Quirky Files for Bankruptcy, Will Sell Smart-Home PlatformBy
Flextronics submitted bid of $15 million for Wink business
Company among more than 30 failed startups this year
Quirky Inc., which helps inventors develop small household products, filed for bankruptcy and plans to sell its assets, including the Wink smart-home business.
Quirky accepted a $15 million offer for Wink from Flextronics International USA Inc. subject to a higher bid, the New York-based startup said Tuesday in a blog post. The company, which filed for Chapter 11 protection to guide the process, plans to conduct an auction if other offers are received and intends to seek court approval to complete the sale within 60 days. Quirky also is seeking a stalking horse, or lead, bidder for other assets and will conduct an auction if it gets offers.
Chief Executive Officer Ben Kaufman said at Fortune magazine’s Brainstorm Tech Conference in July that his company had run out of cash and was trying to raise money. Quirky said later that month that it was halting some activities including product evaluation as the team focused on seeking funding.
As of August 15, 34 startups have failed this year, according to research firm CB Insights. The list includes Internet of Things company Lumos, anonymous posting platform Secret and assistant service Zirtual. Failed startups typically close shop about 20 months after raising a round of financing, according to CB Insights.
“The individual failure of Quirky doesn’t really affect the startup funding momentum we’re seeing,” said Matt Wong, a research analyst at CB Insights. Instead, the company’s decline is a “warning sign” for other Internet of Things startups.
“For a lot of these companies, the economics of how they’re selling the products and distributing them isn’t necessarily there,” Wong said in a phone interview.
Quirky, started in 2009, had raised several rounds of funding, including $79 million in 2013 from General Electric Co. and previous investors such as Andreessen Horowitz and Kleiner Perkins Caufield & Byers.
The company’s death can be attributed its attempt to run two separate businesses that had two different missions and goals, Nizar Tarhuni, a financial writer at data company Pitchbook Inc., said in a phone interview.
Filing for the Chapter 11 and seeking buyers “means they think the assets are worth it to someone who believes in the business and can bid for the business,” Tarhuni said. “In their Chapter 11 filing, they don’t think any unsecured creditors won’t get their money.”
Kaufman said at the Fortune conference that Wink wasn’t profitable. Quirky also had to recall some Wink products, which hurt the company’s ability to raise capital for the business, Tarhuni said. Filing for Chapter 11 protection won’t affect the day-to-day operations of the home-automation business, according to the post.
Quirky “is hopeful that the ultimate successful purchaser will restart those operations and re-establish a meaningful and productive relationship with the community members,” the company said in the blog post.
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