Jawbone
From Invertopedia, the encyclopedia of how things fail
Jawbone was a consumer electronics company that made Bluetooth headsets, wireless speakers and the UP fitness band[1][2]. The first UP went on sale in November 2011 for $100[3], and within weeks so many bands had failed that Jawbone cancelled pending orders and offered every buyer a refund without asking for the band back[6][7]. It raised about $951 million[4], was valued at $3 billion by early 2015[2], and in July 2017 was reported to be liquidating[2][4].
Contents
The bet
People would wear a band all day and night that counted their steps and tracked their sleep, and look at the results in a phone app[7]. Jawbone, already known for headsets and speakers[2], could win that market with design and keep it while it grew, backed by some of the best-known investors in Silicon Valley[2][4].
What happened
| 1999 | The company that becomes Jawbone is founded. Over 18 years it makes Bluetooth headsets, wireless speakers and fitness trackers.[1][2] |
|---|---|
| Nov 2011 | The UP band goes on sale for $100.[3] |
| Dec 8, 2011 | Jawbone cancels all pending UP orders and offers owners of faulty bands a refund of $109.43 in cash or $150 in store credit, with no need to send the band back.[6] |
| Dec 2011 | Hosain Rahman blames "two specific capacitors in the power system" and pauses production.[7] |
| Nov 13, 2012 | A rebuilt UP returns at $130 after 2.9 million hours of testing, with 141 new parts.[3] |
| Early 2015 | Jawbone has 450 employees and a $3 billion valuation.[2] |
| May 2016 | Jawbone stops making UP trackers and sells its remaining inventory to a reseller to raise operating money, betting on a clinical-grade heart-monitoring device instead.[5] |
| Early 2017 | Rahman is reported to be moving the company toward clinical health services rather than competing with Fitbit.[4] |
| Jul 6, 2017 | Jawbone is reported to be liquidating, and Rahman starts a new company, Jawbone Health Hub.[2][4][5] |
| Dec 2017 | Fitbit and the Jawbone side settle all their outstanding litigation on confidential terms.[8] |
The kill shot
The first UP broke in customers' hands, and fixing it took a year. By the time Jawbone could ship reliably, Fitbit had outmaneuvered it.
Rahman's own explanation was that two capacitors in the power system stopped some bands holding a charge, and that "typically, these issues surface within the first seven to ten days of use"[7]. Production was paused[7], and the UP did not return until November 2012, a year after its launch[3].
Fortune's account of the end names the same pattern: Jawbone struggled to ship products on time, Fitbit outmaneuvered it, and sales of wrist-worn trackers softened[2]. In 2016 Jawbone left the tracker business to chase a medical device[5], and in July 2017 it was reported to be liquidating[2][4].
Red flags ignored
- Failures inside the first week. The capacitor fault usually showed up within seven to ten days of use[7], a window a few weeks of real-world wear testing would have covered.
- Two stars on Amazon. Within weeks of launch the UP had two out of five stars on Amazon, with 41 reviews complaining of 23 "bricked" bands[7].
- Late shipments. Jawbone struggled to get products out on time while Fitbit outmaneuvered it[2].
- A pivot as a last resort. It stopped making trackers and sold off inventory to fund a medical device it had not yet launched[5].
- Silence at the end. Its social media accounts went quiet at the start of 2017, leaving customer complaints unanswered[4].
The cost
About $951 million raised, according to PitchBook data cited by TechCrunch[4], including $300 million from funds managed by BlackRock[4]. SiliconANGLE put the money spent before liquidation at $890.8 million[5]. Investors including Andreessen Horowitz, Sequoia Capital, Kleiner Perkins and Khosla Ventures stood to lose millions[2][4].
The 2011 refund let every UP buyer from an authorized retailer keep the band and still get their money back, through December 31, 2012[7].
The inversion
In hardware, the return rate is the business. Prove the device survives weeks of real wear before you ship it at scale, because the year you spend fixing it is the year a rival takes the market.
What survived
Some of the people. Jawbone Health Hub, a new company with a new investor, was reported to be taking on many Jawbone employees and to plan support for existing Jawbone devices[4][5]. The trade-secret fight Jawbone started against Fitbit ended in a confidential settlement in December 2017, after a 2016 ruling that no party had been shown to have misappropriated a trade secret[8].
References
- ^ “Jawbone (company)”. Wikipedia. Supplementary: founded 1999 as AliphCom, renamed Jawbone in 2010, product lines.
- ^ “Jawbone Is Going Out of Business”. Fortune (Kirsten Korosec), July 6, 2017. The liquidation, 18 years in business, headsets/speakers/trackers, Rahman as co-founder and CEO, 450 employees and $3 billion valuation by early 2015, investors, late shipments, Fitbit outmaneuvering it, softening tracker sales, investor losses.
- ^ “Jawbone's Up health wristband is back after 2.9 million hours of testing”. VentureBeat (Devindra Hardawar), November 13, 2012. The November 2011 launch at $100, the $130 relaunch, 2.9 million hours of testing, 141 new parts.
- ^ “Jawbone is being liquidated as its CEO launches a related health startup”. TechCrunch (Brian Heater), July 6, 2017. The liquidation, about $951 million raised per PitchBook, BlackRock's $300 million, investors, Jawbone Health Hub, the earlier-2017 report of a shift to clinical health, silent social accounts.
- ^ “Jawbone goes into liquidation as founder starts new health-related company”. SiliconANGLE (Duncan Riley), July 6, 2017. The May 2016 exit from UP trackers and inventory sale, the heart-monitoring device bet, $3 billion peak valuation, $890.8 million spent, Jawbone Health Hub.
- ^ “Jawbone Cancels All Pending Up Orders, Refunds Unhappy Owners (Even If They Keep It)”. TechCrunch (Greg Kumparak), December 8, 2011. Pending orders cancelled, the $109.43 cash or $150 credit refund, no need to return the band.
- ^ “Jawbone explains UP wristband failures and offers full refunds”. WIRED (Jon Phillips) via CNN, December 9, 2011. Rahman's capacitor explanation and quote, the seven-to-ten-day failures, paused production, two-star Amazon reviews, the refund through December 31, 2012, what the band tracked.
- ^ “Fitbit and Jawbone resolve all outstanding civil litigation”. SGB Media, December 11, 2017. The confidential global settlement and the 2016 ruling that no trade secret had been shown to be misappropriated.