Pivots can be the making of a startup, helping teams refocus on a good idea when previous things haven’t worked. But sometimes, they are just one more step on a difficult track. TechCrunch has learned and confirmed that Adero — an Amazon-backed maker of Bluetooth-enabled tracking tags that until last December was known as TrackR — is laying off at least 45 percent of its staff. The cuts come as Adero refocuses on building software instead of hardware products, and attempts to build a B2B business that reduces its emphasis on the consumer market, ahead of plans to raise another round of funding.
The layoffs, which started last week, follow a pivot about two months ago from selling individual tracking tags — a business that had become increasingly commoditized — to developing solutions to organise and track groups of items that tend to be used together (such as the contents of a school backpack).
It’s not clear exactly how many employees are being affected, but when the pivot was announced at the end of November, the company had 60 employees, which would work out to 27 employees in this latest cut.
A spokesperson said that layoffs were being made to put more focus on building software instead of hardware.
“As our new brand grows, we can now move to the next chapter in developing the intelligent organization platform,” he said. “As a result, we’ve parted ways with a portion of the team that was brought on to help design and deliver the consumer product. We will both support the consumer products and focus new energy on developing the platform that powers our consumer products so it can power the experiences of our strategic partners.”
The layoffs and shift at Adero underscore the more general, continuing challenges of building hardware startups. If the product is unique, chances are that the economies of scale to manufacture it will be too capital-intensive for even well-capitalised startups.
But often, the products are just not unique enough. Adero, for example, competes with Tile and a plethora of smaller brands selling tracking dongles are either very similar, or fulfil a similar purpose, and that in turn commoditizes the core product. The mission then becomes building services around the hardware that are in themselves distinctive, or at least trying to be.
“It took a superhuman effort to develop and deliver a new product from scratch — hardware, software, cloud — in nine months,” CEO Nate Kelly wrote in an emailed statement when contacted to provide more detail about the layoffs.
“We threw everything we had into that work and are happy to say that not only did we launch but we have, since launch, delivered two updates to iOS, one to Android and will be delivering… a firmware update that increases the reliability of the product and releases new functionality like removing the limits on the number of taglets.”
Adero’s relaunch in December saw the company building a new line of large and small tags that allowed users to group items that often travelled together to help track them more logically, with plans to add more predictive and other intelligent features over time. “We did more than launch new products, we also built a platform, Activefield, that can scale across many products, many companies and unlimited use cases,” Kelly said.
He added that now the company is trying to work with more (unnamed) strategic partners. That B2B shift also has translated to cutting costs and streamlining particularly in “areas where we had bulked up” to launch the consumer product. “We don’t need that level of support anymore,” he said.
“Now that we’ve launched on our website and on Amazon” — which is an investor in Adero — “we will continue to take our product into other channels and countries, but the push in consumer comes second in focus to the further development of the platform and the deployment into a number of strategic partners,” he said. “This is all very ambitious and we are a small company with limited resources so I’m having to make some changes to the org that makes us leaner and sharpens our focus on deploying our ‘powered by Activefield’ strategy.”
He said that while Adero will continue to support its consumer products, “we hope to come back to you soon to share some good news on partnerships.”
He added that Adero also hoped to have more news of a new round of funding later this quarter. To date, the company has raised about $50 million, but its valuation has yo-yoed from $150 million in August 2017, to just $40 million in July 2018. Investors in the company, in addition to Amazon, include Foundry Group, NTT and Revolution.
While the company would only confirm 45 percent of employees were laid off, our tipsters paint a slightly more dire picture of the company. One tip we received described the layoffs as covering “almost everyone” and another noted that “the majority of the team” at the Santa Barbara-based startup were now gone. “Very few remain to help close the business,” it said.
The news caps off a tricky year for Adero. In January 2018, still branded TrackR, it laid off around 42 employees — at the time just under half its employees. The layoffs came as it was emerging that the startup’s core product, its Bluetooth tag, was becoming increasingly commoditized, with dozens of me-too trackers sold alongside it on Amazon and other marketplaces. (Its biggest rival, Tile, has also seen some big changes and also appears to be shifting its focus to a wider home IoT play.)
Around the time of those layoffs, first one and then both of the company’s founders — Chris Herbert and Christain Smith — stepped away from day-to-day roles at the company. Herbert had been CEO and he was replaced by Kelly, who had been the COO.
Then came the funding round at a big devaluation. “Foundry and Revolution [two of the startup’s investors] were hoping that they would put this money in and I could fix and scale things, similar to how I’d scaled Sonos and so on,” Kelly said about the funding in November (his experience includes Sonos, Tesla and Facebook). “But within six weeks, it became evident that we didn’t need to scale but figure out what the future was and where this is going.”
Where this is going continues to be the question as Adero takes its next steps.This post was originally published here