Speaker 1: In two thousand twelve, a small startup on the verge
Speaker 1: of collapse called Pebble endeavored to fund their smart watch
Speaker 1: company via a Kickstarter campaign and insanely successful Kickstarter campaign.
Speaker 1: And not only was their first Kickstarter campaign ridiculously successful,
Speaker 1: but their next two were as well. In fact, three
Speaker 1: of the five most successful kickstarters to date have been
Speaker 1: for Pebble watches. And yet this smart watch company, with
Speaker 1: so much public backing, went from crowdfunding success to complete
Speaker 1: stop in just a few short years. So let's travel
Speaker 1: slightly back in time and learn how a meteoric rise
Speaker 1: turned into a rock slide of misfortune for Pebble Watches.
Speaker 1: On the Brink. Hi, I'm Jonathan Strickland and I'm aerial casting.
Speaker 1: You guys are listening to the Brink today. We're talking
Speaker 1: about Pebble watches, a subject that I might have a
Speaker 1: slight bias tour. I was about to say you were
Speaker 1: an owner of a Pebble watch. Im I still am.
Speaker 1: I still am. I'm not wearing it today, but I
Speaker 1: do have it. Now, You're an owner of a very
Speaker 1: unsupported piece of technology. I mean, it still tells time,
Speaker 1: but yeah, I'm not going to be getting any new
Speaker 1: apps for it, so I was not a Kickstarter campaign
Speaker 1: funder for the Pebble Watch. However, I did pre order
Speaker 1: the watch before it officially was available, uh in store shelves.
Speaker 1: I'll talk about that a little bit, But technically I
Speaker 1: saw it at CS. I went to C E S.
Speaker 1: There was a a m meeting in a big conference room,
Speaker 1: not on the regular show floor where the pebble Watch
Speaker 1: folks were there showing off pebble watches. This was post
Speaker 1: kick started campaign, pre store or availability, and I got
Speaker 1: a chance to see it, and it was impressive enough
Speaker 1: for me to go ahead and put a pre order
Speaker 1: in and they sent me a Kickstarter edition. That's nice.
Speaker 1: You know, I kind of always wanted a pebble watch myself,
Speaker 1: but I'm glad I don't have one, because currently I
Speaker 1: have a tablet sitting on my desk that I can't
Speaker 1: use because I switched phone providers, and I feel bad
Speaker 1: even owning that piece of technology that is no longer
Speaker 1: really useful. But pebble watches are still somewhat useful. And
Speaker 1: we're going to take you back to the very beginning
Speaker 1: of pebble watches, which is even before there was a pebble. Yes,
Speaker 1: and technically pebble Watch was started out of a brink
Speaker 1: moment of a previous company. Yes, so way back in
Speaker 1: two thousand eight, which is ancient times for modern technology companies.
Speaker 1: Right ten years ago the Stone Age, there was a
Speaker 1: guy named Eric Mischakovsky, and Midchakovsky he uh, he was
Speaker 1: twenty two at the time, and if you read the
Speaker 1: series of Wired articles we read, you would learn that
Speaker 1: he has six ft six because I'm pretty sure that
Speaker 1: that was sent. And so he had come from Canada.
Speaker 1: He had attended the University of Waterloo. And the story
Speaker 1: is that he was in the Netherlands and he had
Speaker 1: taken a semester to study industrial design over there. And
Speaker 1: while he was over there, he was riding his bike everywhere,
Speaker 1: and he was still wanted to stay in touch with
Speaker 1: his friends back in Canada. A and that man he
Speaker 1: was using his his cell phone. But the problem is,
Speaker 1: you're riding your bicycle everywhere, you can't easily check your
Speaker 1: cell phone. It's hard to dig into your pocket and
Speaker 1: pull your cell phone out without potentially ramming your bike
Speaker 1: into a pedestrian or going out in the traffic. And
Speaker 1: so he thought wouldn't it be nice if there were
Speaker 1: some sort of device that I could quickly check to
Speaker 1: see what incoming call I'm getting or incoming message. Maybe
Speaker 1: I could read the whole message, or I could at
Speaker 1: least see who's calling me, and I could determine, Oh,
Speaker 1: maybe I should pull over to the side take this
Speaker 1: phone call, or no, I can let this go to voicemail.
Speaker 1: That actually led him to go back to his room
Speaker 1: that night, and he started tinkering around with basic electronic
Speaker 1: components to see if he could build something that could
Speaker 1: do what he was thinking. Now, this was not meant
Speaker 1: to be like a finished product, This was just a
Speaker 1: proof of concept, but that led him down the path
Speaker 1: towards this idea of yeah, this is possible. I'm going
Speaker 1: to make a device that compare with a phone and
Speaker 1: give you notifications and you don't have to take your
Speaker 1: phone out to look at you just glance at your
Speaker 1: wrist and hey, what the heck, I'm gonna let it
Speaker 1: tell time to which you know, makes total sense because
Speaker 1: you're already used to looking at your wrist for a time,
Speaker 1: and and also coming up with a small device to
Speaker 1: take care of your phone needs is not a bad line.
Speaker 1: Of logic, because computers over history have been getting smaller
Speaker 1: and smaller until recently when they're kind of getting big
Speaker 1: in right. And I think this is sort of what
Speaker 1: spurred his imagination, was this idea of if you look
Speaker 1: at the history of computers, then you see them going
Speaker 1: from the size of a floor of a building to
Speaker 1: the size of a room, to the size of a
Speaker 1: desk or a filing cabinet, to the size of a
Speaker 1: desktop computer to a laptop too, smartphones and tablets, and
Speaker 1: the trend is going from specific purpose where it's really
Speaker 1: good at doing very specific things but it can't do
Speaker 1: anything else, to general purpose and smaller and eventually mobile.
Speaker 1: And he thought, well, with this trend, which has been
Speaker 1: going on since computers started, let's look at what's the
Speaker 1: next logical step, and that's wearable computers. And so that's
Speaker 1: what I was thinking, was that let's see if we
Speaker 1: can I think the world is ready for it. As
Speaker 1: it turns out, that was an assumption that I think
Speaker 1: has yet to bear out. We can talk more about
Speaker 1: why that hasn't quite panned out yet towards the end
Speaker 1: of this episode, But that was the premise, Yes, it
Speaker 1: was now unfortunately for him. The start of this whole
Speaker 1: story comes about at a time where he was just
Speaker 1: slightly ahead of his time because he made a company
Speaker 1: called Alerta, and he decided to make a product called Impulse,
Speaker 1: which was a watch that did all the things that
Speaker 1: we previously talked about, specifically with the BlackBerry operating system,
Speaker 1: which you know, was a good phone for a while
Speaker 1: well and and again, to be fair like, he started
Speaker 1: really working on this in two thousand eight. In two
Speaker 1: thousand and eight, the iPhone was not even a year
Speaker 1: old yet. The iPhone had come out in the summer
Speaker 1: of two thousand seven. I mean, Blackberries were still in
Speaker 1: popular use, and even if you wanted to develop for
Speaker 1: the iPhone, you couldn't because they had not introduced the
Speaker 1: app store yet. That didn't get introduced till the summer
Speaker 1: of two thousand eight. Android was not ready for public
Speaker 1: release until the fall of two thousand eight. So he
Speaker 1: developed a prototype of the Impulse that worked only with
Speaker 1: BlackBerry and uh, but it did all the things he
Speaker 1: wanted it to do. It if you've got a BlackBerry message,
Speaker 1: which BlackBerry has their own encrypted version of messaging, you
Speaker 1: could actually display it on the watch and it was
Speaker 1: a cool companion piece of tech chnology. It wasn't actually
Speaker 1: from Research in Motion, which is the company that made BlackBerry. Yeah.
Speaker 1: I know a lot of people who own Blackberries, and
Speaker 1: I know a lot of who did own Blackberries, and
Speaker 1: a lot of people who do have smart watches. Despite
Speaker 1: the iffiness of its popularity and in a big company meeting,
Speaker 1: blackberries were largely you know, business phones. You know, it's
Speaker 1: a lot more polite to glance at your watch than
Speaker 1: it is to pick up your phone and look at it.
Speaker 1: Not that that has stopped any people still do, but yeah,
Speaker 1: these days, Uh, if you were with any tech podcasters,
Speaker 1: I think people in general this is true, but definitely
Speaker 1: true for tech podcasters because I've been there. If you
Speaker 1: ever diner, yeah, I am one, and then I hang
Speaker 1: out with them. Sometimes when a group of tech podcasters
Speaker 1: go to dinner, the first thing that happens is, however
Speaker 1: many tech podcasters you have, you have at least that
Speaker 1: many phones hit the table, probably more phones than there
Speaker 1: are people for each pockets. Yeah, sometimes people carry more
Speaker 1: than one. Uh Well. In two thousand eleven, the company
Speaker 1: Alerta was invited to participate in a group is called
Speaker 1: the y Combinator and this is what they call an accelerator.
Speaker 1: An accelerator is a company that is designed to help
Speaker 1: startups get a foundation. So they pair people with mentors
Speaker 1: to teach about forming business plans and uh, what sort
Speaker 1: of of pitfalls to look out for. And they also
Speaker 1: attempt to match up companies with potential investors. And that's
Speaker 1: what was going on with y Combinator. And by the
Speaker 1: time the Impulse was ready to be shown off there,
Speaker 1: it had already been available for purchase and they had
Speaker 1: expanded beyond BlackBerry. Now they were also compatible with the
Speaker 1: Android upbreaking system, but not iOS, not yet. But the
Speaker 1: thing is, even though everybody at this Y Combinator incubator
Speaker 1: got a hundred and fifty k, yeah, everyone, everybody got it,
Speaker 1: Alertor had a really hard time getting investors. They only
Speaker 1: got about three hundred. They only doubled that initial investment.
Speaker 1: Like some of those companies or some of those startups
Speaker 1: were able to get significantly more investment, but Alerta was
Speaker 1: limited to three thousand, which sounds like a lot of money.
Speaker 1: But the problem is Alerta was also is a hardware company. Yeah,
Speaker 1: so you're having to buy all these different components as
Speaker 1: opposed to just exactly. Yeah, so you have to figure
Speaker 1: out supply chain, you have to figure out where where
Speaker 1: are we going to manufacture these things. Now, in the
Speaker 1: early days they went pretty low rent with that. They did.
Speaker 1: They only sold fifteen hundred units of Impulses. They didn't
Speaker 1: have to worry about bulk production, half of which they
Speaker 1: made in their garage and the other half they made
Speaker 1: it a small local factory that they hired out. Yeah,
Speaker 1: at that scale, it doesn't make sense to look overseas,
Speaker 1: which is what Pebble would do later on. They would
Speaker 1: start looking at manufacturing facilities in China. But you don't
Speaker 1: do that if you've got if you're only making a
Speaker 1: thousand or so units, you don't that that would be overkill. Yeah.
Speaker 1: So they have used all of this money that they've
Speaker 1: made at the incubator to make these units, and nobody
Speaker 1: wanted to buy him. Yeah, so we are at a
Speaker 1: point where the company, the idea that that Eric had
Speaker 1: just wasn't taking off. Investors didn't seem interested, customers didn't
Speaker 1: seem interested. He had not found a way to tap
Speaker 1: into anyone's desire for technology. It was like, could he
Speaker 1: have been totally off base with his earlier assessment that
Speaker 1: this wearable computing model was the way to go. And
Speaker 1: I think for a lot of first time business owners,
Speaker 1: they would look at this and say, I'm on the
Speaker 1: wrong track. I'm going to go do something else. I'm
Speaker 1: going to take some time, I'm going to come up
Speaker 1: with a different idea, especially when you come from a
Speaker 1: background where Eric Maschakovsky he had been through two different
Speaker 1: accelerators at this point, because there was one at the
Speaker 1: University of waterlooka Velocity had already done that one, and
Speaker 1: then why Combinator he did another one. So he had
Speaker 1: at least had the benefit of being able to work
Speaker 1: with people who had experience in launching startups. So he
Speaker 1: could have just stepped away, but he didn't. He he
Speaker 1: was like, well, I still think this is a good idea.
Speaker 1: I still think people wanted I just definite hit that
Speaker 1: sweet spot yet. Yeah. And by this time it's getting
Speaker 1: close to two thousand twelve, the landscape had changed quite
Speaker 1: a bit. Both Apple and Google were really starting to
Speaker 1: take over the market share of smartphones. There was a
Speaker 1: rising interest in developing for those platforms, developing apps for
Speaker 1: those platforms, and Mitchakovsky said, I think I'm ready to
Speaker 1: take another stab at this, but I think it's going
Speaker 1: to require rethinking my approach. And we'll talk about what
Speaker 1: he did next in just a moment, but first let's
Speaker 1: take a quick break to thank our sponsor. Okay, So
Speaker 1: we talked about how Mitchikovsky wanted to rethink his ideas
Speaker 1: instead of give up. So the first thing he did
Speaker 1: was he rebranded, renamed his watch to Pebble, and eventually
Speaker 1: the company would also be called this Yes. And then
Speaker 1: he decided to make it work with multiple oss Yes,
Speaker 1: multiple operating systems. Now you've got all these people who
Speaker 1: are interested in making apps for Apple and Google, they're
Speaker 1: going to be interested in making apps for his watch
Speaker 1: as well. So this opened it up to a whole
Speaker 1: new market of people. And then he also made the
Speaker 1: watch waterproof, and he decided to make some other changes
Speaker 1: to the technology. So the original Impulse watch had an
Speaker 1: O LED screen US organic LED if you prefer, and
Speaker 1: it was a full color screen and you had to
Speaker 1: plug a charging cable into the watch. That's what would
Speaker 1: make it not water resistant, right, because you have an
Speaker 1: opening there. So for the Pebble, he decides, well, let's
Speaker 1: let's make it monochromatic screen, will use e paper as
Speaker 1: the display, which had a lot of benefits to it. Yeah.
Speaker 1: It removes it removes a lot of the power requirements
Speaker 1: because it's not back lit, and it also takes off
Speaker 1: a lot of glare so you can see it in
Speaker 1: brighter light. Yeah, it's like paper. You need that external
Speaker 1: light to be able to see what's on there. So
Speaker 1: this decision to go with a brand new approach, a
Speaker 1: brand new name, a new design model. All of that's great,
Speaker 1: except where are you going to get the money to
Speaker 1: fund the research and development, the prototyping, the manufacturing. I mean,
Speaker 1: you don't have revenue coming in from the impulse, Yeah,
Speaker 1: and you don't have investors who want to buy hardware.
Speaker 1: So where do you turn if you if you can't
Speaker 1: get any angel investors. Well, Midchakovsky decides to turn to
Speaker 1: a relatively new form of fundraising. It it had been
Speaker 1: around for a few years, but he was one of
Speaker 1: the early birds on this platform. I would say yes,
Speaker 1: he launched a Kickstarter campaign in two thousand twelve. It
Speaker 1: would be the first of three, and it would be,
Speaker 1: as we said in the opening, incredibly successful spoiler alerts.
Speaker 1: In this case, they had set their goal at one
Speaker 1: hundred thousand dollars, and they gave themselves thirty seven days
Speaker 1: or so to hit that goal. How long did it
Speaker 1: take them to hit one hundred thousand dollars? Two hours?
Speaker 1: And then they hit a million in twenty eight hours? Shikes?
Speaker 1: And they hit ten million, two hundred sixty six thousand,
Speaker 1: eight hundred and forty five dollars overall. Yeah, which is
Speaker 1: watch orders approximately. Yeah, although when you look at the
Speaker 1: full number, because you know, if you start going at
Speaker 1: the higher ends, there were other other elements that you
Speaker 1: could get. I think they ultimately said it was around
Speaker 1: sixty nine thousand watches total that they ended up selling
Speaker 1: pre selling through Kickstarter, and only that they could have
Speaker 1: made more. Yes, Yes, they end in their campaign a
Speaker 1: whole week early because they didn't want to get greedy. Honestly,
Speaker 1: if I were really putting critical thinking to it, I
Speaker 1: would say that this was a combination of a couple
Speaker 1: of different things that Midjakovsky was taking into account when
Speaker 1: he said, let's end it early. We've made ten million
Speaker 1: dollars and we have this number of commitments. I think
Speaker 1: there are two things that he's probably thinking. One is
Speaker 1: I want to make sure that the number doesn't get
Speaker 1: so far ahead of us that will be in trouble
Speaker 1: trying to meet our commitment. And the second is that
Speaker 1: if you're making hardware, in order to create an incentive,
Speaker 1: you typically offer that hardware at a discount, sometimes a
Speaker 1: substantial discount. They planned on selling the Pebble at d
Speaker 1: fifty dollars, but the early bird on a Kickstarter Pebble
Speaker 1: was you also want to make sure that you haven't
Speaker 1: grossly underestimated how much it's going to cost you to
Speaker 1: make those things. Yeah. Well, and also one thing that
Speaker 1: is common in kickstarters there are stretch goals. So if
Speaker 1: we reach this goal, we're going to add this feature.
Speaker 1: And if they add too many features to the smart watch,
Speaker 1: it either may not be producible or it gets too expensive,
Speaker 1: gets too expensive or doesn't work right, and then you
Speaker 1: end up sabotaging yourself. And then you either come out
Speaker 1: with something that's less than what you promised, which upsets everybody,
Speaker 1: or you don't come out with anything at all, which
Speaker 1: really everybody. Fortunately, Pebble is not one of the though
Speaker 1: in fact, this first Kickstarter campaign that they did is
Speaker 1: still the fifth most funded kickstarter in history. The Kickstarter campaign.
Speaker 1: That was part of what got them over the brink,
Speaker 1: and it was that and their commitment toward developers. I
Speaker 1: think that helped establish a good reputation for Pebble. Turns
Speaker 1: out that would not be enough to keep things going,
Speaker 1: but we aren't there yet. So two thousand thirteen, the
Speaker 1: watch comes out. The end of two thousand thirteen, you
Speaker 1: see them sell three thousand units, which is pretty good
Speaker 1: for a brand new company with brand new hardware, a
Speaker 1: brand new concept to many people. Yeah, and one that's
Speaker 1: already reliant upon you owning a smartphone because it connects
Speaker 1: via Bluetooth. It cannot on its own connect to the
Speaker 1: Internet so that you get updates and notifications. It has
Speaker 1: to connect to a smartphone. So you've already said, my
Speaker 1: demographic is a smaller pie because it has to be
Speaker 1: people who own smartphones. Yes. Despite this early success, in
Speaker 1: two thousand fourteen, Apple announced that it was making a
Speaker 1: smart watch as a competitor to Pebble. Now, Mischakovsky was
Speaker 1: not really upset about this. Yeah, he felt like this
Speaker 1: is a space where lots of folks could play, and
Speaker 1: he was pretty sure that whatever Apple would produce would
Speaker 1: not be a direct competitor with Pebble because secret here
Speaker 1: is coming close coming us. I mean, here's your secret.
Speaker 1: Apple is not known for making cheap discounts stuff, nor
Speaker 1: are they known for really integrating with other people. Yeah,
Speaker 1: so watch. Everyone was pretty sure one it was only
Speaker 1: going to be interoperable with iOS and to it was
Speaker 1: not going to be like a add on. Apple watches
Speaker 1: are expensive, yeah, for comparison, Pebble watches were about a
Speaker 1: hundred and fifty to two hundred fifty dollars cheaper than
Speaker 1: an Apple watch like base level. Now, they did have
Speaker 1: some technical benefits, and we won't go too much into this,
Speaker 1: but you know their batteries lasted longer a week instead
Speaker 1: of a couple of days, and it had the open
Speaker 1: a p i um, but it didn't have a touch
Speaker 1: screen like the Apple Watch. It didn't have like exotic
Speaker 1: sensors like heart rate monitors or things like that at
Speaker 1: that time, and it didn't have official designer names attached
Speaker 1: to it, like when you got sir Johnny, I've there
Speaker 1: as your designer for your your watch, and then you
Speaker 1: have all these other names for like the the wrist
Speaker 1: bands that are making thousands, thousands of dollars for a
Speaker 1: wrist band for your watch, and man must be nice
Speaker 1: and by watches. Yeah, listen, I got my Pebble and
Speaker 1: must watch all right, so I hear you. But yeah,
Speaker 1: this was also a time where Android was starting to
Speaker 1: push smart watches as well. Actually, to be fair, the
Speaker 1: Google created a platform called Android War, but rather than
Speaker 1: Google getting into the hardware game directly, they created that
Speaker 1: for other manufacturers to use. Yes, you had Motorola and
Speaker 1: Samsung make their versions of a smart watch, and they
Speaker 1: were smarter technically than Pebble, but they weren't getting as
Speaker 1: good of reviews. Right, It's hard to demonstrate the utility
Speaker 1: of a smart watch to the point where you feel
Speaker 1: like you have to have it. Like smartphones, you get
Speaker 1: they do so much, they do it really well. Smart
Speaker 1: watches you have smaller amount of real estate for you
Speaker 1: to be able to use green There are barriers there.
Speaker 1: I don't think anyone has hit upon the perfect smart
Speaker 1: watch implementation yet, but I think activity trackers are better
Speaker 1: about this than smart watches are. But it's for again,
Speaker 1: a smaller piece of the pie. Yeah. Mitschikowski would come
Speaker 1: to realize this later on, but we'll get to that
Speaker 1: later in the episode. In two thousand fourteen, two thousand fifteen,
Speaker 1: right around the time that Apple announced their watch, Pebble
Speaker 1: was coming out with another watch, the Pebble Time. Yes,
Speaker 1: more advanced version of the Pebble. It's going to have
Speaker 1: a lot more higher end features than the Pebble did.
Speaker 1: The Pebble you can think of a sort of like
Speaker 1: a bare bones smart watch. And actually that was one
Speaker 1: of the things that appealed to me, like the swatch
Speaker 1: of smart watches. Yeah, and I was totally fine with that.
Speaker 1: Pebble Time was a step up from that, And like
Speaker 1: the original Pebble, they decide that they would hold another kickstarter, Yes,
Speaker 1: and this kickstarter raised double the amount of money all
Speaker 1: told that the first one did twenty million dollars. So
Speaker 1: this one had a color display, although it used an
Speaker 1: e paper display for this too, so it had sort
Speaker 1: of almost like a faded approach, like some people describe
Speaker 1: it as looking like a faded comic book. Yeah, it wasn't.
Speaker 1: It wasn't as graphically appealing as an Apple watch. And
Speaker 1: it had sixty four colors, so not nearly as many
Speaker 1: colors as what you would find in like a retina display.
Speaker 1: Apple watch. It also had a microphone in it too,
Speaker 1: so you can make voice notes things like note to
Speaker 1: self charge watch. This, like I said, had sort of
Speaker 1: a step up from the original Pebble. And by this
Speaker 1: time they also had a pretty strong developer community, more
Speaker 1: than twenty thousand developers out there and six thousand apps yep,
Speaker 1: which shocked me because I was never really looking at
Speaker 1: the apps part. Now I can't, but I never was
Speaker 1: really looking at the apps part for Pebble except for
Speaker 1: different watch faces. Well, you know, and you would have
Speaker 1: up to fifty watch faces if you wanted. Um. But
Speaker 1: the thing I liked about the Pebble time is that
Speaker 1: you you had your apps, and then you had like
Speaker 1: your eight top apps. They would just kind of display
Speaker 1: in a timeline, so you didn't have to like going
Speaker 1: click through, which is great because you didn't have a
Speaker 1: touch screen. In fact, they had decided that they wanted
Speaker 1: to tie app notifications to timelines. So let's say you
Speaker 1: downloaded an app that would give you sports scores, then
Speaker 1: you would need to dial back into the timeline to
Speaker 1: the end of the game and that would give you
Speaker 1: the sports score. That kind of thing, just to make
Speaker 1: it easier to navigate your watch. Yeah, I think that's
Speaker 1: kind of I mean it makes sense. I mean the
Speaker 1: whole concept of a watches about. You know, it's a chronometer, right,
Speaker 1: it's measuring time. And by the end often Pebble looked
Speaker 1: like it was in a really good position. It had
Speaker 1: sold a million units, which wasn't bad. We don't know
Speaker 1: what Apples sales figures are officially for the watch. They've
Speaker 1: never shared them. They always lump the Apple Watch in
Speaker 1: with the category of other Estimates have put it at
Speaker 1: slightly higher than a million units. In fact, I read
Speaker 1: one that said that in just the quarter that ended June,
Speaker 1: sold three and a half million. Yeah, that's that's in
Speaker 1: one quarter of a year, not a full year. Also,
Speaker 1: it must be a little disheartening from Mischakovski and and
Speaker 1: you know Pebble who says, we think people are going
Speaker 1: to want our watch over Apple because it's cheaper. But
Speaker 1: then again, you're having to appeal to people who already
Speaker 1: have smartphones, which changes the landscape a bit. Now, next
Speaker 1: we're gonna really talk about the issues, the challenges that
Speaker 1: Pebble encountered and why the company is no longer around.
Speaker 1: But before we get into that, let's take another quick
Speaker 1: break to thank our sponsor. Alright, So in two thousand fourteen,
Speaker 1: Pebble makes its millionth sale. Two thousand fifteen, the first
Speaker 1: half of the year is going well, but by the
Speaker 1: second half of the year things were already staring to
Speaker 1: kind of fall apart. And a large reason for that
Speaker 1: was Minschakovsky said people weren't as interested in buying wearable computers,
Speaker 1: and he said, I don't see this actually changing the
Speaker 1: following year. I think we're in a little bit of
Speaker 1: a slump here. People were initially interested. Maybe the people
Speaker 1: who were most interested when out and bought one, and
Speaker 1: now they don't feel the need to buy another one. Yeah, Yeah,
Speaker 1: limited market. This is also kind of the difference between say,
Speaker 1: a smart watch and a phone. You know, a phone
Speaker 1: typically has enough things change from one iteration to the
Speaker 1: next to at least tempt you. If you're an Apple
Speaker 1: iPhone user, you might be getting an updated Apple phone
Speaker 1: every single year, and that's not necessarily the same as
Speaker 1: smart watch. No, And you know, Pebble did take some
Speaker 1: of this into account, where you've got Apple and Android
Speaker 1: making these higher end watches with all the features all
Speaker 1: at once. They figured that they could at feed as
Speaker 1: they found a good providers for him and keep the
Speaker 1: costs low and kind of outpace updates and newer watches
Speaker 1: from Apple and Motorola. But people were just going ahead
Speaker 1: and spending more money on these watches that had everything. Yeah,
Speaker 1: they tried to kind of compete a little bit more
Speaker 1: with Apple with some more upscale versions of the pebble,
Speaker 1: including one that was in the color of gold, if
Speaker 1: not made out of gold. But it didn't really matter
Speaker 1: what kind of trappings you changed around the Pebble watch.
Speaker 1: There were fundamental differences between the way the People watch
Speaker 1: worked and say the Apple Watch. I mean they even
Speaker 1: came out with a pebble round which you know, was
Speaker 1: smaller and round in shape instead of the rectangular one,
Speaker 1: and came out with a new platform for it as well,
Speaker 1: so that as people developed things that could fit but
Speaker 1: not everything fit on around face. Yeah, that's a huge challenge.
Speaker 1: It sounds like it would be a minor issue, but
Speaker 1: it's actually quite hard to design electronics that are round
Speaker 1: in shape. And they also to fit everything into this
Speaker 1: round face, they shrunk down the battery, So now you've
Speaker 1: got this watch that looks prettier to certain people. But
Speaker 1: now the battery only last two days, which is about
Speaker 1: as long as an Apple Watch battery lasts, and it
Speaker 1: doesn't have all the features. So they sold some, but
Speaker 1: it still was not making up for the market difference.
Speaker 1: And beyond that, now that they've got all these different
Speaker 1: versions of their Pebble watch, out their third party manufacturers
Speaker 1: for smart bands because their watches and nately did not
Speaker 1: have GPS or Harrey monitors or health trackers and things
Speaker 1: like that. Right, you can have that incorporated in the band. Yeah,
Speaker 1: and a smart band. But now these manufacturers of these
Speaker 1: third party smart bands are having a hard time figuring
Speaker 1: out what size bands to make and how many to
Speaker 1: make because the band sizes don't fit universally over all
Speaker 1: these different Pebble watches. So without knowing, like how you
Speaker 1: know what the sales figures are going to be for
Speaker 1: each of the different types. Then as a third party
Speaker 1: manufacturing company that could make these smart bands, uh, it
Speaker 1: does make it much trickier, Like you don't want to
Speaker 1: sit there and invest in making way too many smart
Speaker 1: bands for one size and it turns out that that
Speaker 1: was the least popular. Yeah, so that also makes your
Speaker 1: watch less desirable. So, like you said, by the end
Speaker 1: of two thousand fifteen, things were not looking great. And
Speaker 1: this is despite them taking out a five million dollar
Speaker 1: loan and a five million dollar line of credit. Yeah.
Speaker 1: So by the second half of Pebble is no longer
Speaker 1: in the black, it's in the red, it's losing money. UH.
Speaker 1: And in the beginning of things still looking bad. And
Speaker 1: it was one of those deals were in retrospect. And
Speaker 1: this was saying that Midchakovsky would actually admit to later on. UH.
Speaker 1: One of the reasons they went to kickstarters so frequently
Speaker 1: was because they were having trouble raising money through other methods.
Speaker 1: Just as they had had trouble getting investors early, they
Speaker 1: were having trouble raising money to UH to to compete
Speaker 1: in this market space. So they had seen some success
Speaker 1: early on. It was a new category of product. It
Speaker 1: was a very kind of underdog sort of story, and
Speaker 1: a lot of bleeding edge technology adopters found it really
Speaker 1: compelling and so they jumped on board, including me, But
Speaker 1: it wasn't something that they were able to sustain as
Speaker 1: an ongoing business. And um, Midchakovsky actually said that, you know,
Speaker 1: while they did go to kickstarter three times, he said,
Speaker 1: you know, I can't. We can't keep doing that because
Speaker 1: it sends it sends the message to our customers that
Speaker 1: the only way we can survive as a business is
Speaker 1: through their ongoing investment. And that's no way to run
Speaker 1: a product company. It's not so. Unfortunately, in March of
Speaker 1: two thou sixteen, because of these financial woes, Mitchakovsky had
Speaker 1: to lay off about his workforce, which at that point
Speaker 1: was a hundred sixty people. And this was particularly rough timing.
Speaker 1: The company had just recently relocated from Palo Alto, California,
Speaker 1: to Redwood City, and they moved into a new office building.
Speaker 1: And originally they were supposed to take up two floors
Speaker 1: in this office building, and it was, you know, that
Speaker 1: Silicon Valley, super sleek design kind of stuff. But now
Speaker 1: with those layoffs, their team was smaller, and so small
Speaker 1: in fact, that what was originally spacious was now too spacious.
Speaker 1: So Midchakovsky made the call to consolidate everybody onto one
Speaker 1: floor and not draw quite as much attention to the
Speaker 1: fact that there was a lot of empty space around. Yeah,
Speaker 1: but that didn't That didn't solve things, No, it didn't.
Speaker 1: Sales did not pick up the wearables market had not
Speaker 1: really taken on hold. Apple was not enjoying as far
Speaker 1: as we can tell, amazing sales either. They were selling
Speaker 1: well enough, but no one, like at least in literature,
Speaker 1: no one had been really blown away by wearables. It was,
Speaker 1: like I said, peop Will felt that no one had
Speaker 1: really hit upon it. It's just it's just another piece
Speaker 1: of technology that you have to charge, you have to
Speaker 1: keep track of, you have to man and again, like
Speaker 1: I think hardcore fitness tracker fans, that's a group you
Speaker 1: can really market too. But your average consumer still is
Speaker 1: not quite ready. And other than Garman, even really well
Speaker 1: established fitness device companies have struggled. Oh yeah, there's some
Speaker 1: that went out of business. Jawbone went out of business,
Speaker 1: and for a while Pebble and jaw Bone we're working
Speaker 1: together now. Ultimately, the decision came down to Midchaikovsky, like,
Speaker 1: what do you do? Your company is not raising money. Uh,
Speaker 1: the market doesn't look like it's going to magically turn
Speaker 1: around anytime soon. It's getting harder to stay afloat. What
Speaker 1: do you do? He ultimately decided the most responsible thing
Speaker 1: for him to do for everybody would be to sell
Speaker 1: the intellectual property of Pebble to an interested buyer, which
Speaker 1: turned out to be Fitbit had some interested buyers before
Speaker 1: and they kind of all fell through for various reasons. Yeah,
Speaker 1: and the Fitbit deal went through for reportedly less than
Speaker 1: forty million dollars. It was supposed to go through for
Speaker 1: forty million, but then the thought is at least in
Speaker 1: the research I read that Fitbit had some bad numbers themselves.
Speaker 1: Fit that was also having its own struggles. Yeah. Originally
Speaker 1: Fitbit was supposed to buy the intelectual property, the patents affirmed,
Speaker 1: like everything, and most of the employees, and they ended
Speaker 1: up really just keeping the software and the employees that
Speaker 1: worked with the software, the engineers specifically with Pebble, and
Speaker 1: everyone else was let go. That hardware was not part
Speaker 1: of the deal, and Fitbit kept support going for Pebble
Speaker 1: for a little while, but it was not going to
Speaker 1: be forever. Know, they were supposed to end support in
Speaker 1: two thousand seventeen, but they actually ended it later. They
Speaker 1: supported the Pebble community longer than they had initially said,
Speaker 1: which was very kind of them. Um. They stopped supporting
Speaker 1: Pebble in June of two eighteen this year. Yeah, so
Speaker 1: finally the end of the Heuble saga as it stands.
Speaker 1: But I think there are a lot of interesting lessons
Speaker 1: to to learn from here. One is that the power
Speaker 1: of crowdfunding is real, and that, uh, it's a great
Speaker 1: way to to judge at least early interest in a product.
Speaker 1: Hardware products on crowdfunding are hard to do because it's
Speaker 1: hard to really estimate exactly how expensive it's going to
Speaker 1: be to make the thing, especially if it's a brand
Speaker 1: new thing. And I've seen this happen with people I
Speaker 1: know you were producing, you know, stuff like card games,
Speaker 1: and they say, I got quotes before I did any
Speaker 1: of this, and then it turns out everything got more expensive.
Speaker 1: Is like, yeah, this is that's what contractor work does.
Speaker 1: That's how every contract I've ever seen how it works. Um,
Speaker 1: so that's a valuable lesson. Another valuable lesson is just
Speaker 1: really taking a hard look at the potential market for
Speaker 1: your your idea. And it may be that you have
Speaker 1: a groundbreaking concept, but it might be too early for
Speaker 1: it to survive. And to end on a little bit
Speaker 1: of a positive note, Mitchakovsky, despite not coming out of
Speaker 1: this a rich man or super successful, he did learn
Speaker 1: a lot and so now he's working at why Combinator
Speaker 1: teaching people all these lessons that you just talked about. Yeah,
Speaker 1: he says, here, here's what I learned. And like I
Speaker 1: would argue, Pebble is not a story of failure. Pebble's
Speaker 1: Pebbles a story of really there's this great success story
Speaker 1: in the first half. And I think the reason why
Speaker 1: Pebble ultimately wasn't able to stick around wasn't because of
Speaker 1: bad decisions on the part of the team at Pebble.
Speaker 1: It literally was that the market they thought was there
Speaker 1: just had not quite developed. That not enough people saw
Speaker 1: the product as being desirable or indispensable enough to adopt it.
Speaker 1: And if you do, you don't necessarily feel the need
Speaker 1: to upgrade on a regular basis. So once you get one,
Speaker 1: you're like, no, I'm good, I got what I need.
Speaker 1: Does limited things. It does a limited things I need exactly.
Speaker 1: It's a product that is exactly what it promised to do,
Speaker 1: which is both a good thing and a bad thing,
Speaker 1: because coming out with a new version that has a
Speaker 1: few more bells and whistles doesn't necessarily, you know, get
Speaker 1: your attention. It has to be truly transformative. But I
Speaker 1: really am still glad that I bought a Pebble. I
Speaker 1: still wear it occasionally. I'm not wearing it today. It's
Speaker 1: not supported, but it will still kind of work for yeah,
Speaker 1: and still tells time. I mean, you know, until until
Speaker 1: that Bluetooth chip gives out. I think I'll be able
Speaker 1: to be able to see the time that uh. And
Speaker 1: also I really like the watch face I guess, and
Speaker 1: it'll still SMS and email with an Android phone. Yeah,
Speaker 1: so that's what I use. So you know, as far
Speaker 1: as I'm concerned, still works, Yes, But this was this
Speaker 1: was one of our first episodes where we decided to
Speaker 1: take a look at a company where they faced two
Speaker 1: brink moments, one of the very beginning and then one
Speaker 1: that sadly did not work out for them, and we'll
Speaker 1: look at other companies that also had smiler situations and
Speaker 1: similar fates. Kudos to everyone who worked on the Pebble.
Speaker 1: I mean, there were some really innovative ideas and hopefully
Speaker 1: some of those are being incorporated into other technologies even today. Yes,
Speaker 1: all right, well until our next episode, I have been
Speaker 1: Jonathan Strickland and I have been aerial casting. If you
Speaker 1: would like to learn more about what we've talked about,
Speaker 1: as well as keep track of all of our episodes,
Speaker 1: make sure you visit our website at the Brink podcast
Speaker 1: dot show, or you can email us at Feedback at
Speaker 1: the brink podcast dot show.