Nov 2, 2023, 1:36 PM ET

Jawbone: The Rise and Fall of the First Wearable Technology Company

Sequoia CapitalHosain Rahman, Alex Asseily, Yves Behar, Rolof Buerta

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Success in the next decade is contingent upon sound fundamentals and operating rigor.
New startups are expected to derive valuable insights to construct future market-leading companies.
Initial wireless Jawbone headsets were anticipated to sell out immediately due to craftsmanship and attention to detail.
The Jambox product was projected to generate 80% market share until competitor entry eroded price points and margins.
Product differentiation for the Jambox was expected to rely on superior sound quality and expressive design against static industry competitors.
Sales for the Jambox were planned to leverage the mobile phone revolution to reach an existing customer base of mobile operators.
The team believed internal intuition would mitigate the risks associated with innovating a new product category.
Revenue stickiness was expected to be achieved by establishing ownership of a music service, despite not currently possessing one.
Market dynamics for wearable technology were predicted to mirror the predictable demand observed in speakers and headsets.
The Up bracelet was expected to achieve category-breaking success following a positive reception at TED Global.
A durable, fixed version of the Up bracelet was targeted for release in late 2012 to resolve prior recall issues.
Short-term debt financing was planned to fund inventory needs and resolve cash constraints prior to an equity round.
A larger equity offer was expected to provide sufficient capital to address P&L gaps and open orders.
A final equity round was anticipated to fully fund the amount intended to restore the business to a growth trajectory, though this funding ultimately did not materialize.
The business was expected to become self-sustaining if it had executed difficult decisions to rebuild the organization from scratch.
Success was projected if the company had delivered reliable products with strong margins rather than operating as a low-margin, capital-intensive entity.
Failure to align company valuation with actual financial reality was expected to create significant investor conflict.
The board's delayed communication regarding the potential negative outcome contributed to the eventual failure.
Future investors are expected to become more risk-averse following the company's collapse.
Breakthrough R&D from Jawbone is anticipated to have directly led to the founding of All.Health.
Lessons from the failure are expected to result in better handling of difficult conversations in future ventures.
Future advising is expected to be ruthless regarding specific past mistakes, including overvaluation and low gross margins in capital-intensive sectors.