If Silicon Valley rumors are to be believed, Pebble’s CEO is up and running. Still would! – in the summer of 2015, Citizen offered $740 million for a controlling stake in Pebble, at the beginning of 2016 – Intel was given $70 million. As a result, Fitbit bought the manufacturer for $30-40 million in the fall. WTF?
Meet Eric Migikovsky, the CEO who spent the last nine years wasting time and making time, literally. Eric founded the Pebble company at the age of 21, as a student. Initially, the organization was called Alerta, and the device was called InPulse. Watches became pebbles on Kickstarter.
The young man’s growth trajectory was breathtaking: a graduate of the Y Combinator business incubator, a Kickstarter hero, a platform creator and a seller of over two million smartwatches. But this was not enough. Pebble lost, and on December 6, Migikovsky sold assets and intellectual property to Fitbit. And he was left without money, writes backchannel.com. The proceeds will be used to pay debts and salaries of employees.
The ex-CEO entered Silicon Valley’s failure fetish culture easily, with the shattered backbone of a successful startup that had been trending in the smartwatch market since 2012. The valley treats failure with great respect. Her famous motto is: “Los faster, lose better.” A person cannot achieve success without failing. For example, Steve Jobs is a prime example of this.
In EU it is difficult to understand. In our country, a person who fails is considered a loser. In the US, a person is rarely poked with a failure in the face. If you don’t fail, you may be taking little risk, says Tina Seelig’s Do It Yourself book (Mann, Ivanov, and Ferber, 2013). Our mothers on the streets yell at children: don’t do this, don’t do that. In the West, kids are supported: you will succeed, you can.
Pebble became unprofitable in 2015. In March 2016, Migikovsky fired a quarter of the staff (40 out of 160 people) and moved from the loft to a simple office.
The company overestimated the market for smartwatches that have become boring to the consumer. Pebble is not alone: Apple’s plans also went down the drain. Apple focused on fashion, releasing glamorous wearable electronics in gold with straps for the price of a year’s salary of a European. Pebble invested in performance and cooperation with third-party developers. Both were wrong.
Users wanted to wear biometric sensors, not just watches. Migikovsky sighs that in 2014 Pebble missed the chance to release a gadget with a heart rate monitor, a pedometer and a sleep tracker: “We realized it too late. Apple was already working on a fitness lab, and Pebble was floating somewhere else. If we had released an activity tracker two years ago, the situation would have changed.” The late-announced Pebble Core in 2016 didn’t have time to jump on the bandwagon of the departing train.
The crowdfunding campaign raised $12 million on Kickstarter, but the amount was not enough to cover the costs. Now the invested money is being returned to public investors. 24,000 people ordered the activity tracker, and 43,000 ordered new versions of the watch. Using Kickstarter was a necessary measure because the manufacturer needed money after a series of employee layoffs. It so happened that Kickstarter became not a starter, but a brake.
In the spring and summer, Migikovsky tried to stay afloat. The late release of the product and the holiday season dragged the company to the bottom like heavy stones. It turned out that the delivery date is postponed due to the fault of the partners. Eric dangled to China, trying to speed up the processes, turned to private investment funds, as top venture funds refused. Migikovsky compared the last year to an RPG game: the settlement is passing a dangerous red line in development, but nothing can be done except…
…Sink the ship. In October, Eric decides to sell the business with a guarantee of a return on the funds invested by users and protection of the rights of developers. Migikovsky saw a future partner in Fitbit, which agreed to the terms of temporary support for released products. The former CEO suggests that Fitbit will release its own watch based on the Pebble operating system, and add 2 million existing users to its 50 million. He did not go into details under the terms of a non-public deal, from which little is clear. It seems that Fitbit buys Pebble assets, software, patents, but does not claim inventory and equipment. A number of Pebble engineers are joining Fitbit.
The deal is good for Fitbit as sales of sports trackers are dwindling and Pebble’s innovation will help the fitness electronics giant grow its smartwatch business. The situation is comical, since Pebble emphasized watches, and Fitbit emphasized trackers; the consumer wanted both that, and another “in one bottle”. The statistics confirm this. The takeover of Pebble and perhaps the launch of a new category of products will allow Fitbit to maintain its leading position and fend off the attack from Apple, Samsung, Sony and others.
Migikovsky won’t go to Fitbit: “We fired the first shot, developed a great product, shipped 2 million devices, exploded the market… but failed to reach the next stage of development. My entry into Fitbit won’t change anything.”
In less than 30 years, Eric has achieved a lot. His Pebble has gone down in history as an innovative company that created the value of smartwatches. The appearance of Pebble, albeit short-lived, was akin to a breath of fresh air in an iron cage with predators that rushed about in the fog and tore at each other without understanding where to go next.
I think that Eric Migikovsky will rest, draw conclusions and, in the best traditions of Silicon Valley, rise from the ashes. Over the past four years, the smartwatch market has evolved so rapidly that many players have fallen off the track. Where are the new model announcements, where are the hot discussions of new products? Although Eric blew a whistle at the start, at some point, confident in his innocence, he turned at the wrong intersection and broke away from reality, which led to the collapse of the company. However, the Pebble business lives on.