Hacker News Reader

Comment by twblalock | Hacker News Reader

If I understand the sequence of events properly, the company entered acquisition negotiations and agreed not to solicit other bids during that time. When the acquisition fell apart, the company was out of money and had to stop operations.

If that's correct, it seems to me like it's something they should have known in advance -- if they knew they would be out of money by the end of the year, why would they enter acquisition talks that were planned to last until then?

Either they didn't know when they would run out of money, which is a pretty important thing to know about a startup company, or they decided to bet the company on the assumption that the acquisition would not fail, which was very irresponsible.

An employee named Ben Havilland wrote a comment on the article that's worth reading.

View on HN

Thank you for pointing this out. For those reading, an archive now exists https://archive.fo/CJF9r

the original comment is at https://medium.com/@ben_73928/as-one-of-the-team-members-let...

> CEO and investment team ignored the negative aspects of the $700 lock and didn’t see that the competition would be able to provide the same features (and more) at less than 1/2 the price.

If Ben realized this, he should have never worked at this company in the first place. It sounds like it was a failure of a product strategy.

A $700 lock is a product offering, not a product strategy. A strategy could have been "start with a $700 offering at the top of the market and work down," but that's not something they tell you on the way in, and even if they do, it's no guarantee that the execution will/won't work.

Whether you want to call it an offering or a strategy, Ben doesn't claim that the failure was due to any aspect of the business model other than a) price, and b) competitive risk. Both of these were risks that existed (I assume) at the time he joined the company. So he can't blame management for failing to assess these risks any more than he can blame himself.

> A strategy could have been "start with a $700 offering at the top of the market and work down," but that's not something they tell you on the way in

This is absolutely the kind of thing you should be asking about and they should be telling you on the way in. As an early stage startup employee you are basically an investor. You should deeply understand how the businesses you are joining are going to work, and if they wont tell you you should consider it a red flag.

I have been lied to on the way in. You hear about all this incredible stuff coming down the pipe that just needs a little more work. After a few months you figure out that that cashflow was 1/10th of what was implied and the pipe is dry.

Some tweets from Christmas Day : https://mobile.twitter.com/clickyspinny/status/9451788438908...

> @joshelman do something. Help us. Two days notice before a holiday with no compensation for the fact that not a soul hires during these weeks. You have the $ to pay severance when you terminate 70 people. So you decided on letting us all get screwed. You need to help us.

Okay, there's possibly some reason for sympathy here. But how much were these 70 people being paid? How much did they save? How many of them could have been in a position to have a month or more of cash saved as an emergency fund? It's smart in any situation to save for a rainy day but especially so when you're working for a startup.

It's unlikely any of the employees are truly broke, they're just (rightfully) complaining about not getting a reasonable severance.

It's likely that several of these employees are legitimately broke (for reasons beyond their control, not because they're bad at adulting), but they conceal it. Signs of weakness harm your negotiating position.

Honest question: What normal circumstances would lead to anyone making six figures being broke that doesn't involve bad adulting?

Paying off student loans, medical bills, emergency car repairs... basically anything that might deplete an emergency fund or where you might have dipped into this on the assumption your job wasn’t about to be made redundant.

Children.

Are you calling these people children, or suggesting that children eat up emergency funds? I suspect the latter.

Not having much of a savings, and moving to the bay area after getting a bay area job with a bay area salary (wow!!), only to realize that you also need to pay for bay area rent (WOW!!!).

If said person has animals, children, or a spouse it becomes even more complicated.

This question makes it hard to believe you’re of adult age. Just about any adult should be able to imagine reasonable circumstances in which they could make “six figures” and still struggle to (e.g.) make rent.

This is almost the definition of bad adulting. If you make six figures, there's so many ways to live in the US within your means. Of course you can create difficult circumstances for yourself by paying 4k in rent as the sole provider, but this is irresponsible.

What's the deductible on your health insurance, my dude?

protip -- that fucking deductible resets 1 January, so if you were to get hurt in late 2017 and the treatment spanned calendar years, surprise, you pay it twice! One of the reasons I left my last shitty startup job is the deductible was $6k, ie a month's take home wages. That's not real health insurance.

That’s a nice hill and all, but you don’t have to die on it.

I don't think you appreciate just how crazy Silicon Valley, and by extension, most of the rest of California, is. You don't really get an option to not participate in the craziness if you live there. Your only real choice if you want financial sanity is to not live there. Naturally, it's difficult to work in a SF-SV-based startup if you don't live there.

So we're not talking about responsibility anymore, you're moralizing on people's life choices. There's no way to responsibly live in SV without being already rich.

Location, location, location.

Now, if you can get into a remote position, awesome, but I could see living in SV or NYC or similar and feeling middle class pangs at low 6 figures.

I've been one of those people. Sending money home to parents who were barely holding on to their home, and with health conditions that insurance terminated coverage for, combined with rent getting jacked up, a $4000 emergency room bill I couldn't even pay, and my own health issues creating a vicious cycle of lower productivity, more stress, worse health.

This isn't even an uncommon occurrence. I had coworkers (at one of the big 5) who were making pretty decent money who were still in the hole for similar reasons.

Have some compassion man, jeez.

A good friend's brother was badly hurt. Insurance is fighting paying for things. My friend has paid about $40k so far, and he was laid off two weeks ago. Even if you earn $150k in the valley (which btw is really only $95-ish k after taxes), that's a lot of money. The dirty secret to health care in the united states is the good providers can not serve you if you don't have the right insurance.

My partner worked in an industry that laid off 50% of their employees. It took her 8 years to get close to her old salary. No matter what anyone says, the reality is very few of us are truly prepared to have our jobs/industry vanish.

My brother who doesn't earn much money had significant health bills for one of his kids. I hadn't planned to spend that $10-$15k.

My idiot nephew road a dirt bike on a road (against all his parents' rules) when he was 15 and didn't have a license. He didn't look both ways, there was a truck coming, and he was hit by the truck. His parents had to buy the guy a new truck because my nephew wasn't licensed to drive, and pay the deductibles for several surgeries.

At least the employees were paid for each day that they worked. At least five contractors were not paid for work dating back two months.

Those were exactly my thoughts upon reading it. “Four weeks from generating revenue” and then sudden death because of a failed acquisition sounds like awful planning for a well-funded startup.

Also, it’s a damn internet-connected door lock with Bluetooth. Do you really need $45M and designing new mechanical systems from scratch to make it work? I’m sure their team did amazing work but all of it sounds incredibly head-in-the-clouds.

>Also, it’s a damn internet-connected door lock with Bluetooth. Do you really need $45M and designing new mechanical systems from scratch to make it work?

If you don't intend on making just a "damn internet-connected door lock with Bluetooth", of which there are many, but a great one, then very possibly yes.

Many great hardware products and companies have been built on budgets a fraction of $45M. Even the Apple 1 was an ugly hodge-podge of parts. If you want to build pyramids, it's best figure out how to build sand castles before.

The thing is, the definition of a great product is one that solves a user's need. While people may have problems with the internet-connected door locks they have now, I'm pretty confident their issue isn't with the deadbolt mechanism, which is as close to a solved problem as you can get.

The market for people who care that their door locking mechanism is as precise as a Swiss watch is so vanishingly small, it feels almost self-evident that there's not a viable business there.

It reminds me of Juicero. The mechanism was total overkill -- it was actually very well engineered and machined as though cost was no object. They would have taken a loss selling them even at $699.

The mechanism of a deadbolt is pretty simple. Other smart lock companies do fine with simple mechanisms. The way to differentiate a product in that space is ease of use and battery life, not by needlessly over-complicating a part that the users won't see.

From their website: “Freed of keys, you might just have more time and opportunity to explore life’s possibilities.”

C’mon really?

Similar to Juicero they could have gone to market with a simpler and less over engineered product and have a viable company but leadership had their heads in the clouds. He even starts the article with how amazing the Swiss watch engineer respected their work - as if that matters in the door lock market.

From the article: “... our customers would fall in love with the way they engaged the product and actually experience joy as they used it.”

I’m having a hard time visualizing myself experiencing joy unlocking a door.

> From the article: “... our customers would fall in love with the way they engaged the product and actually experience joy as they used it.”

He doesn't seem to have literally copy-and-pasted that palaver from somewhere else, but the first page of these search results suggests a malfunctioning robot stringing together memorized phrases at random:

https://duckduckgo.com/?q=our+customers+would+fall+in+love+w...

Besides, a lock seems like the last place I would possibly want to power something by battery...

>it was actually very well engineered and machined as though cost was no object

I would argue that it wasn't really engineered at all. Almost anyone can build something with a practically unlimited budget; engineering is a game of trade-offs. That juice press was ridiculously over-designed and didn't need to cost anywhere near that much.

They must have wanted that deal pretty bad. At the very least they should have demanded a break-up fee in return for agreeing to forgo all other attempts at finding an investment partner. The acquirer might very well have refused but that would have been good information to consider.

There has to be something else going on, otherwise Greylock would have given them some kind of bridge. 4 weeks to revenue also doesn't mean 4 weeks to profitability. 70 employees in the Bay Area probably implies a burn rate north of $10mm annually.

From the blog post:

>I define startups as companies that don’t have control of their own destiny because they rely on investor cash infusions to operate. When asked, “How’s business?”, I always replied “I don’t have a business yet, we’re still a startup.”

I despise this definition. I have grown my hardware startup sustainably while pursuing an engineering degree and maintaining full control of the company. I may soon look for VC funding, I may continue to use revenues and personal savings, but nothing will change my responsibility for my business' future.

The fact that you've had money invested into your startup means you have increased control of your destiny, not the opposite. Use that money shrewdly and build a product people want, and you will succeed. That Otto was able to burn through $45 Million in funding without shipping a product makes me believe that poor management and product strategy is behind their failure, not bad luck as the article would ask you to believe.

Why is what you have not a "small business?" Is that phrase just not sexy enough?

Being a stable bootstrapped small business is more worthy of respect than being an unstable underfunded startup, in my opinion.

certainly more respect than an unstable, overfunded startup too!

Late response, but I often times do use the term small business when talking to people about it. But it's also a startup, which is why I responded so strongly to that bit of the blog post.

> I have grown my hardware startup sustainably while pursuing an engineering degree and maintaining full control of the company.

Can I ask how you had time? And what was your source of income and funding while you were doing that?

And engineering degree alone is a huge workload, no?

I found time by picking something I enjoyed doing - turning my hobby into something more, and occupying that time plus some more. And then honestly I prioritize it over getting great grades in my classes, because even if it fails I'll still get a lot more out of the experience (personally) than sitting in a lecture or checking over the answers of a problem set. I bootstrapped with about $3000 of savings, and run a lab at school that's a bit of extra income. Pick the right market and be smart with your suppliers and revenue can start coming in pretty quick. But you're right, time is the big thing stopping me from growing faster... I worked full time last summer and that pretty much stopped me from doing new R&D work, this summer I'm going to be working on the business full time, we'll see how it goes!

I don't see the reason to hate that definition. It feels spot-on.

The defining characteristic of a startup - as the word is used in the real world - is being unprofitable and funded by investors. That literally means one doesn't have control over their company, because they've sold ownership to investors.

What you have is a sustainable, bootstrapped small business. It may not sound sexy, as 'dfcowell points out, but IMO, it should - it suggests that the company is actually doing something useful, unlike many startups, which exist only as long as they can keep the growth up to solicit more investments.

I wonder what, if anything, the agreement to proscribe other fundraising was traded for? Why would the management enter that deal without something in return (i.e. a cancellation penalty payment)? It seems negligent at best.

Yes. Also, the video about the product https://www.youtube.com/watch?v=UsT5xvoaHBo was kind of disturbing, talking about "those we love".

To the people you love, you don't send a code or some app or procedure. You greet them at the door.

If you need to send people a code to enter your property, you're not loving them, you're running a business. Which is fine -- just don't pretend it has anything to do with "love".

Or if you truly love everyone... then you don't need a lock.

Love ≠ Trust

For example if I love a junkie, I wouldn't want to enable that person to easily enter my house to steal something to pawn for drugs.

Love == Trust -- or we really disagree about love, so much in fact, we might as well use different words.

That might be why there are 2 different words for those 2 things.

That’s an interesting definition of love. May I ask if you have kids?

For me, love is multi-faceted and can’t be defined as a single attribute like trust. People love food that literally kills them. You don’t always get to choose whom or what you love.

> May I ask if you have kids?

Yes you may. I have 3 (8-9-12). I don't "trust" them to not eat candy that I said they shouldn't eat, but I do trust them not to kill me in my sleep -- which is what trust is about (IMHO).

In fact I think I trust them more than I love them, and I love them a lot. But sometimes I'm upset with them. Being upset or angry doesn't affect trust.

Trust is a kind of binary quality that is either on or off; it may be too strong to say that love == trust, but I really can't imagine how I could love someone without trusting them.

Look up the marshmallow experiment.

I'm wondering how this is relevant, when I looked at the wiki article[1] it seems to be about delayed gratification.

1. https://en.wikipedia.org/wiki/Stanford_marshmallow_experimen...

Yes, the marshmallow experiment is avout self control and not trust or love.

Sometimes those we love do things that hurt us. While we may still love them, our trust can be broken (to varying degrees).

So I guess you don't believe in "unconditional love"?

I just can't imagine not loving my kids even if I knew I could not trust them. Another example would be family with mental illness to such a degree you may actually fear they will kill you in your sleep, but hopefully they would be placed in a safer environment and still have their families love and support.

I do believe in unconditional love -- in fact it's my whole point. How can you not trust your kids?

The case of mental imparemeent is interesting and I had not considered it. It would be possible to argue that the person isn't there anymore if they're crazy, and there needs to be someone to exercise love against. I'm not sure.

Also, maybe persons with mental illnesses could be trusted more in our society.

> I do believe in unconditional love -- in fact it's my whole point.

OK, so if love is unconditional, then what about situations where you love them but they hate you? If it's unconditional love, then you love them regardless of their feelings towards you.

What do you do if your kid is an actual psychopath and doesn't love you. Do you still love them unconditionally? Would you trust them with the keys to the gun safe?

What do you do if you have an adult child that has made some really bad life choices and is spiraling out of control addicted to hard drugs? Do you still love them (unconditional, right)? Do you trust them with the keys to your alcohol cabinet? The details to your bank account?

Love != trust.

There are some situations where if you truly love someone you do not extend them trust (because they will abuse it regardless of your love for them).

Drug and alcohol.dependency are the things you need to worry about, not mental illness.

http://research.bmh.manchester.ac.uk/cmhs/research/centrefor...

Page 5:

> xx. In all four UK countries, most patients convicted of homicide also have a history of alcohol or drug misuse, between 88% in England and 100% in N Ireland. In other words it is unusual for mental health patients to commit homicide unless there is a coexisting problem of substance misuse.

There is a strong correlation between mental illness and substance abuse.

https://www.drugabuse.gov/publications/research-reports/como...

But it's the drug and alcohol misuse which predicts violence, not the mental illness.

I don't think it is so clear cut, there are certainly violent mentally ill people who don't use substances. Alternatively there are addicts who are very kind.

> Love == Trust

Simple counterexample: An aged parent with severe Alzheimers. Maybe it's not OK for them to have unfettered access to the car.

You want oversight/control/verification because you love them, not despite it.

If you love someone you should be willing to give anything up. Anything. Morals, country, God, anything -- let alone, property.

If not, that's ok but it's not "love" in my book.

Love is sacrifice. Be with someone that brings you joy when those sacrifices are necessary.

Yes, love is sacrifice, that's my point.

Maybe the above comment is unclear. By "let alone" I mean "including, of course", not "excluding".

Yeah, based on the video I think they got the market for this wrong. I can easily imagine businesses wanting something like this. I don't know anyone who would be running to get it at home.

Our signed agreement restricted our ability to solicit other bids or fundraise and targeted a close on December 11th, 2017.

Indeed, that was just poor management. Did they have a board that accepted that too? It seems like having a sole bidder is the single worst way to get a good price. You only do that if there's no other choice.

Sam was a general partner at Mohr Davidow, and a Managing Director at Internet Capital Group. He was a 12 year early employee at Microsoft. He had to know better.

people only get backed into corners (i.e., exclusivity, compelled actions, or some kind of limitation on funding, bad pricing) when they're desperate.

protip: never be desperate.

easier said than done, sort of like "eliminate refined carbs from your diet" or "save enough for retirement" or "stop looking for love in all the wrong places"

The post didn't say this directly, but it could be that they had no other options. He said that they had started fundraising efforts and were resistant to an acquisition - reading between the lines, their attempts for another round of funding were shot down cold.

The employee never worked on the actual product. He joined as a contractor 1 month before launch to work in the IT department on the website. He had been with the company only 3 months.

So, I disagree with his comments about the product. His points about management should be taken into consideration. The shutdown was mismanaged.

The core engineering team had folks with 3+ years working on Mechanical, Electrical, Firmware, iOS, Android and Backend engineering. This was not an easy feat to pull given the small team and that the manufacturing was in China on the same lines that build Apple's iPhone with the same level of quality.

So what if he wasn’t there the entire time? Why are you trying to attack his credibility?

I mean - think about, would you listen to someone who had given 3+ years of blood/sweat to a company and product vs 3 months.

The shutdown was mishandled, we all felt the pain. Most of all the contractors and I wish I could pay them. I would if I had the money. But I am also looking for a job.

> I mean - think about, would you listen to someone who had given 3+ years of blood/sweat to a company and product vs 3 months.

I think both people would be worth listening to. The one who was there for three months would probably have a very different perspective on the corporate culture and management, by virtue of not having worked there long enough for those things to seem normal.

This is the same reason some companies get value from bringing in outside consultants -- their different perspective enables them to recognize aspects of the business that have not occurred to the long-term insiders.

Right, and I would agree with you - we had outside consultants who worked alongside us, in iOS, in Firmware, in Cloud, in EE, in Security. We all worked as a team to put the last finishes on the product. Also, there were a lot of new employees as well. The whole SW QA team was hired this year.

We did not know about insolvency - no one did - except the leadership team, or many would have raised concerns or left. Maybe this was the fear. Who wants to acquire a company where people are jumping ship.

We wanted the product in people's hands. Heck, it's on my door at home.

I also would say that this employee has the right air his grievances. I disagree with his criticism of the product and the company's mission and vision. I believe - there was no malice. There was mismanagement.

He doesn’t blame malice, he blames negligence and greed.

That makes it sound worse. Based on what you say he wasn't paid for 2 out of 3 months. And presumably they were bringing new people on until the very end, when they must have known it might fall apart.

He fought hard to become full time, he came in as a contractor and became full time within a month. He was paid until the last day. The contractors in the engineering team were all given option join full-time from the get go - they chose not to become full-time. No one in engineering knew we were shutting down. We were told 2 days before shutdown. I worked until 11 pm with many team members, including my manager until the night before.

Reply on news.ycombinator.com