Otto, the IoT-enabled door lock company, closed down and sacked all of its staff just before Christmas.
Otto’s business was built on a door lock that could be opened using a fingerprint, but before shutting shop, the start-up never managed to deliver the finished product.
In a post on Medium, Otto CEO and founder Sam Jadallah denied that the start-up’s failure was down to a lack of consumer interest or the eye-watering price ($ 699) of its smart lock. In fact, he insisted, “When we introduced Otto to the world, we struck a happy chord with the marketplace.”
Far from being concerned over price, he continued, homeowners “valued the security, design and performance of a new generation of home access that Otto represented.”
Turning point for Otto
So what went wrong? According to Jadallah’s account, the failure of his company is down to a botched acquisition deal, which came shortly after the company began fundraising last summer for its next investment round.
“In early September, we were approached by a public company who understood the product we built, the engineering behind it, and the opportunity it represented. Initially they proposed investing, but quickly shifted the conversation to an acquisition,” he explains.
“It wasn’t our desire to be acquired so early, but they helped convince us that the best path forward was to marry our innovation with their scale and distribution. We would focus our energy on accelerating product development as a global opportunity. This would be as transformational to them as it would be to us,” he adds.
Jadallah claims that the two companies’ signed agreement restricted Otto’s ability to solicit other bids or fundraise, and targeted a close on 11 December 2017. Between September and December, both companies were involved in meetings, trips, due diligence and planning – but on 11 December, the acquiring company called him to say that deal was off. It would not complete the acquisition or revisit the investment proposal, its executives said.
Jadallah says he was stunned, adding: “The reason is still not understood.”
“We had extended our cash to get to the closing date, and now were left without alternatives. Rather than telling our dedicated team that we were accelerating our growth plans and their equity ownership might provide them some financial stability, I had to tell them we could not continue operations,” he continues.
Of course, this is just one side of the story and the would-be acquirer is never named. It also seems strange that a public company would leave it right until the day of the deal to pull out.
The Next Big Thing – or RIP?
Either way, Clive Longbottom, analyst at IT advisory company Quocirca, believes that Otto will be one of many IoT companies that will cease to exist.
“There are far too many small companies trying to be the ‘next big thing’ in IoT – the market does not have spaced for all of them,” he said.
He said that although Amazon and Google are creating a basic set of functions and APIs that others are adopting, there is still a lack of standards that is hampering the industry. Even for those companies that do adopt either of the tech companies’ basic standards, there is no guarantee of success.
“As the Alexa and Google standards mature, these other third party companies will need to ensure that their equipment keeps up with the changes – and that costs money. It’s fine if you have created a large enough market already, such as with Phillips Hue or Hive and Nest, but very difficult if you have a ‘wonderful’ door lock with nothing else,” he explained
However, the technology behind the company may not be disappearing forever, as Jadallah said Otto will be evaluating its options in the coming weeks.