The Downfall of Doppler Labs: Inside the Last Days of a Hardware Startup

On October 23, Doppler Labs founder Noah Kraft got a Facebook notification. One of those “On This Day” pop-ups, resurfacing a post from exactly two years ago, when Kraft had appeared on CNBC to make the case for his company. “We want to put a computer, speaker, and mic in everyone’s ear,” Kraft said during the interview. “We have very lofty visions of the future, everything from real-time translation to personal assistants.”

The memory stung. Because on October 23, Kraft was nine days away from shutting down Doppler Labs for good. Kraft, co-founder Fritz Lanman, and newly installed CEO Brian Hall were still doing all they could: trying to convince big companies to buy Doppler, trying to raise another round of funding, trying to sell more Here One earbuds, the company’s wireless headphones that gave users a way to change the volume of the real world. They had as many as 10 meetings a day, with increasing desperation. Nothing was working. Kraft would set a deadline for calling it quits, then extend it a week just in case. By October 23, with November payroll looming and no options in sight, they’d lost nearly all hope.

That Doppler Labs is closing its doors now seems surprising for many reasons. Internally, executives say the company’s never been more stable. Kraft and Hall spent most of 2017 re-orienting the team’s efforts around the hearing-health market, helping pass a bill allowing hearing aids to be sold over the counter and building a new app for those with mild to moderate hearing loss. Progress is underway for the second version of Doppler’s main product, a pair of wireless earbuds called Here Two.

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Meanwhile, Doppler’s core idea—that in-ear computers are the next frontier—has permeated the industry. Apple’s promoting AirPods, Google’s touting Pixel Buds, and every headphone maker from Bose to Jaybird is experimenting with wireless earbuds you can wear all the time. Voice assistants like Siri and Alexa continue to improve rapidly, and users are beginning to look for ways to stay connected to tech without having to bury their face in a smartphone all day. These are the things Doppler’s been waiting for. It just ran out of time.

Doppler made plenty of mistakes over the last year or so. It also had the bad luck of being a hardware company at a time when the biggest players in tech—Microsoft, Apple, Google, Amazon, and Facebook—are all pouring billions into developing their own gadgets. “Hardware is hard” is one of the great Silicon Valley clichés, but plenty of startups are feeling the truth of that statement.

Kraft has always been Doppler’s best cheerleader. But when I walk into his office to talk about the end of Doppler, he’s different. Normally talkative and assured, Kraft now takes long pauses to collect his thoughts, fidgets in his chair, and can’t even bring himself to sugar-coat the situation. His sales pitch didn’t work, he says. Why keep selling? Instead, Kraft has been doing a lot of reflecting over the last few weeks, wondering what happened and what could have been different.

Kraft thinks back to a year ago. After selling its Dubs earplugs and the Here Active Listening earbuds, Doppler was ready to start manufacturing the product it had been working toward since Kraft and Lanman founded the company in 2013: Here One. They raised $24 million in a Series B round of financing in the summer of 2016, bringing the company’s total funding to about $50 million. They had big-name investors like David Geffen and Henry Kravis, and plenty of believers in both the tech and music worlds. Things looked good.

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At the end of the summer, an investor set up a meeting with the hardware heads of one of the aforementioned five big tech companies. (Kraft won’t say which, both because he’s signed non-disclosures and doesn’t want to hurt his employees’ chances with those companies.) The Doppler executives left that meeting convinced this company was either going to invest heavily in Doppler Labs, or buy it outright.

Early Doppler employees in their first office.

Doppler Labs

Around the same time, an early build of Here One came back from Doppler’s China manufacturers in far better shape than anyone expected. (I got a demo of this build around the same time, and it was impressive.) The earbuds looked good, the software worked almost perfectly, and even the real-time translation feature seemed to be coming together. Suddenly, Here One was on pace to beat Apple’s AirPods to market. “Not only did we have an inbound offer, but we were ahead of the curve,” Kraft says.

Armed with an awesome demo and what they believed was a real offer from a tech giant, Kraft and his team started to think about selling the company. “Before this revolution happens, maybe somebody’s going to take us out to win the race,” Kraft thought. The team set up shop in the gorgeous offices of the Universal Music Group in downtown San Francisco, a wide-open space with spacious views of the Bay Bridge. Through October and November, they hosted a parade of potential investors and acquirers from all over the Valley, including all of the big five. Kraft, Lanman, and some high-level Doppler engineers took each group through the company’s technology and vision, and gave them a demo of Here One.

Looking back, both Kraft and Lanman say they should have approached the process differently. “We were definitely irrationally confident,” Lanman says. Kraft is more blunt: “We thought we were the shit.” He won’t share Doppler’s actual asking price, but compares its fortunes to Dropcam, which sold to Google for $555 million in 2014. “We were signaling that we’re not desperate at this point, so if you want us, it has to be proactive.” That might be why, at the end of the meetings, everyone responded the same: Investors love your tech, but wanted to see Doppler actually mass-produce and sell a product

By the end of November it was clear the best thing for Doppler to do was prove that Here One could be a success. That presented its own challenges. They’d switched manufacturers, and a longer-than-expected wait for a component pushed mass production back from fall of 2016 to February of 2017. That meant Here One wouldn’t beat AirPods to market, or capitalize on the all-important holiday sales rush. And Doppler had to raise another $10 million just to get the product out the door.

To make matters worse, in January, a team came back from China with troubling news. They’d hoped the earbuds would to get 4.5 hours of battery life with augmented hearing, or three hours of music streaming. But because of a Bluetooth chip drawing more power than expected, Here One was lasting barely three hours of AR, and less than two for music. Apple was promising five hours on a charge for AirPods, which made Doppler look even worse. “We focused so much on size and compactness with Here One that we kind of compromised battery life,” Lanman says.

Right before the product launched, Kraft gathered the team and told them to expect reviews that praised the technology but slammed the battery, which is precisely what happened. But then users started reporting problems with the charging case. Hall, a longtime Microsoft marketing exec initially hired to help Doppler scale and sell Here One, was suddenly thrust into triage mode. The product was already late in getting to folks who pre-ordered, and Doppler wanted to keep supply promises to retailers and partners. “We made the choice to keep going,” Hall says. “That was a mistake, in retrospect.”

Kraft and Hall watched sales numbers trickle in for the next couple of months, and by May, realized Here One was a flop. They’d originally planned to make and sell a few hundred thousand models, but only sold 25,000. Another 15,000 sit in a warehouse somewhere. Even with all the people who love Here One, those sales numbers turned Doppler from hot-shit startup to virtual impossibility. Here One was Doppler’s only real chance, and they’d missed it.

But it’s not that simple. At one point during our conversations, I ask Kraft if he thinks that Doppler could have succeeded, if it had done everything right. No delays, no product issues, everything out as promised. He thinks about it for a long time, then answers simply: “No.”

When you get right down to it, Kraft says he feels he’s only made one real mistake. “We fucking started a hardware business! There’s nothing else to talk about. We shouldn’t have done that.”

Back in 2013 and 2014, when Kraft and Lanman first raised money for Doppler, the gadget industry looked ripe for startup disruption. Pebble, Jawbone, and Xiaomi looked like burgeoning behemoths. Beats got $3 billion from Apple, Oculus $2 billion from Facebook, and Nest got $3.2 billion from Google. Founders and investors alike believed that thanks to smartphones, and the giant supply chain they wrought, a new breed of consumer tech was coming soon. Gadgets were back.

Now, however, the hardware world is full of cautionary tales. Juicero conned investors out of more than $118 million, while Jawbone lost nearly $1 billion. Pebble was stripped and sold for parts to Fitbit. And let’s not even get into Lily Robotics, Electric Objects, Hello, Pearl, Zeebo, Zano, or the dozens of other hardware companies that have failed for one reason or another in the last few years. A study by analytics firm CB Insights found that while it’s still relatively easy to get early funding for a hardware company, only 24 percent of those companies will raise any more money at all, and 97 percent will essentially turn into nothing. “As hard as it is for all tech startups, it’s even more difficult for consumer hardware companies,” the survey concludes.

Despite the odds, Doppler spent the summer of 2017 pursuing every imaginable way to save the company. They started looking to raise another round of financing, a Series C, meeting with current investors and potential new ones. Hall calculated that Doppler needed at least $35 million to finish development of the next product, which became a line in the sand. With Here Two, and a new focus on the hearing aid industry, they thought Doppler had a shot. With any less funding, they’d be transplanting blood without closing the wound. They could get a few million to keep going, and even had $4 million in the bank that would at least pay people until about the end of the year, but that didn’t feel right. Hall, Kraft, and Lanman didn’t want to lose any more money than they already had. If Doppler couldn’t make a real go of it, it would end things the right way. It was $35 million or bust.

Doppler co-founder Fritz Lanman wears a (very) early prototype of Here One.

Doppler Labs

Unfortunately, $35 million is a big number. They’ve raised too much money to be be considered an early-stage venture, and don’t have enough sales or momentum to merit a growth round. “People said, ‘Look, we’re not going to write $40 million checks for businesses that don’t have real revenue,’” Kraft says. Doppler had meetings with 60 investors, and none panned out. It was the same feedback as before: great tech, great team, great demo, no checkbook.

Doppler’s other option was to sell the company at a far lower valuation. Kraft and Lanman explored shaving their equity stakes by more than 75 percent, hoping to find a way to at least pay back investors and make a little money for employees. Mostly they wanted a landing place for the tech and the team. That’s the thing the Doppler leadership comes back to over and over in the weeks leading up to the end of Doppler: doing right by the employees. They eventually received two offers from hardware giants, but neither was meaningful money. “They said, ‘Let’s see if we can do a deal that’s definitely shitty for you, but not too shitty, and definitely better than going out of business,'” Kraft says. Doppler would have saved face, but it wouldn’t have made anybody any money. So Doppler said no.

With your company facing closure, when do you tell employees? You want them to know as early as possible, so they can go get new jobs and not miss too many paychecks. You can’t tell them too early, though, in case something comes through and the company’s not over after all. You don’t want to have everyone show up one day to an empty office with a note on the door, but you don’t want to panic them too early either.

Kraft says he’s tried to be honest with his team without freaking them out. Most employees knew Here One wasn’t selling well, and that fundraising was hard. But they only found out for sure last Wednesday, a week before the company’s all-but-certain last day of solvency. Kraft and Hall kicked off an all-hands meeting. They started with a detailed update on all the company’s projects: a team back from China with progress on Here Two, manufacturer changes, a last update on the new hearing-health app set to be available November 1.

After about 45 minutes of business as usual, Hall changed the subject. “All I can tell you is,” he said, “we still don’t have a lead, and if anything the options have become slimmer.” Kraft mentioned that if anyone had been hiding a billionaire relative with cash to burn, now would be a good time to introduce them. For the following hour or so, Hall and Kraft took questions: Why can’t we raise money? What does this mean for us? Some were sad that it was over, others defiant that it wasn’t.

Doppler’s first ever product, the Dubs earplugs. (Those are Kraft’s ears.)

Doppler Labs

At another all-hands on Monday night, the team heard the final bell. It was a shorter meeting than the previous one—people knew it was coming. The discussion quickly turned tactical, as the employees tried to figure out how to go out the right way.

On Wednesday morning, Doppler’s website will change. Instead of an online store, it’ll contain a download link to the new app, pages about Here One and Doppler, and a note from the leadership explaining what happened and why Doppler is no longer. The whole team has a job until November 10, and the company is trying to find everyone a job, including potentially all at the same company, one of the big five. In the meantime, everyone’s task is to help get the company’s assets ready for sale and maximize their value. Everything has to go, from the patents to the office furniture. For another three weeks after, there will be eight Doppler employees—two in HR, two in tech, two in customer service, and two in finance—helping old employees get situated and ensuring customers aren’t left with no options.

Doppler’s new app, made for people with hearing loss who could use a little help in the form of a cool looking pair of headphones, will be free to download for the next 10 days. Kraft calls it “a final gift” to users, who can get support until December 1. After that, everything will shut down and Doppler will be over.

Every employee I spoke with at Doppler echoed the same thing: that this was a difficult, demanding, chaotic job, and they wish they didn’t have to leave it yet. Even so, they seem to take some solace in the company’s legacy. “Down the road, let’s say the hearing aid market is completely disrupted three to five years from now, it’s so important that Doppler is remembered as the company that opened that door,” says KR Liu, Doppler’s VP of advocacy and accessibility and the driving force behind the company’s hearing-health work. “That’s really important not only to me, but the employees of the company. That’s what we want to be known for, remembered for.”

At the end of it all, the people who worked at Doppler at least feel like they tried. And they’re all excited, in some way, to live in the future they predicted. “It’s not as good as doing it yourself, but it’s something,” Lanman says. “At least we left a mark.”

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