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TABLE OF CONTENTS INTRODUCTION
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COMPANY OVERVIEW
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FUNDING
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MARKET
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SCALABILITY
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CONCLUSION
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Introduction Over the course of history the purpose and uses of a watch have changed numerous times and once again the watch is undergoing another transformation. Whether that watch was something stored in a pocket or on the wrist of soldiers in order to synchronize strategic moves, the purpose has always been to tell the operator the time. It is no surprise then at this juncture in time, the development of the watch has progressed to meet the demand of a technologically hungry generation. This is where Pebble: The E-Paper Watch, comes into the picture. It is the first digital display watch to work seamlessly with both Android and iOS devices. Using Bluetooth, Pebble syncs with your phone to provide real time information relating to your phone. The idea came from Eric Migicovsky, a Canadian who moved to Palo Alto, California in order to take full advantage of all of the benefits of Silicon Valley, the mecca of tech start-ups, has to offer. Migicovsky, along with his team, developed a prototype and turned to KickStarter, the popular crowdfunding site to create their dream. After one of the most successful campaigns, Pebble began production and is now in full force. Just recently they released their second watch, the Pebble Steel, a more sophisticated steel framed watch for those fashion conscious consumers. Pebble continues to flourish because of their open source software that allows its customers to write new apps for the watch and allow other users to access them. Pebble has benefited greatly from opening up to the public and they are just one example of how crowdfunding and sourcing can enable a business or idea to grow and ultimately succeed.
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Company Overview While studying at The University of Delft, Eric Migicovsky began his plan for what is now “Pebble smart watch.” During his exchange in The Netherlands, Migicovsky was immersed in a culture that was different than anything he had ever experienced. He was interested to discover that “approximately 90% of Dutch people ride bicycles a day.” With cycling being such a large part of Dutch culture, Migicovsky found that the Dutch people have an uncanny ability to both cycle and execute other tasks. As a foreigner, Migicovsky was unable to multitask as successfully. The main problem Migicovsky found was that he was unable to check his messages as he rode. This is when Migicovsky identified a need for what he originally envisioned as a “bike computer.” As he began his work on his “bike-computer,” he realized that bicycling is not the only time that smartphone users could benefit from a device that would simplify multitasking. This is when the idea for a watch was born. The watch that he envisioned was a primitive version of what Pebble smart watch is today. He imagined a device that would allow him to check messages as he cycled without needing to reach into his pocket. This convenience is just a minor upside to the current capabilities of Pebble smart watch. The road leading to this final product though, was not quite refined. The first unit of hardware Migicovsky pieced together was composed of a Nokia cellphone screen and several circuit boards that he was able to purchase online. This was what Migicovsky considers the minimum viable product. This was his first prototype in his quest to create a smart watch. In 2009, Migicovsky felt he had finally created his dream when he released his first sellable product, Inpulse. Inpulse is an ancillary device that works along side Blackberry smartphones. While he was working on the idea of 4
Inpulse, he was studying at the University of Waterloo in Ontario, Canada. Waterloo is home of Blackberry headquarters, which ultimately made Migicovsky incorrectly gauge what was really going on in the market for smartphones. Despite his very impressive new product, its growth in popularity was minute compared to what Migicovsky would have hoped. The truth was that Blackberry was being overshadowed by Apple and Android and no longer held its original position at the top of the smartphone market. As Inpulse failed, Migicovsky was constantly being asked when his product would be compatible with Apple and Android; this is what led to Pebble. Pebble is a Bluetooth linked smart watch that is compatible with both Apple and Android smartphones. It acts as a complimentary device to a smartphone as it is able to receive messages, emails and other notifications. In addition to receiving notifications, Pebble is capable of running many of the smartphone apps that allows users to customize the use of their Pebble and ultimately grow and change it as they please. The Pebble watch is very unique in its ability to change. Whether aesthetically or through app building, Pebble is constantly able to improve its look and its features. The company has also improved Pebble this year in releasing Pebble Steel, the same great product, in a stronger, sleeker package.
Funding Pebble was originally designed based off a concept conceived by founder Eric Migicovsky. He invisioned a watch that could display messages from a smartphone and select android devices, similar to that of existing Bluetooth cellular earpieces. Migicovsky successfully pitched his idea to the Y Combinator business incubator 5
program based out of Mountain View, California. With surprise to those at Y Cobinator, Pebble actually generated revenue during the program. Migicovsky was able to raise $375,000 from investors such as Tim Draper of the Californation venture capital firm Draper Fisher Jurvetson, but was unable to raise additional funds. The investment from Draper was, unfortunately, not enough to support the development and production of Migicovsky's minimum viable product. "I wasn't extremely surprised... hardware is much harder to raise money for," he said in an interview with the Los Angeles Times. "We were hoping we could convince some people to our vision, but it didn't work out." Additionally, the company failed to attract traditional investors under their new brand name after raising venture capital for the product under Pebble's former name inPulse. Thus, the company resulted to alternative means of funding. With that, Pebble launched a Kickstarter crowd funding campaign on April 11, 2012 with an initial fundraising target of $100,000. As a reward, backers spending at least $115 would receive a Pebble when they became available. For the first 200 backers, the minimum investment was $99 in order to recieve a watch (effectively purchasing the $150 watch at 2/3 the price). To the absolute surprise of Migicovsky, the campaign met the initial $100,000 goal within two hours of its release. After six days, the campaign had become the most funded project in the history of Kickstarter, raising over $4.7 million with 30 days left in the campaign. Following a surge in the number of backers, Pebble announced on May 12th, 2012 that they were limiting the number of pre-orders. Six days later, on May 18, 2012, funding the campaign closed with a staggering $10,266,844 pledged by 68,928 people.
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Looking back, there were several unique elements to the initial Pebble campaign that set a precedent for future campaigns. To begin, Pebble gained the attention of bloggers and media. The exposure on their personal outlets, as well as the attribution on the Pebble Kickstarter campaign page, helped assure consumers of Pebbles quality. Additionally, Pebble followed up media inquaries with press packets that included high resolution photos and detailed information regarding the product. The ability for others to create high quality content regarding Pebble, was crucial in being able to promote the campaign. Another impressive and unique element of their campaign focussed around offering frequent and engaging communication content. Pebble realized that communication isn't an important part of a crowdfunding campaign, but rather that communication is the campaign. The company published frequent updates and prioritized their customer service by immediately and personally answering customer inquiries and requests. Pebble also stunned backers with an engaging video that caught the attention more directly than text and images alone. Statistically speaking, Kickstarter has stated that projects with videos are successfully funded 50% of the time, while those without are only 30% likely to fund their project.
Market Though the market for wearable technology has been around for the past decade or so, the market for smartwatches has only just developed throughout the past couple of years. The ability to sync personal information from smart devices like cellular mobile phones with wearable tech products like smartwatches has encouraged tech giants to 7
develop and sell their own devices. Consumers have desired a way to formally train things like their physical activity, and as business analysists have seen, consumers are embracing "cloud based" technology that allows for the integration of information across all products. Since the release of the first wearable fitness tracking computers with tightly integrated fitness training and planning software in 2006, the success of wearable computing has so far been secured by the selling of smart fitness bracelets such as the FitBit and the Nike Fuel Band. Nonetheless, smartwatches have added a whole new dimension to the mobile technology market. As of today’s market standards, most smartwatches have screens, and often run software that allows users to sync information between their smart devices. The ability to serve as an extension to complement smartphone operating systems and apps has transformed the longstanding purposes of what it means to own a watch. Tech giants have started to capitalize on this growing market. One example of this occured on September 9th, 2014, when Apple unveiled their much anticipated smartwatch. The watch, which had been the subject of much speculation and rumors for the months prior to its release, was generally well received by the public upon release. The Apple Watch is expected to enter the smartwatch market and challenge the survival of many other products like Pebble. Nonetheless, Apple has brought a lot of attention to the evolving smartwatch market, something that a lot of other companies have failed to do. Though they’re not the first tech company to introduce a smartwatch, they’ve been able to get a lot of public interest in the technology. In fact, they’ve been able to do all of this without actually
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selling the product (as the product is available for purchase in 2015). The hype is similar to that of the release of the iPad, when tablet technology was only first made popular after the introduction of Apples iPad in 2010. Pebble has garnered support from orginal backers, bloggers, and the tech media. Originally, the popularity of Pebble not only brought attention to the product, but also to the idea of crowdfunding. In January 2013, Pebble entered mass production with a planned production of about 15,000 watches per week. Shipping was first expected to begin September 2012, but do to surprising success, Pebble was forced to begin shipping units on January 23, 2013, about four months after the fact. More recently, Pebble has sold over 400,000 units since March 20, 2014. In comparison to Pebble, the Apple Watch has a cult following of supporters. Pebble has only reached those who already know about it. Marketing the Pebble has been a difficult task simply because the trend of smartwatches has not yet caught on for most of the public. According to the newly founded Smartwatch Group, a research institution dedicated to tracking the movements of the smartwatch industry, smartwatches are expected to only account for about 5% of the watch market in 2014. Overtime, this market will grow to an extent that will encourage the release of similarly innovative products. Consumers all over the world will come to embrace smartwatches because they will become even more unobtrusive, advanced, and compatible to certain lfestyles and devices than they already are now. The only thing keeping companies from innovating now is the fact that the market for smartwatches is still in its infancy.
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Scalability The market for smart watches is relatively new when compared to the smartphone and other mobile devices. There are a whole host of new entrants into the smartwatch market from well established players. Everyone from Apple, Samsung, Sony, Motorola, and LG has a smart watch they are offering to consumers. Unfortunately, many of these companies have ulterior motives behind their smartwatches because they also sell mobile devices that work flawlessly with their respective watch. In short, they are trying to sell a package deal. Pebble’s chief goal is to bring the most effective and efficient smartwatch to the market. They are at a disadvantage when it comes to the bigger firms in the marketplace because of their lack of experience and resources, yet they make up for it in innovation. Pebble works seamlessly with both iOS devices and Android so that no consumer is left out unlike other companies which force consumers to either purchase the watch mated to their phone or switch phones. Due to patents, trade secrets, and general intellectual property, many of these companies are afraid to let the public gain access to any of their code or processes to develop apps. Pebble is an open source platform which is very much in tune with their previous history of crowdfunding. Anyone who has the ability and know-how to create an app is able to contribute to the pebble community. Not only does crowd-sourcing allow for the watch to be user customized, but it can also be constantly improved. This feature has huge implications for the future of Pebble and its ability to collaborate with other individuals and firms to better their smart watch. Some of these partners include GoPro, The Weather Channel, and RunKeeper. All of these apps for the watch have created a secondary market for Pebble 10
Apps and they have made the process extremely easy for those who want to develop their own app. All it takes is access to the internet and Pebble’s development portal online, they provide guides and even a simplified way to integrate your mobile app into pebble if you have already created one. The Pebble app store has over 1,000 apps for their watch alone. The possibilities are endless with this approach to mobile technology and this reason is why Pebble is at the forefront of the Smartwatch industry. This industry has huge potential due to the popularity of smartphones in the current and forthcoming generations. Unfortunately many can view these devices as redundant. It does not take much effort to check your phone for messages or change music. The challenge then comes from convincing the consumer that this is a product they need in their lives. The watch was originally designed to give the operator an accurate representation of the time of day. Today that information comes from your phone along with a plethora of additional information about messages, e-mails, upcoming events, and weather forecasts. From a practical stand point then, the watch has been marginalized. However, those who are fashion conscience still find a watch a useful accessory in the wardrobe, even though its purpose may be overlapping. Pebble many of these concerns in their latest model, The Pebble Steel. Utilizing a steel frame and solid design, the Steel has moved away from its little brother’s plastic frame and bright colors and has matured into an accessory worthy of any corporate or business setting. The simplicity of its design is what many consumers find most appealing. There is only so much one can do with a watch and its hardware. Brands who try to overdevelop features usually end up negatively impacting other vital features as a result. A
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prime example of this is the watch display. Other brands have chosen to go with the most colorful and highest resolution display available but without considering the downsides of diminishing battery life. Pebble has by far and away the longest battery life of all its competitors at seven days on a full charge. This is largely due to their e-paper display which is very similar to that of an e-reader like Kindle or Nook. This display not only is easy to read during both the daylight and evening hours but also uses minimal power because it’s black and white. The closest competitors offer four days of life with minimal use. It is extremely inconvenient for a customer to have to charge two devices each night when the alternative is only once a week. Pebble has done an excellent job in simplifying the smart watch in order to appeal to a much greater audience. Consumers who want the convenience of a smart watch yet don’t want to compromise their sense of style now have that option at a smaller price than most of the competition. The basic Pebble is $99, and the Steel goes for $199; a bargain when considering their competitors range from $150 all the way to $600. Pebble provides their customers with the greatest amount of simplicity in a device that although is intended to make one’s life easier, can often have the opposite effect. Their fashion forward design, access to crowd-sourced apps, seamless integration of both major operating systems, extreme battery life, and attractive price make it the only choice when deciding to purchase a smartwatch. Pebble’s future is promising because of their approach to open source development using their customers as a sources of inspiration and creation. This enables them to focus on improving hardware and addressing other issues. Pebble is definitely a company to watch in
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upcoming years as they look to revolutionize how we wear and use technology in our everyday lives.
Conclusion Upon the release of the new Apple Watch in 2015, it will be interesting to see how Pebble separates itself its growing competition. Since Pebble only sells watches, some analysis believe that Migicovsky’s response to a new power like Apple entering the industry will determine the fate of the company. Migicovsky’s answer in an interview was one of very little concern as he is convinced that Pebble’s dedication to smart watches only will position them for future success. Regardless of Pebbles future, the company has proven to be one of the most successful crowd-funded companies. As the company has developed, so has its following. With only 5 years of work in the smart watch industry, Pebble has now released 3 products and is working towards the next. Software is what will allow Pebble to continue its growth and enable it to improve its market share. The business plan of Pebble is one that will improve as more people feel a need to purchase the smart watch. It is designed so that it is practically limitless in the applications that it can work alongside. It seems that Pebble’s open SDK (the open platform for app building) will be its recipe for success, as it will promote growth and outside innovation. While crowd funding is Pebble’s current claim to fame, the company hopes to carry on its positive reputation as they continue to put out top-notch hardware and software. Its goal is to improve the amount of users and ultimately build a strong following of smart watch users, users who will continue to support Pebble even as new 13
products like the Apple Watch are released. The market does not currently pull for smart watches, which is why Pebble believes its efforts and its complete focus on creating smart watches will allow them to compete for the number one spot in the industry. In studying Pebble and Eric Migicovsky’s entrepreneurial endeavors, our group has learned several qualities that we will carry with us. The first is that when one venture fails, find out why, and keep going. Inpulse was Migicovsky’s dream product, he thought, until it proved otherwise. The second is that consumers are the ultimate judgers of company success. A successful KickStarter will only tell what investors might think, the true pull for a product will be dictated as one sells units! A final takeaway is not to be intimidated by the brand name. Migicovsky’s response to Apple entering the market is one that is enviable. His believe in his product and passion for creating smart watches is one that is irreplaceable.
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