After years of struggling against dominant competitors like Fitbit and Samsung, multiple strategic shifts and failures, fitness tracker company Jawbone has gone into liquidation.
The collapse of the San Franciso-headquartered firm, which at its peak in 2014 was valued at US$3.2 billion ($4.4b), was reported last week by technology website The Information.
Chief executive Hosain Rahman has founded a new company, Jawbone Health Club, and is taking a number of employees with him, according to multiple reports.
"It's a nail in the coffin for the way we know Jawbone today," IDC analyst Jitesh Ubrani told Bloomberg. "We'll probably know them very differently going forward. Within the medical industry they might be recognised but not by the consumer."
The company began its life in 1999 as AliphCom, selling various products including Bluetooth headsets and speakers, before changing its name to Jawbone in 2011 and entering the burgeoning fitness "wearable" market.
With more than $900 million raised from venture capital firms Sequoia, Andreessen Horowitz, Khosla Ventures and Kleiner Perkins Caufield & Byers, as well as the Kuwait government's sovereign wealth fund, Jawbone now ranks as the second-largest failure among venture-backed start-ups behind solar energy firm Solyndra, which went under in 2011.
Speaking to Reuters, industry experts said Jawbone was an example of too much cash actually being a bad thing, sustaining a business that has no future and artificially inflating its valuation, preventing a suitable acquisition.
"They are basically force-feeding capital into these companies," tech entrepreneur Sramana Mitra said. "I expect there will be a lot more deaths by overfunding."
Despite worries from existing investors as Jawbone struggled to gain market share, last year the Kuwait Investment Authority poured in cash, leading to a US$165m funding round. Such large fundraising rounds "create this artificially bloated valuation that doesn't compute with the revenue", Mitra told Reuters.
In 2015, Jawbone sued Fitbit and a group of former employees who quit to join the rival company, alleging they stole trade secrets, business plans, market research and other information.
The lawsuit claimed Fitbit recruiters contacted about 30 per cent of Jawbone's employees in early 2015, and the employees who accepted Fitbit's offer took information about Jawbone when they left.
According to Bloomberg, citing one person close to the company, the ongoing lawsuit against Fitbit is the biggest asset it has left, out of which Jawbone believes it can generate returns to its creditors.