Jawbone, another unicorn washed away

And Noah looked out through the driving rain, Them unicorns were hiding, playing silly games.They were kickin’ and splashin’ while the rain was pourin’, Oh, them silly unicorns!

There was green alligators and long-necked geese, Some humpty backed camels and some chimpanzees.Noah cried, “Close the door ’cause the rain is just pourin’, And we just cannot wait for no unicorn!”

The ark started moving, and it drifted with the tide, And them unicorns looked up from the rocks and they cried.And the waters come down and sort of floated them away, That’s why you never seen a unicorn to this very day.

But you’ll see green alligators and long-necked geese, Some humpty backed camels and some chimpanzees.Some cats and rats and elephants, but sure as you’re born, You’re never gonna see no unicorn![1]

I advise a fitness monitoring technology company[2] and consequently have followed the rise and, as of this week, demise of Jawbone, which has run through $1 billion and was at one point valued in 2015 at $3.3 billion.

The company started out modestly, founded as Aliph in 1998, in the first dotcom boom. It started out making mobile phone headsets, launching a wireless version at the Consumer Electronics Show in 2007 prior to raising $5 million from Khosla Ventures later in the year and $30 million from Sequoia Capital in 2008. Bluetooth headsets followed (I think I may have had one) in 2009, and the Jambox, a Bluetooth compact speaker and speakerphone, in 2010.

Things started to go crazy in 2011, with three rounds of funding bringing in $160 million, new product launches and, most critically, entry into the into the lifestyle tracking market with a wristband product called UP by Jawbone. Product enhancements, acquisitions, awards for design, and citations – and the TED talks – for founder and CEO Hosain Rahman[3] all followed. May 2013 brought the addition of a heavyweight corporate board: Marissa Mayer, CEO of Yahoo!, and Robert Wiesenthal, COO of Warner Music Group as directors and Mindy Mount, corporate vice president and CFO for the Online Services division of Microsoft, as president of the company (although she was gone within 12 months) A further round of funding later in 2013 brought in $20 million more equity and $93 million of debt, followed by another round in 2014 bringing in $250 million and finally another $350 million of debt from Blackrock in April 2015.

A flurry of new product introductions, expanding into other areas of monitoring including heart rate and sleep – but complaints from consumers and technical criticism, and intellectual property suits from market leader Fitbit and a dispute with a manufacturing supplier in 2015 suggested all was not well. Later in the year a market research report suggested that Jawbone’s share of the fitness tracker market was only 2.8% and in November the company started to announce lay-offs.

After Reuters marked last week’s announcement that the company had placed itself in liquidation with a report titled “Death by Overfunding”, Jonah Comstock of Mobile Health News put out a call on Twitter to mobile health pundits for their views. Opinions included the company having too much money to spend and consequently under pressure to chase investor expectations with a need to do stuff – innovate (“random pet projects and pilot collaborations go no where and suck up precious engineering resources….. too pie in the sky- not enough rubber-meets-road”), launch new products, invest in marketing – probably ahead of its ability to deliver quality, and with the volume of activity generating internal turmoil and lack of focus, in marked contrast to the laser sharp strategy of rival Fitbit.

I’m not sure that this can be the whole story. But what is without doubt is that

  • the efforts of what I assume were bright and capable people on the front line – probably poorly led, directed and managed – failed to deliver output that delivered products and services that customers valued
  • the company burnt through a lot of money in a very short time, with the result that some very big investors destroyed a lot of value for the investors upstream of them
  • the presence of a board of heavy weight external directors did very little to secure the future of the enterprise.

(And perhaps sometimes it’s better to settle on being a green alligator, long-necked goose, humpty backed camel, chimpanzee, cat, rat or even elephant that can deliver value sustainably than a unicorn left “kickin’ and splashin’ while the rain was pourin’”)

[1] Shel Siverstein, 1962 (extensively covered, eg byThe Irish Rovers, Val Doonican and many others)

[2] HRV Fit Ltd, manufacturers of ithlete https://www.myithlete.com/

[3] Fortune magazine’s 40 Under 40; Fast Company magazine’s most creative people; Vanity Fair magazine’s New Establishment; TIME 100’s most influential people of 2014