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Death by Overfunding: Jawbone Attempts Another Pivot

Posted on Thursday, May 25th 2017

According to IDC, the overall wearables market grew 3.1% over the year in 3Q 2016 with total wearables shipments at 23 million. Basic wearables, which primarily comprised of fitness bands, accounted for 85% of the market and recorded double-digit growth. Smart wearables capable of running third party apps are expected to continue to struggle in the near term. Overall though, growth has fallen considerably from the more than 40% growth rates projected back in 2013. This slowdown in market pace has already translated to a significant devaluation of existing players.

Jawbone’s Continuous Pivots

One such company that is struggling to make its importance felt in the market is San Francisco-based Jawbone. Founded as Aliph in 1999 by Stanford undergraduates Hosain Rahman and Alexander Asseily, the company has been focused on developing wearable technology and audio devices that are easy to use. It did spectacularly well in its early days when it won awards for its premium ICON Bluetooth headset that delivered the most efficient noise-cancelling technology in the world.

But since then, fortunes have turned. In the recent IDC report, Jawbone does not even feature as a listed vendor and has been clubbed under the group “others”. Fitbit is the market leader with 23% market share followed by Xiaomi’s 17% share.

Jawbone’s Financials

Jawbone does not disclose any of its financial results. But reports suggest that the company has been struggling for the past few years. Jawbone has raised more than $983 million in venture and debt funding to date. Investors include Kuwait Investment Authority, Black Rock, Rizvi Traverse Management, Khosla Ventures, Sequoia Capital, and Andreessen Horowitz. Over the past few years, its valuation has plummeted. It last funding round was held in January last year when it raised $165 million at a valuation of $1.5 billion. Valuation has fallen from its 2014 valuation of $3 billion.

To manage its financials, the company laid off nearly 15% of its staff last year. In August 2016, news emerged that Jawbone was looking to sell itself. Rival Fitbit was rumored to be an interested party. However, the price that it offered was so low that Jawbone backed out of the sale.

Jawbone’s Pivots

The company has had to do several pivots to survive so far. After making audio devices that included speakers and bluetooth earpieces, it transformed to design and sell elegant fitness trackers designed by Yves Behar. For the past few years though, Jawbone has been struggling. It hasn’t released a product that is able to earn big money in the past two years. Its most advanced wristband the UP4 was released more than two years ago and since then, its price has fallen 75%. Constant cost management has led to reduced customer support and inferior quality. Customers are complaining of frequent breakages of different bands and Jawbone fails to offer reliable service to take care of these broken devices.

More recently, Jawbone got caught in a patent suit with Fitbit, where Fitbit sought to block Jawbone from selling its devices stateside. The case was dropped citing Jawbone’s precarious finances.

The failure to sell to Fitbit did wake Jawbone up a bit. Now, Jawbone is pivoting itself to focus on medical devices. Providing medical services in a wearable device is not a new trend. According to a Juniper Research report, nearly 25% of fitness trackers will become more than a wristband by 2021 and will begin catering to the needs of the healthcare industry. It does have some experience with the medical devices through its 2013 acquisition of Body Media. Body Media was a maker of wearable sensors that ran a trial program with insurer Cigna to track the health of Americans at risk of diabetes. The deal had cost Jawbone $100 million. In 2015, Jawbone also acquired Spectros, a diagnostic equipment company that developed molecular sensing and imaging devices to enable doctors to remotely monitor patients with life-threatening diseases.

It is too early to tell what would come of these experiments. For the moment, the company remains in precarious territory.

Photo Credit: Kazuhiro Keino/Flickr.com

This segment is a part in the series : Death by Overfunding

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