Starting a connected device business can be tough.
This is
emphasized at each annual CES in Las Vegas, where countless startups show the fruits of their work, some of which will never reach the market for any number of reasons.
Now the maker of a
high-end smart lock is calling it quits just before CES.
California-based Otto, which showed its smart lock in late summer, just announced it is suspending operations after a deal to be
acquired fell through at the last minute.
A lengthy note from Otto founder and CEO Sam Jadallah detailed the demise of the startup.
“This past summer, we began fundraising for
our next financing round,” stated Jadallah. “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. 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.”
The deal was set to close in the second week of December.
“On December 11, they called me and
stated they would not complete the acquisition nor revisit the investment proposal,” said Jadallah. “I was stunned. The reason is still not understood.”
While the potential
sale was in the works, the startup backed off its fundraising.
“Our signed agreement restricted our ability to solicit other bids or fundraise and targeted a close on December 11,”
Jadallah said. “The interim period was consumed with meetings, trips, lawyers, planning and intensive due diligence.”
The smart lock was targeted to the high end of the market and
was to be priced at $700, a steep price for any smart lock, no matter how elegant a design. The company, with some ex-Apple employees, had received tens of millions of dollars from investors.
It just may be that the acquiring company ultimately figured that getting many consumers to pay $700 for a smart lock, which can’t work as a replacement for many locks, was not a promising
business.
For example, the Schlage Sense smart lock costs $200, the August Smart Lock HomeKit enabled $172, Yale Real Living Z-Wave $1600 and the Lockitron Bolt $143.
The cheapest form
of hardware for opening a door isn’t very smart, but still remains the biggest competition for smart locks. It’s the key.