I recently saw a story about a smart lock startup that had made some financial decisions that resulted in the company locking up its doors – before it had even had a chance to ship its product and truly launch in the smart home space.
Haven’t heard of Otto before? That’s not surprising; they were more in the luxury smart home space than they were in the mainstream smart home space, where you can find brands like August and Kevo. Touting that their product was something that you could mistake for an Apple product, the $700 product would have given users a few options to access their homes, including push-to-unlock and digital combination.
Otto was founded in 2013, and during a recent round of funding, instead struck a deal with a company that agreed to acquire Otto and take over management of the shipping process. Unfortunately, just a few months shy of the expected shipping timeframe, the deal fell through and annihilated Otto. Without any other funding, the company is likely going to be forced to close up and lock up.
I suppose for the customers that were ready to invest in this product, the timing was good; I’m sure they will be refunded for any pre-orders they placed. At $700 each, refunds better be in order.
But, what DOES happen to our connected smart home when companies go under? The industry is still very new; though big brands are releasing their own products, there is still room for currently unknown brands to throw their hat in the ring. With those small, unknown, many times still startup status, brands, the consumers are risking a vulnerable home.
Here are a few things I think might happen as consumers get burned by Kickstarter and IndieGoGo campaigns for smart home products:
While some consumers might want to start with a smaller company – big your reason here, maybe they think the big companies are selling their data or working for the government – they might end up with less trust for the small guy. If a product is hyped and ordered but then never delivered, people are going to stop trusting these start up campaigns. If a product is received and integrated, and then a company shuts down and stops supporting their project, well that is even worse. At that point, the user has to spend more money on a new product, then reconnect its whole smart home system.
As consumers decide to take the leap into smart homes but get burned by their grassroots intentions, they might be slower to convert to smart homes in general, and certainly slower to convert to the big name brands in the space.
Big Smarts to the Rescue
All of this is going to set the industry up for big success for the big brands. As some people lag behind because of their trust issues, the big brands will improve their products, expand their lineup, and acquire the startups that have found success. By the time these “burned” users are ready to try again, they will find a renewed trust in the big brands.