You win some and you lose some, and unfortunately for Otto, a smart lock startup that was ever-so-close to shipping its first product, the door is now slammed shut on the company. Otto founder and CEO Sam Jadallah stated in long-winded Medium post that an acquisition deal crumbled at the least minute, leaving the startup in shambles and forcing it to shut down despite having shown off its smart lock product just months earlier.
Otto's fate is a cautionary tale to other startups. Sadly for Jadallah and company, the decision to move away from investments and go all-in with an acquisition offer proved fatal, as the company's hands were tied during the buyout process that never came to fruition.
"This past summer, we began fundraising for our next financing round. In early September, we were approached by a public company who understood the product we built, the engineering behind it, and the opportunity it represented. Initially they proposed investing, but quickly shifted the conversation to an acquisition. It wasn’t our desire to be acquired so early, but they helped convince us that the best path forward was to marry our innovation with their scale and distribution," Jadallah says.
According to Jadallah, the signed agreement between Otto and the unnamed acquisition partner restricted the company's ability to solicit other bids or continue fundraising. That wasn't an issue for Otto, not at the beginning or even during the process, during which time Otto and the acquisition partner "build a close working relationship" with shared enthusiasm on the future.
Then Jadallah received a phone call right at the finish line. After going through the usual struggles that any startup faces and dodging "a hundred bullets along the way," that phone call proved to be "the bullet we couldn't deflect."
"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," Jadallah added.[embedded content]
Prior to shutting its doors, Otto had high hopes of being a premium smart lock vendor. Its first product was to be a $699 smart lock. That price point and focus on the high-end of the market was probably influenced at least partially by some former Apple employees who were among the first workers at Otto.
It was a unique product, to be sure, but one that as of right now looks destined for the startup graveyard.