Smart lock startup Otto suspends operations before shipping product

Hardware is hard: Otto won't meet its January ship date and has abruptly suspended operations after failed acquisition.
Written by Jake Smith, Contributor
(Image: Otto)

Smart lock startup Otto announced it's suspending operations after a public company offered to buy the $700 Wi-Fi-enabled lock maker, but it backed out at the last moment.

Announced in September, Otto's smart lock aimed to be an elegant addition to your door with a premium design and keyless entry. Its $700 price outpaced rival August by hundreds of dollars, and it required Otto installers to place the hardware on customers' doors.

Despite its sleek look, Otto's smart lock won't meet its January ship date and is likely not to come to market.

"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," CEO and founder Sam Jadallah wrote in a blog post.

"Seeing Otto light up as it welcomes me home and unlocks with a simple press, is a moment of joy that is now coupled with deep sadness. Otto will not ship next month and it may never ship. We will evaluate our options in the coming weeks and see what is open to us," he continued.

The unnamed public company approached Otto about an investment turned acquisition after the smart lock was announced in the fall.

"On December 11th, they called me and stated they would not complete the acquisition nor revisit the investment proposal," Jadallah wrote. "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."

While waiting to finish a deal with the unnamed company, Otto didn't pursue other investments. With no more cash and a buyout opportunity gone, the company is in limbo and is evaluating its options.

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Jadallah told CNET that Otto employees were only given two days notice and no severance pay ahead of the holidays. Otto smart locks are sitting in a warehouse, but they may not be able to be shipped to customers, he told TechCrunch.

Otto's closure comes at a booming time for smart home devices. In October, NDP said home automation products have increased 43 percent year over year, and security and monitoring is the largest share of dollar sales in the category.

But the hardware business is hard. Research from CB Insights found hardware startups generally fail due to lack of consumer demand, high burn rate, lack of interest after initial crowdfund, and product strategy mistakes, among other reasons.

Other big hardware failures have occurred in the recent past, including startup Jawbone selling off its assets despite $930 million in funding, and Pebble's inability to fend off Fitbit.

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