Misfit, which began life as a Kickstarter and became one of the best known wearables companies, was bought yesterday by a big public watch company for $230 million. That was probably its best possible end as an independent company.
Misfit, over its four years of life, had raised $63 million in three rounds of funding. The products are beautiful and have a loyal following. The company has great distribution; they’re in Best Buy and the Apple Store. CEO Sonny Vu became a popular speaker on the conference circuit, and for good reason.
But consumer electronics is a volume business, and when you look at the numbers, Misfit lags behind Apple, Fitbit, Samsung, Garmin, Xaomi, even Jawbone. And even if you believe that a growing market with cause all boats to rise, it’s not like the activity tracker business is going to get less competitive. If anything, we still haven’t heard much from legacy mass-market wristwear makers: Timex, Casio, Sharp, Citizen. Their entrance will surely change the market.
This left Misfit’s investors with a problem. Investors want an exit strategy: how do they get their money back? Fitbit went public very successfully, to the tune of $730 million, but it was far and away leading the tracker market. Misfit’s down in the “Other” category and wasn’t going to get anything like that if it had tried to IPO. Which meant a buyout was probably inevitable.
Fossil, it turns out, is a pretty good match for Misfit. It’s a solid brand, an American company (one of the few U.S.-based watch companies), with wide distribution and strong interest in wearables. It’s got an Android Wear watch due any moment, and a couple of fitness trackers that started shipping a couple of weeks ago that are just like the Misfit Shine in concept — except more expensive and not nearly as nice. Expect those Fossil products to quietly sunset.
The Fitbit IPO marked the end of innocence for the fitness tracker market. The top players in the market are now either public companies or megaliths, or Jawbone. Fitbit is the only pure-play tracker company among the top tier; the others could quit the wearables market tomorrow and probably not have to even file “material effect” paperwork.
But what of Jawbone and Pebble?
Pebble is an admirable and scrappy company that resolutely goes its own way. It’s raised most of its money in crowdfunding and (according to Crunchbase) has taken only $15 million in conventional fundraising, which means it can afford to keep going unmolested for a while because its investors don’t have the urgency to get out. But Fossil isn’t the only big watch company that wants into tracker business. It wouldn’t surprise us if we were back here next year with Pebble having been acquired by one of the big Japanese watch companies with ubiquitous distribution and cheap supply chains.