Member Discussion

Smartlock Manufacturer Otto Shuts Down A Month Away From Shipping

Founder Sam Jadallah explains his side of the story here.

Ok, so what happened? This past summer, we began fundraising for our next financing round. In early September, we were approached by a public company who understood the product we built, the engineering behind it, and the opportunity it represented. Initially they proposed investing, but quickly shifted the conversation to an acquisition... Our signed agreement restricted our ability to solicit other bids or fundraise and targeted a close on December 11th, 2017... On December 11th, they called me and stated they would not complete the acquisition nor revisit the investment proposal. I was stunned. The reason is still not understood. We had extended our cash to get to the closing date, and now were left without alternatives. Rather than telling our dedicated team that we were accelerating our growth plans and their equity ownership might provide them some financial stability, I had to tell them we could not continue operations.

And

To our beta users, pre-order customers, suppliers and partners, I’m so very saddened that we can’t deliver Otto, which was planned for first revenue in just four weeks... Otto will not ship next month and it may never ship. 


Otto's smartlock was nondifferentiated in an increasingly crowded smartlock space.

Most major hardware vendors have a smartlock they are selling and supporting, with several examples already in 2nd and 3rd generation releases. (eg: Smartphone Controlled Kevo Lock TestedAssa August Smartlock Pro Tested)

Incidentally, those products typically resell for $200 - $300.  Otto's price was $699.  So I'm not convinced that even if product was available, it would sell.  It is/was priced out of line with competitors, with no substantial advantage or features to justify it.

It's conjecture on my part, but given the rough timeline Otto's founder shares, it corresponds with Assa Abloy Acquires August, with that deal finalized and completed the first week of December 2017.

I looked at their site www.meetotto.com and you are right.The lock does not look to be anything special. It does not integrate with any alarm panel, and actually appears to be more of a pain to use than other locks. Who wants to turn the dial, press enter 4x.

 

I think this was destined to fail from the beginning

I don't have a degree in business but it seems like the agreement was a bad deal. The buyer gets to do all of their due diligence, prevent the seller from pursuing other activities, and has no risk.

 

Even when buying a house, the buyer has to put up a deposit, and the seller still keeps the house on the market labeled as pending.

 

Not a very good position to put themselves in.

Jay -

I was about to post something similar. The CEO bears a significant amount of blame for getting so far down a 1-way street with no backup plan.

Agreed. The CEO was arrogant enough to believe that people would buy a $600 smart lock nearly identical to all other smart locks on the market, and was arrogant enough to believe that he had somehow locked down an acquisition deal well before shipping a single unit. 

Never believe your own press clippings.  

Was looking forward to having a third access control company with a palindromic name :(

You could start your own. How do you feel about Hannah? Or Racecar? Or Kayak?

Our slogan would be

“Live not on RMR, not on evil”

Palindrome score = 101/101

They were selling the Otto lock as an upscale swiss-timepiece quality lock.  They claimed their drive gear design was along the precision of a watch-maker's, only much larger of course. Their target market was the high end customer who wanted to serve the perception of having the most expensive home lock available.  

That's a big risk in the resi market, no doubt, and one that shrunk their niche in the market quite a bit/  Will the residential market buy an upscale version of a much less expensive alternative?  I guess we won't know, at least for a while.

It does seem odd to get that far along in an acquisition deal to have it fall apart at the last hour ...... and not have any reserve cash at all to even make one last payout to their employees and contractors at Christmas time.