GoPro’s spectacular implosion reveals brutal reality facing tech hardware startups

While the recent earnings warning from GoPro was seen as a disaster, it’s quite possible that the situation for this briefly high-flying camera company is even worse than it appears. But GoPro’s fate is also an indicator of a larger problem that’s sweeping across independent hardware startups.

Just since GoPro took its pratfall in early January, there has been a steady drip of grim announcements from consumer electronics hardware startups: Sphero fired 45 employees following weak holiday sales of its smartphone-controlled gizmos; Tile laid off 30 employees citing the need to “recalibrate” its business; and Fitbit confirmed it was finally euthanizing the Pebble smartwatch brand this summer after buying it for chump change last year.

Speaking of Fitbit, back in November the company reported it lost $ 113 million in the previous quarter, almost nine months after it laid off about 100 employees. But at least they are still in business. The same can’t be said for Jawbone, Njoy, Electric Objects, Lily Robotics, sleep-tracker Hello, and tablet startup Fuhu.

And, of course, Juicero.

Each has its own tale of misery and woe. But at their heart, they reveal the same fundamental issue: Building an independent hardware startup is next to impossible in an age where hardware sales are still dominated by giant tech companies.

A decade ago, that wouldn’t have been such a startling idea. Hardware required big investment upfront, capital expenditure to create manufacturing capacity, logistics for distribution, marketing muscle to get products onto shelves, and a strong brand.

Then came along what I, and many others, began to refer to as a new “Golden Age of Hardware Startups.”

Entrepreneurship had opened up in the late 1990s to a far greater range of founders thanks to the internet, and then tumbling storage costs, broadband, and the cloud accelerated that trend. This led to web services, and then apps. The kind of stuff a couple of kids and their dog could build in a dorm room after a long weekend of hacking.

But eventually these trends intersected with hardware. The smartphone era meant more objects could be connected cheaply with most of the computing being done on the phone. Kickstarter offered a fast way to raise money. 3D printing allowed for rapid prototyping. Outsourced manufacturing operations became available for rent. Ecommerce meant no need to go begging at bricks-and-mortars. Suddenly, hardware didn’t seem so far out of reach.

That explosion can be tracked by the arc of CES, the famous Las Vegas-based gadget show.

The last time I went was in 2014, when I wrote that year: “CES set a new record with 3,200 exhibitors across more than 2 million square feet of exhibit space — or enough to fit about 35 football fields. That’s up from 3,000 exhibitors and 1.92 million square feet last year. Eureka Park, which is the traditional start-up corner of CES, hosted 200 companies this year, up 40% from last year.”

And now?

In 2017, CES reported 4,000 exhibiting companies, and exhibition space of more than 2.6 million square feet — 600 companies in Eureka Park alone. Final numbers are not yet in for 2018, but CES had said it expected 800 startups in Eureka Park and 2.75 million square feet of space.

And so the number of gadgets exploded. It was a phenomenon that was always going to be unsustainable. There simply wasn’t going to be enough interest, enough consumers, enough need, for the vast majority of this stuff.

Yet surely some would break through?

Indeed, some have. Unfortunately, these hardware startups are named “Amazon” and “Google” and “Facebook.” And they are sucking up most of the oxygen when it comes to hardware sales these days. They have the deep pockets and the long-term outlook to invest in research, take their time, and not get completely torpedoed if one product sputters, or rises and falls.

The same can’t be said for these smaller, independent companies. GoPro is a pretty good indicator of why.

The company’s sports cams were a sensation with a strong brand identity. The problem with such devices is that eventually prices drop as cheaper knockoffs enter the market. A company like Apple has defied this dynamic for years by continuing to spend huge sums on new features and designs, and expanding its ecosystem of products. But you can do that when you’re the world’s most valuable company and have a license to print money.

GoPro tried to do something similar, but almost every initiative failed. Drones? GoPro tried to make one, but it was heavily delayed before being released, and then recalled in 2016. That led to its second round of layoffs that year. And it eventually decided to exit the drone business.

Its GoPro Hero5 camera, a version that is both waterproof and responsive to voice commands, hasn’t turned things around either. It initially rolled out this and other new versions of the Hero5 and Hero 6 at steep prices, before being forced to cut them dramatically in the face of consumer indifference.

And then there’s content. GoPro users produce insane amounts of content, which presents a couple of interesting opportunities for GoPro. The first is helping users manage, store, and edit that mountain of video. But its software solutions haven’t done much to translate that into revenue.

The company also tried to leverage content that was getting huge traffic on its YouTube channel by creating its own content platform.

GoPro hired Tony Bates, the former Microsoft executive and head of Skype, in 2014 to be president. Part of his mission was to oversee the development of this content platform, which would hopefully generate ad revenue as well as fuel marketing and interest in GoPro hardware. Alas, no. Bates left quietly in late 2016 amid broader layoffs.

This was all bad, and yet somehow, it’s gotten worse.

At the beginning of January, GoPro pre-announced fourth quarter revenue of $ 340 million, a gigantic miss from the $ 470 million guidance it had given two months previously. And the company said it would cut its workforce from 1,254 to 1,000, down almost one-third from its peak of 1,500 employees in 2015. GoPro is scheduled to officially report earnings February 1.

That’s already got legal eagles sniffing around for possible class action lawsuits. And it forced the company to deny rumors that it was for sale, even though many analysts believe a sale is probably the best option at this point.

But its stock has been hammered. After going public in June 2014, its stock peaked that September at around $ 93.70 per share. Today, it’s trading at around $ 5.50 per share.

It’s hard to imagine GoPro pulling out of this downward spiral, as resources and staff shrink, smartphone cameras become more powerful, and prices of knockoffs continue to drop. There is no room to maneuver.

But what about all those thousands of other hardware startups? While controversial at the time, the decision by Oculus VR founders to sell to Facebook looks prescient now. Could an independent Oculus has survived the softer-than-expected reception to VR hardware? Tucked inside money-machine Facebook, however, it doesn’t really matter.

For other hardware startups, though, it seems the choices are limited. Either remain small, almost novelty size. Or, if you score a hit, rather than scaling quickly, just find a willing buyer and exit ASAP.

This reality hasn’t seemed to dim the enthusiasm of hardware startup founders, as evidenced by CES. Starting seems to be the easy part — maybe too easy. Yet sadly for those poor souls, hardware has created a strange reality where failing is bad, but succeeding a bit is almost worse. Because it’s just going to make the inevitable crash that much more painful.

Apple – VentureBeat

‘Implosion – Never Lose Hope’ Developer Rayark Soft-Launches Gorgeous Puzzle RPG ‘Sdorica’ on iOS and Android

Back in December of 2015, Implosion – Never Lose Hope [$ 4.99] developer Rayark released a teaser trailer for a new game called Sdorica, and although that teaser didn’t really explain what sort of game it was what it did show was that Sdorica had an absolutely stunning art style and extremely fluid animations. And that’s pretty much all it took to rocket the game towards the top of my most anticipated games list. Well, last week Rayark sneakily soft-launched Sdorica into several regions of App Store and equipped with my trusty New Zealand account I’ve finally been able to take the game for a brief spin.

To my surprise, Sdorica is a puzzle RPG that has you matching blocks in order to produce attacks from your party. Not totally unlike games like Puzzle Quest or Hero Emblems, but the matching portion isn’t your typical match-3. During battle you have two rows of colored blocks in the lower part of the screen. There are 3 colors of block, one for each member of your party. You can only match in groups of 1, 2, or 4 and that will determine the strength of your attack. Obviously you typically want to go for matches of 4 whenever possible for the strongest attacks, but this can be tricky to set up and you’ll also need to strategically make 1 and 2 matches in order to have the new blocks that slide in from the right when other blocks are cleared set up the bigger 4 block matches.

I’m not terribly deep into Sdorica, so I’m not sure if there’s more to the matching that what I’ve just described, but so far I’d say it definitely does the trick as a way to facilitate battling and the real draw of the game is in its story and characters. There’s quite a bit of dialogue and the characters each have very different personalities that are all endearing in their own way. There also appears to be some extensive character progression in terms of upgrading your team’s skills and abilities. This is a free to play game so that progression looks tied to amassing the different in-game currencies and buying IAP if you wish to speed up that process, but it doesn’t seem there’s any sort of energy system that will limit your ability to play, which is nice.

There’s plenty more to learn about the ins and outs of Sdorica as I continue on my quest, but so far it looks like it’ll be a winner for fans of these types of games. It’s also even more beautiful in person than even the very stunning trailers released so far, which you can scope out on Rayark’s YouTube channel. Until we have a date for the game’s global launch, definitely give Sdorica an early spin if you have an account in one of the soft-launch regions (NZ, AU, SG and possibly more) and be sure to check out the game’s forum thread for some discussion.

iTunes App Store Soft-Launch Link: Sdorica -sunset-, Free (By Rayark International Limited)

Google Play Soft-Launch Link: Sdorica -sunset-, Free (By Rayark International Limited)