Startups · Entrepreneurship

What is your take on Pebble's failure and what does this mean to crowdfunding?

Svetlana Gluschuk QA Analyst

December 7th, 2016

I was shocked this morning when I found out that Pebble is doing a fire sale to Fitbit (read about it here). As you may recall, Pebble was the project that launched Kickstarter and other crowdfunding platforms to mainstream after raising over $10M in just a few weeks.

Without a doubt, Pebble also was one of the triggers behind equity crowdfunding and perhaps a precedent that helped in pushing forward regulatory frameworks like the JOBS Act which allow for everyone to invest in startup companies in the US.

After reading today the news, I am left wondering why this happened after receiving such great momentum and traction. According to Crunchbase (see here), they also raised over $15M from sophisticated VCs in Silicon Valley including the likes of Charles River Ventures or Tim Draper.

My other question here is what kind of impact if any would this have on the crowdfunding space now that one of its biggest success stories has failed?

Look forward to hearing everyone's thoughts.

Steven T.A. Carter

December 7th, 2016

Not sure it is an indictment of crowdfunding to be honest. They delivered their first project (I was a funder for that one). They launched several other products too. What they didn't do is anticipate the exponential growth of the wearables segment including Apple, Samsung, Garmin, Fitbit and Polar. Apple and Samsung especially were painful because of their close ties to their phone products which allowed for features that Pebble couldn't compete with. I'd guess there was some opportunity for them to sell to one of those bigger companies and they decided not to. That will likely go down as the worse decision the management team ever made. As to the monies they raised, any money they raised from crowdfunding resulted in products delivered to their customers...I don't see any issues with the way that happened. As to the venture capital they raised...those folks are adults and know the risks...and $15mm isn't a lot of money in general to those kinds of folks. If you are worried about Crowdfunding and bad stories...look no further than Skully...that is a story that should worry anyone with an interest in the crowd funding craze. 

David Austin Relentless problem solver and innovator.

December 7th, 2016

The should've partnered, or better yet ... just sold the brand, to weather the ensuing storm after their mind-blowing 1st round success which declared a blue-light special to all the electronic giants in the industry.  They let the cat out of the bag that a market everyone thought was relegated to nerdy geeks was instead the next successful evolution in smartphones. As others have said ... many problems associated with being *too* successful on kickstarter.  I don't know if kickstarter will let you do this, but indigogo and others lets you cap the investment which would have helped them.  Also they say you don't want to start out fullTilt on the first day ... you should have all your marketing ready on that first day to turn on the spiggot to full within 1-2 weeks ... they might have watched that first day and throttled back to make their goal but still fly under the radar.

The other thing not yet discussed so far (unless I missed it), is too much money too fast is one of the top if not the top reasons well funded startups fail.  It just is.

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

December 7th, 2016

Mr. Carter: I believe that the overall statistic is that 30%of rewards based crowdfunding campaigns do not deliver their product. Fitbit is offering refunds to people who did not get their watches shipped. And even shipping the product is no guarantee that the business will succeed.  My understanding is that the CEO of Pebbles turned down better offers a while ago.  A lot of founders know what they know but not what they need to know.  That should be the lesson here.  Running a successful business is complicated. You need the right people and loading the company with developers to the exclusion of business people will always be a problem.

Alejandro Cremades Executive Chairman at CoFoundersLab

December 14th, 2016

There is no doubt in my mind that execution was the critical piece here. Also the fact that this market was getting very crowded with big corporations like Apple or Samsung was probably another trigger. I don't believe this will have a negative impact on the crowdfunding space. Look at Oculus which was acquired for billions by Facebook. It is just like investing in the venture space where 1/3 of the time you will loose your money, another 1/3 you will break even, and the remainder you will perhaps make money and make up for the losses.

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

December 7th, 2016

If you want to be blunt about it, Pebbles is an example that programmers and software developers cannot run a manufacturing company.  If you look at their "team" it is dozens of 20 and 30 year olds most of whom wrote code. There are still people from their Kickstarter campaign in 2012 who never got the product they bought.  The Crowdfunding industry will not take notice because it too is populated by amateurs but investors will get tired of losing their money company after company.   

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

December 7th, 2016

Mr. Carter: You are certainly correct about Skully, another company run by a "self-taught" engineer without any business school background.  Only about 30% of crowdfunding campaigns raise the money they seek and large, well publicized failures will only scare investors away. Neither Pebbles or Skully were equity deals, which are more highly regulated and should be better, but the equity crowdfunding industry has very few people with investment banking or corporate finance credentials who actually know what they are doing.

Steven T.A. Carter

December 7th, 2016

I've done quite a few Kickstarter/Indiegogo type deals. Pebble was my first. I got my original order and then a subsequent order and then  Pebble Steel. From what I know their original campaign fulfilled nearly all of their orders and what didn't get filled were likely corner cases that happen when you sell 2 million of anything. But the products I have bought have been in front of products from big companies. SpaceMonkey...a home based cloud storage device got bought by Cisco (I think). Canary is now in stores. I've only had one Kickstarter not ship to me and that was a single man operation putting together kits for Arduino stuff. Not a wild new idea from scratch. I think they are a great way to validate a market. If you'd have tried to pitch a "smart watch" in 2011, I suspect you'd have had a hard time doing it. Pebble proved the market and just didn't position themselves for a good exit.If I had an idea for a product that I did a Kickstarter campaign for...I'd for sure make sure selling out to a much bigger company was in my top 2 exit outcomes and I'd search for that. Kickstarter and Indiegogo are about passion...I think you should be willing to let your idea go if it lets this think you are passionate about move into the mainstream. 

Ema Chuku Designer. Product Developer. Founder @ NuPad

December 7th, 2016

Could it be they outgrew themselves through too much public relations noise and in reality they were not really selling enough product? Perhaps a type of product overran by Apple company.

At the end the outsider will never what's happening among an insider unless they are in the shoes of the insider.

I definitely think it will impact the "Crowdfunding" culture, but only if the average consumer knows about the failure of Peeble.

Mark Wilcox Chief Technology Officer - Consulting - Security Practice at Oracle

December 7th, 2016

Businesses always fail for the  same reason. Regardless of the industry.

They underestimate how hard it is is to acquire and service customers.

And they run out of money (and/or energy) before they can solve that problem.













Patrick Colmenar Development Manager at LDProducts

December 7th, 2016

I would think that this wasn't an issue with crowdfunding but more of an issue of competition (Apple, Fitbit, Samsung) and lack of barriers to entry. I'm sure all hardware devices that are crowdfunded lack barrier to entry.