Pebble

What did it do?

Pebble Technology made Pebble smartwatches, which displayed notifications from smartphones on an e-paper screen and could run downloadable apps. The company financed its products through Kickstarter campaigns and, in 2012 and 2015, twice became the platform's highest-funded project. By the end of 2014, 1 million watches had shipped.

Why did it shut down?

According to Wired, the company, which had been profitable for a time, slipped into losses in 2015 and missed its sales targets in the second half of the year. In March 2016 it laid off 40 of its 160 employees. Founder Eric Migicovsky said they had been late to realise that the smartwatch market was built mainly on health and fitness. The 2016 Kickstarter campaign had become a necessity because the company could not find investment, and no new capital came afterwards either. In December 2016 Pebble filed for bankruptcy in California and sold its software, intellectual property and some assets to Fitbit.

The story

On 11 April 2012 Pebble's Kickstarter campaign hit its $100,000 goal within two hours. Six days later it was the highest-funded project in the platform's history, and it closed on 18 May with $10,266,845 pledged by 68,929 people. Yet venture capitalists had previously turned their backs on the idea.

In 2008, as an exchange student in Delft in the Netherlands, Eric Migicovsky was looking for a way to get information while cycling without looking at his phone. That search turned into the BlackBerry-compatible inPulse watch in 2010. The company, which went through Y Combinator, raised $375,000 from angel investors such as Tim Draper but could not find more; that is why it went to Kickstarter under the name Pebble. The watches began shipping in 2013, and 1 million had been reached by the end of 2014. In 2013 Charles River Ventures invested $15 million. In 2015 the colour-screen Pebble Time set a new Kickstarter record, raising $20.3 million from 78,471 backers.

The company was reported to have turned down a $740 million acquisition offer from Citizen in 2015. According to Wired, Pebble, which had been profitable for a time, slipped into losses that same year and missed its sales targets in the second half. In March 2016, 40 of the 160-strong team were laid off. Migicovsky later explained that they had been late to realise that the smartwatch market was built mainly on health and fitness. The 2016 Kickstarter campaign had also been launched because no investment could be found, and no new capital came afterwards.

In October 2016 Migicovsky decided to sell the company. On 6 December 2016 Pebble filed for bankruptcy in California and sold its software, intellectual property and some other assets to Fitbit. The price was reported to be $23 million; the company's debts were said to exceed that amount. Eighty-two employees were laid off, and the Pebble Time 2 and Pebble Core were cancelled. Fitbit shut down the servers in June 2018, and the volunteer Rebble community kept some of the services going. After Google open-sourced the software's code in 2025, Migicovsky founded Core Devices and revived the Pebble brand with new watches.

Pebble shows that community support can provide a powerful start but is no substitute for a profitable business.

Lessons for founders

• Crowdfunding proves demand but not profitability; do not treat pre-orders as a substitute for working out your unit economics.
• Measure early what users actually use the device for; for Pebble that was health and fitness, but the company saw it late.
• When you turn down an attractive acquisition offer, build into your scenarios the possibility of being stuck in a tough funding climate the following year.

Sources

1. Pebble (watch) (Wikipedia)
2. The Inside Story Behind Pebble's Demise (Wired, 2016-12-12)
3. Pebble Lays Off 82 Employees (The Wall Street Journal, 2016-12-29)

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