Jawbone

The Second Costliest Death of Silicon Valley

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First of all I'd welcome all the 2.9k members who joined in this little family.

Today's case study is on Jawbone. After searching a lot of failed startups I finally picked up failure of Silicon Valley's second most funded startup

About

The 17-year-old consumer electronics company, Jawbone (originally named AliphCom) had raised $929.9M in funding by 2014 but got demised in 2017.

It is said to be one of the costliest deaths in Silicon Valley.

While many startups fail from lack of funding, many have attributed Jawbone’s mercurial rise and fall to overfunding. .

The Start ▶️

In 1999, two students from Stanford University got together and decided to create AliphCom. It was initially developed as a military technology that would help soldiers to communicate properly by cancelling the noise.

Soon in 2002 they reached out to DRPA, Defense Advanced Research Projects Agency, of the United States Department of Defense and closed the deal. And they started manufacturing mobile headset and named it Jawbone later.

The company saw the commercial value in it and lauched it in the general market.

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The Rise 📈

Success came in when US allowed handsfree handset while driving in several states. Then 2017 Jawbone announced Jawbone Bluetooth headphones, with Noise Shield noise cancellation, to 157 Apple Stores. The device was sold along with iPhone for $119

Later in 2009, jawbone 2 was released with better sound and noise cancellation system. Now in 2010, company annouced Jambox and soon it become the best selling product. A wireless device called Jambox arrived in 2011.

They pivoted towards a consumer technology company as well, but mainly aimed at monitoring physical activity and health.

In 2011, AliphCom became Jawbone and opted for wearables, physical activity tracking bands, a market that was just beginning to flourish.

The arrival of the company in this market category was one of the reasons why it managed to attract abundant venture capital from recognized firms, including Sequoia, Andreessen Horowitz, Khosla Ventures and Kleiner Perkins Caufield & Byers, and even a sovereign fund of investment, that is state investment.

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New bet

After its transformation, the company opted for a new bracelet called UP, which had an elegant and easy to wear design.  It was also water-resistant and had an accelerometer.

What could be done with this device? The device was designed to track daily routines: for example, to know how much and how fast users walked, the number of calories burned, as well as the number of hours slept and their sleep quality.

First mistake

Focus

• Jawbone originally began as a company focused on developing military-grade audio technology. This led to its flagship eponymous product, the Jawbone wireless headset.

• It then began churning out popular, stylish wireless speakers.

• Finally, it bet the house on fitness tracking and became one of the initial leaders in the premium “wearables” market with its UP brand of fitness bands.

• This pinballing of products and focus led to not only confusion from their customers, but from collaborators, too.

Aaron Coleman, the founder and CEO of Fitabase, recalls how Jawbone spread its engineering focus too thin, using costly engineering resources on pet projects and pilot programs that went nowhere and ignoring fundamental.

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The Downfall 📉

The third generation of physical activity trackers, the dubbed Up 3, began bringing problems to the company in 2014.

First, it came with a flaw that made Jawbone stay out of the Christmas sales season.

Then, they ensured that the device would have a heart monitor, which represented a whole innovation in the wearable world. It was later proven not to work well.

Chris Welch, a reporter from The Verge tested the bracelet and said: "Measuring the heart rate during a workout is the key that people expect on a physical activity monitor, and the Up3 simply can't do it."

Instead, the company opted to offer the resting heart rate measurement, ensuring that this was a good health indicator.

Another of the inconveniences that users noticed was the lack of a screen to display information. So it was always necessary to synchronize data with a smartphone

Although it was brave to take part in the wearable market, Jawbone failed to take hold. Their competitors began to grow until just 4.4% of the market pie was left

In 2015, strong competitors began to appear, including Apple with the expected Apple Watch.

Also, Fitbit was on Jawbone's heels and before their  IPO, the company led by Hosain Rahman sued them before the California State Court.

As reported by The New York Times, in May 2015, Fitbit was accused of "systematically looting confidential information by hiring Jawbone employees who incorrectly downloaded sensitive materials shortly before leaving.

Second mistake

Transparency in Shortcomings

• Jawbone’s line of wearable fitness trackers—the UP fitness band—were littered with problems from the go.

• False starts and production delays laid a wet blanket over the initial hype surrounding Jawbone’s promise of a 24/7 wearable.

• The first generation would “brick” and stop working after only days of use. Less than a year after its initial launch, the problems with UP were so common the company had to issue thousands of replacements to its irate customers.

• In 2013 Jawbone seemed to make another massive leap forward, promising the UP3 would be completely waterproof.

• But production delays hampered Jawbone, as the company’s manufacturer apparently couldn’t get the device to be 100% waterproof and leadership refused to compromise for the less impressive “splash-proof” protection.

• Additionally, there were reports that the gap between their office and supply chain was so large that by the time the office caught bugs it wanted to fix, the manufacturer had already produced a new model.

• Even with the significant funding they procured, Jawbone still wasn’t able to overcome its hardware issues

Fitbit ranked first, followed by China's Xiaomi, Garmin, and Samsung.

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The end

With nothing else to do, in 2017, the CEO of Jawbone decided to liquidate the company and leave the ship but jumping to another, which he named Jawbone Health. He brought some of the previous employees with this new company.

In May 2019, the idea that Hossain Rahman pursued with Jawbone Health seems to remain alive. He intends to use personal devices, Artificial Intelligence and other technologies to detect chronic health problems when they just begin to develop.

But Jawbone, one of the pioneers of wearables is nothing more than the memory of a startup that died too soon. What can be learned from them:

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Lessons We Learnt  

Do not forget your customers: If people at any time decided to buy your products and use tour services, show gratitude. Honor the guarantees you offered.

Always communicate: Although things do not work well in your company, users deserve to know the truth. Tell them what happens with your startup.

Don't let them go: If your company is going to transform into a different one, strive to keep your customers and bring them to your new company.

Put yourself in the user's shoes: Would you like to buy a device and suddenly the manufacturer stops supporting it? No. Think of your clients and prevent them from becoming your enemy.

See you next week with next story 👋👋

Richa Vaid

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Sources-

https://amp.slidebean.com/blog/startups-what-happened-to-jawbone?format=amp

https://cmr.berkeley.edu/2018/04/jawbone-startup-failure/