Pebble shot to fame as the inventor of the smartwatch thanks to a 2012 Kickstarter campaign. Now the company has announced a round of layoffs.
That campaign was aiming to raise $100,000 to manufacture the world’s first Android and iOS compatible smartwatch, but ended up raising $10million. So why did Pebble just announce that it is laying off 40 employees, or 25% of its total workforce, asks Betsy Mikel for INC.
Seemingly successful company lays off staff
After that initial $10 million Kickstarter campaign, a second one raised $20 million. Pebble became the crowdfunding platform’s most funded project ever.
A strong start made many people think that Pebble was destined to remain at the top of their game. However yesterday CEO Eric Migicovsky announced the layoffs.
Migicovsky maintains that Pebble is simply being strategic and plans to grow in the future. Outside investors have reportedly contributed $26 million to the firm in the past 8 months, so how did things come to this?
First to market offers no guarantees for Pebble
Pebble may have got into the smartwatch market before Apple and Samsung, but the bigger companies were better prepared for a long war of attrition for market share. That war is still going on, and the wearable market is anyone’s.
This can be seen in other markets too. While Uber may have invented ride sharing, Lyft is slowly encroaching on the market. Users report that Lyft drivers are nicer and treat them better, while others say they feel safer with Lyft.
Smartwatches remain a luxury item
Most people now see life without a smartphone or a computer as unlivable, but smartwatches are resolutely a nice-to-have item.
Wider problems in Silicon Valley
As Pebble CEO Migicovsky admitted, it’s increasingly difficult to raise money in Silicon Valley. “We’ve definitely been careful this year as we plan our products,” Migicovsky said. “We got this money, but money [among VCs in Silicon Valley] is pretty tight these days.”
Other startup chiefs are also admitting to feeling the squeeze. Not without reason was the term unicorpse coined recently. It refers to a former unicorn startup once valued at $1 billion whose value has now plummeted.
CNBC conducted a series of interviews with venture capitalists and tech investors about cash flow in Silicon Valley. All of them admitted that cash is harder to find these days.
“It’s been surprising to see how quickly valuation expectations are recalibrating,” Craig Hanson, a partner at Next World Capital in San Francisco, told CNBC. “Rounds will be harder to raise, valuation multiples will be lower and, in many cases, companies will have to demonstrate metrics that back up the big projections they promised before.”