Pebble was one of the first big Kickstarter success stories
after it raised over $10 million in 2012 and went on to release its
promised smartwatch after minimal delays. However, that success may be
short lived. The company is looking at tight financials, and that has
led to 40 layoffs, amounting to 25% of its workforce.
Pebble
CEO Eric Migicovsky confirmed the layoffs, saying the company needed to
be careful with its cash. Apparently money from Silicon Valley venture
capitalists has been in short supply lately. I’d wager that’s because
the future of wearables is still very murky, and Pebble’s more recent
smartwatch efforts haven’t been met with universal praise. It’s not that
Pebble is making bad products, but the wearable market has gotten much
more crowded since that first crowdfunding campaign.
Based on what we know about Pebble’s finances, this move is a
little surprising. Pebble has managed to raise even more money in its
subsequent campaigns than it did in the first one. The recent
Kickstarter campaign for the improved Pebble Time
raised more than $20 million. Migicovsky also says the company has
pulled in $26 million from investors in the past eight months. So, even
with money in the bank, Pebble is cleaning house to remain nimble. That
might point to problems moving its current round of products. Pebble’s
watches are not as capable as Android Wear
or the Apple Watch, but they offer much better battery life and
improved outdoor readability compared with most other smartwatches.
In 2013 when the first Pebble came out, it was one of the
few competent smartwatches on the market. The design was all plastic,
and the screen was square, but the Apple Watch and Android Wear weren’t
even on anyone’s radar yet. Android Wear started showing up about a year
later, and nearly a year after that, it was Apple’s turn to get into
the wearable market. Pebble was always going to be at a disadvantage in
this match-up. Apple and Google both have the resources to lose money on
wearables for the time being in order to be ready when the market
matures. Pebble needs to be profitable for VCs to continue supporting
it.
Not everyone is convinced that wearables will even be a
profitable market for anyone in the short term. Even Apple recently
dropped the starting price of the Apple Watch from $350 to $299, and it’s unusual for Apple to discount a product before its successor is ready. Migicovsky says Pebble is looking at the long haul
with a plan for where it will be in five or ten years, and that means
it needs more cash right now. Saving money with a smaller staff is
great, but the scale of the cuts has fans of Pebble’s products worried.
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