
Jawbone's demise a case of 'death by overfunding' - randomerr
http://www.reuters.com/article/us-jawbone-failure-idUSKBN19V0BS
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projectramo
I 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
> 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
That is a great point.

One I had buried in my subconscious. I wonder what my options are.

~~~
ghaff
For 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
Based on a sample size of 2, I was pretty sure that among FitBit, Jawbone,
Misfit and Health mate (remember them?), Jawbone UPs provided the most
accurate sleep tracking.

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m777z
So, 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?

~~~
michaelbuckbee
To make a bad baseball analogy: VC is like trying to step up to bat, swinging
at every pitch and only considering it a success if you hit a grand slam
homerun.

If they'd taken less money, maybe they could have gone after a smaller (but
more profitable) niche. Maybe they wouldn't have aggressively hired sales
teams in as many countries across the globe.

Look at something like the VR/AR space - right now there's a firm upper limit
to the number of potential buyers in that space. So, you have this whole
sector where things got overfunded and _weird_.

Like what do you do when you've got $100mil in funding. VCs are expecting a
Billion dollar exit. You've made a great product, but the timing is still too
soon? That the whole industry needs 5 more years to mature?

------
Bartweiss
There'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.

------
pimterry
A relatively similar story to Pebble too, no? Interesting to see two well-
known 'successful' startups implode like this in the same space.

~~~
paulpauper
unless you're apple or tesla, hardware is a really tough business

~~~
jonknee
Tesla is really great at losing money and blowing deadlines, hardware is a
tough business no matter who you are.

~~~
paulpauper
but 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
Better than Leaf or Prius?

~~~
robotresearcher
Would you rather own a Tesla, Leaf or Prius?

Would you rather have bought stock in Tesla, Nissan or Toyota ten years ago?

~~~
bllguo
Silly comparison? So a Camry is not a successful car because people would
rather own BMWs? Do you not realize Tesla has been intentionally making high-
end, luxury vehicles, which are more desirable by nature?

Leafs and Priuses are only part of Nissan and Toyota, their stock obviously
cannot fully reflect the success of those vehicles. And Tesla's stock is
notoriously overvalued.

~~~
robotresearcher
You are misreading my comment. I didn't claim anything negative about Leaf or
Prius. The Tesla S is an absolutely better car than Leaf or Prius. And since
it costs much more, it should be. If we weight for price, that depends on your
price sensitivity.

~~~
jonknee
You are missing the point, all things equal of course people will want the
vastly more expensive luxury product. That has nothing to do with how good
Tesla is at making things. Regardless of the appeal of the Model S, Toyota is
much better at making cars in volume than Tesla.

Similarly, I'd rather have a McLaren than Tesla (or Toyota), but that doesn't
speak anything about the talents of either firm at mass producing cars.

~~~
robotresearcher
This thread is a response to:

> Tesla certainly did a lot better than other attempts at electric cars

You have decided that that claim hinges on their ability to mass produce cars.

I think Tesla has done more for the electric car market than any of the other
companies. I can't justify that with data, but I think it's a reasonable
position. We have different points. I'm not missing yours.

------
mirimir
OK, 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
IMO 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
Sad. So does anyone sell a bone-conduction microphone now? I see bone-
conduction headphones, but they seem to come with regular microphones.

~~~
anindha
The Apple AirPods

~~~
mirimir
Do they have bone-conduction mics?

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DustinOfDenver
Love 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.

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Overtonwindow
I 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?

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maxxxxx
Are there any examples of companies that have taken hundreds of millions in
investment that eventually became profitable businesses?

~~~
paulpauper
It depends how you define profitable. Many unicorns and tech companies have a
lot of debt and funding but are cashflow positive.

~~~
maxxxxx
With profitable I mean a company that can sustain itself through its own
operations and doesn't need more money to keep going.

~~~
paulpauper
very few companies can do that. external capital is an essential part of
entrepreneurship

~~~
frankydp
External 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.

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paulpauper
sounds 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_
These aren’t contradictory: all of those problems are harder to notice when
you’re overfunded.

~~~
paulpauper
the business would have likely failed anyway, the only difference being it
would not have taken so much money with it

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baybal2
I believe their failure was that nobody was buying their stuff

~~~
intoverflow2
Is 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
I 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
Looks like people are smart enough to ask the question, "why PAY to be
tracked?".

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onetokeoverthe
How 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.

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bcit-cst
more like death by snu snu. Am I right.

