Long before the Apple Watch, there was Pebble--the original smartwatch, first introduced to the world via Kickstarter. As the first iPhone and Android-compatible smartwatch, people couldn't wait to get their hands on it. Pebble's first Kickstarter campaign set out to raise $100,000. Instead, $10 million poured in. And that was just the start.
A second, $20 million, Kickstarter campaign later, Pebble is the platform's most funded project. As the first to market with one of the hottest tech gadgets, the company seemed destined to keep its place at the top.
And then, yesterday's breaking news: CEO Eric Migicovsky told Tech Insider that Pebble is laying off 40 employees, about 25 percent of its staff. Migicovsky assured Tech Insider that Pebble is in it for the long haul and is being strategic in their path forward. He said the company plans to grow in the health and fitness category and focus on a few other key areas.
Migicovsky also told Tech Insider Pebble has raised $26 million over the past eight months from outside investors. Add that to last May's Kickstarter success, and that means the company has raised $46 million total in the past year. How could Pebble be in such hot water?
Here are a few reasons that have led to Pebble's need to re-calibrate.
1. First to market doesn't guarantee success
Pebble invented the smartwatch market. No such thing existed before the company brought their mind-blowing technology to Kickstarter in 2012. But just because they were the first doesn't guarantee their place at top forever. We're still in the middle of the wearable war for market share, and it's anyone's game.
This is the case in other markets, too. Take Uber versus Lyft, for example. While Uber invented the ride sharing market, Lyft is quickly encroaching. Drivers tell me Lyft takes care of them better. Riders tell me Lyft drivers are nicer. And in my own experience from taking both, I prefer to take Lyft when I'm traveling solo because I feel safer.
2. A nice-to-have, but not a must-have
Just a few years ago, it seemed far-fetched that a piece of technology could sync to your phone, track your steps, and measure your heart rate. Wearables promised to be the next big thing in technology. But consumers don't seem to be opening their wallets to buy--not enough of them, at least.
Earlier this week, Apple dropped the price of the Apple Watch by $50. Fitbit stock isn't doing so hot. Last year, TechCrunch reported that Pebble was on shaky financial ground and was having trouble maintaining its growth.
Think about it. How many people do you know who own a smartwatch? I have a few of those early-adopters friends, but the general consensus I hear is "I don't really need that." Taking calls from your wrist isn't life changing or necessary. Unlike a phone or computer, most people don't consider a smartwatch a crucial, must-have piece of tech.
3. Less cash flow in Silicon Valley
Pebble CEO Eric Migicovsky told Tech Insider it's getting harder and harder to raise money. "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."
And he's not the only one feeling the pinch. By now you have likely heard the term unicorpse--a startup once valued at $1 billion whose valuation has plummeted. Late last year, CNBC interviewed several venture capitalists and tech investors about the state of fundraising in the valley. The consensus was that cash is getting harder and harder for startups to come by.
"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."