Smart lock startup Otto is forced by circumstances to suspend its operations shortly after getting started because of an attempted deal that has gone bad.
The Silicon Valley startup was about to launch a smart home lock that raised plenty of interest, thanks to its functionality, design, and durability. However, the company is now unable to go on at this point as it no longer has the necessary funds to keep operating.
Otto Suspending Operations - What Happened?
Otto had entered an acquisition agreement last year, and the deal restricted its ability to keep raising funds for its product. The other company then backed out of the deal, leaving Otto high and dry. Without any cash to continue after the other company withdrew its acquisition offer at the last minute, Otto is now forced to put everything on hold and suspend its operations indefinitely.
The first batch of smart locks was supposed to start shipping in a few weeks, but Otto can no longer fulfill this promise.
"Otto will not ship next month and it may never ship," says startup's founder and CEO Sam Jadallah.
The top executive explains that the proposal initially revolved around investing, but it quickly turned into an acquisition talk. Jadallah says that Otto did not plan to be acquired so early on, but the other company convinced it that the best way to go on was to merge Otto's innovation with the acquiring company's scale and distribution.
Dropped At The Last Minute
Otto signed an agreement with the other company and the deal was supposed to close on Dec. 11, 2017. In the meantime, Otto was unable to ask for other bids or fundraising because of a signed agreement.
As the big day came, however, the company called Jadallah on Dec. 11 and said it would not complete the acquisition. Moreover, the company didn't even want to invest anymore.
"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," adds Jadallah.
He further explains that startups are not really in charge of their destiny because they are heavily reliant on funds from investors in order to keep operating. Market financing conditions also affect startups, as failed acquisition agreements and other such events do.
At this point, Otto says that it will evaluate its situation and figure out what options it has to move forward in the weeks to come. Operations are suspended for now, and it remains to be seen what the startup will do next.