0:00 Jawbone burned through nearly one billion dollars in venture capital, hit a three-billion-dollar valuation, and then liquidated with two hundred million in debt.0:10 Last week we dug into the fatal math mistake that killed MoviePass, but this...0:15 this is the hardware version of that story, only it’s a death by a thousand cuts, funded by investors who kept handing them sharper knives.0:24 You have to understand, Jawbone wasn't a joke.0:27 They were pioneers.0:29 The company, founded by Hosain Rahman and Alexander Asseily, practically invented three different product categories.0:36 First, the smart Bluetooth headset.0:39 Then they created the portable wireless speaker market with the iconic Jambox.0:44 And finally, they jumped into wrist-worn fitness trackers with the UP band.0:49 They had world-class design from Yves Behar.0:51 They had brand cachet.0:53 They had ALL the money.0:54 So what the hell happened?0:56 The product didn't work.0:58 It’s that simple, and that brutal.1:00 Their big bet, the UP fitness band, had failure rates between twenty and THIRTY percent.1:06 Imagine buying four of something and knowing one of them is guaranteed to break.1:11 That’s not a business.1:12 That’s a recall waiting to happen, and that’s exactly what they got.1:17 As Behar himself said, “Hardware is hard, quality is harder.1:21 If your physical product fails 1 out of 4 times, no amount of marketing or VC funding can save the brand.” And it didn’t.1:29 Here’s the part that gets me.1:30 The money made it worse.1:32 All that cash—nine hundred and thirty million dollars—it acted like a painkiller, masking the symptoms of a fatal disease.1:40 Instead of fixing the core problem—that their hardware economics were broken and their products were unreliable—they just raised another round.1:49 And another.1:50 The CEO, Hosain Rahman, admitted it himself.1:53 He said, “One difficult financing leads to another one, and you think you’re gonna then use that to get outta the hole.” They weren’t getting out of the hole.2:03 They were just digging it deeper with a golden shovel.2:07 And while they were burning cash, the competition wasn't sleeping.2:11 Fitbit ate their lunch on execution and supply chain.2:15 Apple came in over the top with the Apple Watch and an ecosystem Jawbone could never dream of matching.2:21 Meanwhile, Jawbone was distracted, fighting legal battles with Fitbit over patents, which just drained more money and focus.2:30 Internally, it was a disaster.2:32 The co-founders were at odds.2:33 One of them, Alex Asseily, called out Rahman directly, saying, “You’re not being collaborative with people trying to give you constructive criticism...2:43 and your reaction is unreasonable.” By the end, the board was so fractured that some members just quit.2:50 Roelof Botha, their board member from Sequoia, said they just had to resign and let the founder decide the company’s fate.2:58 That’s not a vote of confidence.3:00 That’s an abdication.3:02 So what does it all add up to?3:04 They were trying to be Apple, without Apple’s margins.3:07 Rahman even said it: “We were spending VC cash, developing high-tech, high-design products.3:13 And high-tech, high-design products need good margins.3:17 That’s how Apple does what it does.” They had the high-design part down.3:21 But they didn’t have the margins, they didn’t have the quality control, and they didn’t have the ruthless operational excellence.3:30 They had the ambition of Apple, but the business model of a lemonade stand.3:35 This week’s implosion sets up the most important lesson for any founder listening.3:40 Your investors are not your customers.3:42 Raising another round doesn't mean you’ve succeeded—it just means you’ve convinced more people to fund your experiment.3:50 The market is the only thing that tells you if you have a real business.3:55 Jawbone had a great story, a beautiful design, and a billion-dollar war chest.4:00 But it didn't have a product that worked or a business model that made sense.4:05 All the venture capital in the world can't fix that.
