Jawbone Is Latest 'Death by Overfunding'

Too much venture capital may have been responsible for company's demise
By Elizabeth Armstrong Moore,  Newser Staff
Posted Jul 17, 2017 9:45 AM CDT
Was Jawbone Overfunded to Death?
UP app by Jawbone.   (PRNewsFoto/Jawbone)

With $41 billion pumped into startups by venture capitalists last year alone, some experts argue that big-money failures are "inevitable." But Jawbone's recent collapse is so monumental that only the Solyndra bankruptcy of 2011 tops it, reports Reuters. And some argue that all the money pumped into it led to its overvaluation and ultimate demise. The consumer electronics company that took on health-tracking wearables like Fitbit was fed so much money by top-tier VC companies—to the tune of $900 million—that it was valued at $3.2 billion in 2014, but its fitness tracker never found a big enough audience, and Jawbone began liquidating proceedings in June.

"They are basically force-feeding capital into these companies," one consultant and entrepreneur says. "I expect there will be a lot more deaths by overfunding." Used-car marketplace startup Beepi also recently closed shop after raising $150 million, and startups like Zenefits and Ola have seen their valuations plummet. But venture capitalists are still raising record-high numbers, topping the charts at $41 billion last year. And just as Uber appears to be digging its own grave, Lyft raised $600 million in April. Meanwhile, USA Today reports that Jawbone has left "a trail of irate customers with little recourse but to vent online," while the Better Business Bureau recently bestowed Jawbone with an "F" for "unanswered complaints." (Check out what most fitness trackers are getting wrong.)

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