Jawbone
The USD 3 billion hardware company behind headsets, speakers and fitness trackers
- Founded
- 1999
- Closed
- 2017
- Lifespan
- 18 years
- Total funding
- $1 billion
- Peak valuation
- $3 billion
- Country
- United States
- City
- San Francisco
- Sector
- Hardware
- Founders
- Alexander Asseily, Hosain Rahman
- Investors
- Andreessen Horowitz, Sequoia Capital, Kleiner Perkins, Khosla Ventures, BlackRock
- At its peak
- 450 employees and revenue in the hundreds of millions of dollars in early 2015
- Cause of closure
- Product problems
What did it do?
Jawbone, officially AliphCom, was a San Francisco-based consumer electronics company. It made its name with noise-cancelling Bluetooth headsets, then launched the Jambox wireless speaker and the UP fitness tracker. In 2014 the company raised money at a valuation of more than USD 3 billion.
Why did it shut down?
Shortly after its 2011 launch, the UP band was hit by technical faults that led to refunds, and in 2012 the company effectively withdrew from the fitness tracker market. Later models were also dogged by reliability problems and delays. Meanwhile Fitbit, operating on far less capital, took 68 per cent of the North American fitness tracker market in 2014. The company stopped making trackers in 2016 and tried to pivot to clinical health devices. It went into liquidation in July 2017.
The story
Hosain Rahman and Alexander Asseily met while playing rugby at Stanford. The first backers of AliphCom, which they founded in 1999, were not consumers but military research bodies: the company worked on noise suppression with the Lawrence Livermore laboratory and received grants from the US Navy and DARPA in 2002. Using this technology, they launched a headset in 2004 that cancelled out background noise. The Jawbone Bluetooth headset that followed in 2006 sold in large numbers, and according to Fortune the company made substantial profits in 2007 and 2008.
The global crisis of 2009 dried up sales and pushed back plans for a stock market listing. In 2010 the company renamed itself Jawbone and moved into new categories: the Jambox wireless speaker and, in 2011, the UP fitness tracker. UP was praised at first, but soon a manufacturing defect caused the devices to fail. Jawbone offered a full refund to anyone who wanted one and in 2012 effectively withdrew from the fitness tracker market. In 2015 Fortune wrote that the band's ambitious design had created durability problems and that the UP3 had missed the holiday season because of a production glitch.
Money, however, was never in short supply. In 2014 Jawbone raised funds at a valuation of more than USD 3 billion; by early 2015 it had 450 employees and revenue in the hundreds of millions of dollars, but was still not profitable. Funds managed by BlackRock put in another USD 300 million, and according to TechCrunch total investment reached around USD 951 million. Over the same period Fitbit, which had raised just USD 66 million, took 68 per cent of the North American fitness tracker market in 2014.
In 2016 Jawbone stopped making UP, sold off its remaining stock and tried to sell its audio business. According to The Verge, as a last throw of the dice it was working on a device for clinical-grade heart monitoring. In July 2017 the company went into liquidation, and its ongoing legal battle with Fitbit was handed over to the liquidation process. Around the same time Rahman founded a new health company called Jawbone Health Hub.
Jawbone's story shows that abundant capital cannot fix a product reliability problem. Its rival, working with far less money, won the market with products that kept working on people's wrists.
Lessons for founders
- In hardware, praise for the design does not make up for a product that breaks in the field; budget for durability testing before mass production.
- Raising a lot of money is not a competitive advantage; study the unit economics of the rival who sells more with less capital.
- Rather than fighting in several product categories at once, pick one profitable core category and defend it.
Sources
- Jawbone (company) (Wikipedia)
- Jawbone is being liquidated as its CEO launches a related health startup (TechCrunch, 2017-07-06)
- Jawbone: The trials of a 16-year-old can't-miss startup (Fortune, 2015-01-22)
- https://www.wikidata.org/wiki/Q6166067
- Wikipedia (English)
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