you failed at supply chain management.

bsder 5y ago
The problem is that $50M in sales is only about 500K units. That's the consumer electronics Valley of Death. You have enough units to get all the downsides of volume but not enough units to get the discounts of volume. Electronics volume discounts really don't kick in until about 1M units. So, it looks like Pebble stretched for the 1M mark, fell short, and died. It's honestly hard to see what they should have done instead. Scaling organically in consumer electronics from 100K to 1M is just absolute murder.
- erohead 5y ago
  naw that's not true. The valley of death is >1k units but <10k. Not enough money to pay back your hw tooling. There are no real discounts in volume for consumer electronics. Just look at the supply chain crunch, sometimes it's actually harder to buy components in bulk and you end up dual sourcing chips just to meet demand.
  - bsder 5y ago
    Tooling for injected plastic crosses over somewhere about 50K units. Before that you have to think hard about whether you can use advanced 3D printing to get where you need to go. > There are no real discounts in volume for consumer electronics. My FAEs and sales reps beg to disagree even in this mess. The first useful discount on microcontrollers I can get hold of generally starts at about 250K units annually (generally that's the first point where I can even get manufacturer attention--and even that's not great) and normally increases until about 1M units annually. The discounts increase from 1M to 10M annually but very slowly. > Just look at the supply chain crunch, sometimes it's actually harder to buy components in bulk and you end up dual sourcing chips just to meet demand. Right now is very different from when Pebble was producing product. Right now, I've actually had pricing revoked on me. However, that is not normal behavior in the semiconductor business.

rtpg 5y ago

honestly my impression even at the time before the sale was that Pebble hired _loads_ of people. I honestly think that there was an alternate universe where they slowed down, paid people "normal" salaries, really tried to not scale up... I dunno. They had a perfect spot in the market where they could rely on older tech, but every company wants to become the biggest company controlling everything all the time. There are companies that survive without having 100% of the market share in something, or even 20%. Selling products at retail are hard and you have way thinner margins in theory. But it felt like there was a sweet spot they could have stayed in for a long time

twobitshifter 5y ago
Yes, the article identified the scaling issue. Since they received minimal VC they were perfectly positioned for “organic growth”, but being part of YC, may have led them to follow the pack and try to hire their way into 10x growth. The original model was made in a garage and then they took on a large staff which burdened the company to produce a higher volume of products. They could have chased more VC money or debt to keep the lights on, but facing up against the Apple Watch behemoth isn’t such an attractive proposition.