While CES 2018 is in full flow, it is worth taking a step back and looking at how some of the much-hyped products of 2017 have fared. The conclusion is damning.
‘Hardware is hard’ is a Silicon Valley cliché, but in 2017 this statement, perhaps more than any other, rang true. While many start-ups in the software space are thriving – developing new apps for consumers and enterprises to use on devices they already own – hardware start-ups have faced a far greater challenge. That is, how do you make people, whether they’re a consumer or an employee, want to use a completely new product?
This is a particularly tough test for smart wearable start-ups. After all, consumers need to gain some sort of value from wearing a ‘smart’ item that is essentially replacing or even adding to their existing list of clothing and accessories. In all likeliness, these items will cost more than their ‘non-smart’ predecessors, and if they’re completely new – like a smart wristband – they will be an additional cost altogether. In other words, they’re seen as a luxury item rather than an essential must-have product.
That’s not to say that it isn’t a market which is full of great ideas, nor that there isn’t scope for major growth. Market intelligence firm IDC suggested back in June last year that the market will nearly double by 2021, and that this would be driven largely by increases in sales of smart watches and smart clothing.
Despite this, smartwatch maker Pebble ultimately failed and was acquired for $23m by Fitbit at the end of 2016. This is even though it raised $10m on Kickstarter, followed by $49m via venture capital investors. Eric Migicovsky, the founder of Pebble admitted to WIRED that the company learned too late that the key value consumers saw in wearables was rooted in health and fitness.
“We did not get this in 2014, if we had come out then as the smartwatch fitness wearable, maybe it would be a bit different,” he said.
Following the “Wearables Crowd”
The ultimate failure of Pebble showed investors that they could not merely trust successful crowdfunding campaigns. A study by CB Insights found that of 382 hardware start-ups that had failed, the biggest reason they fail is a lack of demand for their products. Just because thousands of people are willing to donate money or pre-order a product that doesn’t yet exist, doesn’t mean that millions more will, nor that those who do receive the product will necessarily be happy with their purchase.
In fact it is the latter of those that troubled Jawbone. The company, which had made a name for itself with its headsets and portable speakers, decided to delve into the fitness wearables market. At the time, it seemed a sensible move as that was where Fitbit had gathered momentum, but changing from its unique selling point of audio wasn’t a great idea, and customers were left unimpressed when Jawbone UP didn’t work properly. Jawbone responded to complaints by offering full refunds, which worked in the short-term, but by the time the company got its act together, FitBit and FuelBand were dominating.
More Money, More Problems
Pebble and Jawbone’s other key issue – like many other hardware start-ups, was that they ran out of money rapidly. CB Insights found that overspending was the second reason for failure, hardware is expensive to get right, and companies find difficulty with creating the hardware to support their (potentially) good ideas. Even small glitches in manufacturing, such as a battery problem, can kill a company.
Timing is also critical; Snapchat’s Spectacles failed to live up to the hype because the company waited five months after the initial announcement to actually sell them. By then, their key audience – younger adults and teenagers – had lost interest in the wearables. But this wasn’t the only problem; there were issues with the technology itself; data transfers would take an eternity as Bluetooth wasn’t used, only low-res videos could be delivered at first, phone batteries were drained when synced to Spectacles and various other issues. The marketing behind Spectacles was also an issue. It was clear that Snapchat was not a hardware company, or at least it wasn’t yet ready to be one.
Doppler Labs, the ambitious augmented reality earbud start-up, shut down in November, again, a lot was down to bad-timing. The company had raised about $50m by the Summer of 2016 and counted big-name investors like David Geffen and Henry Kravis as backers. But companies who were potentially interested in buying the company, wanted to see if it could prove that its Here One product could be a success. But it was riddled with issues including battery life, charging case problems and supply chain delays.
However, the company’s founder Noah Kraft, said that even if those delays and product issues did not happen, Doppler Labs would not have been successful. Why?
“We fucking started a hardware business! There’s nothing else to talk about. We shouldn’t have done that,” he told WIRED. Hardware is harder than most think.