The year has not gotten off to a good start for new companies. One of the first potential startup closings in 2018 may have occurred as electronic lock maker Otto suspended operations after an acquisition deal fell through and the company ran low on cash.
Greylock Partners was in negotiations to buy Otto on December 11, 2017, but the deal ultimately collapsed, leaving Otto with only a little bit of cash left to survive on before it ended up suspending operations.
Otto Suspends Operations After Deal Falls Through
This is one of the first potential startup closings in 2018, although the company has said that it has only suspended operations. Otto has not explicitly said it was shutting down, but a blog post by CEO and founder Sam Jadallah did not paint a rosy picture for the future of Otto.
“It is with great sorrow to say we have suspended operations at Otto,” Jadallah wrote. “I have never experienced greater professional pain than I have in the past two weeks. Especially since this post was intended to tell the exact opposite story. I will explain what happened, but to be clear, the main point is to reflect on the story of Otto and honor the very ambitious team that set out to create an entirely new experience of accessing and sharing your home.”
Jadallah went on to explain the details of the deal.
“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.”
Otto’s Target Product
The San Mateo-based Otto launched in 2013 with $37.0 million raised in venture capital. The ultimate result of the company’s production was a deadbolt lock that could be operated from a smartphone.
“It is still very early in the cycle of bringing smart devices to all parts of our homes, though it’s starting to happen,” Greylock Partners investor Josh Elman wrote in August, announcing the investment in Otto. “… From smart phones to smarter homes, we are at a moment where people are ready to use smart devices that make their lives more convenient and comfortable. But there are still a lot of key areas in our home waiting for great products to bring them into this smarter, more digital world.”
Whether or not Otto will truly be one of the first startup closings in 2018 remains to be seen, but things are not looking good for the tech company.
“$700 smart lock maker Otto said it suspended operations days away from acquisition,” Silicon Valley Business Journal, January 2, 2018.
“So Close.” Hacker Noon, December 27, 2017.