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$700 Otto smart lock is the latest luxe gadget to go belly-up

The CEO admits he left employees out in the cold.

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The Otto smart lock. 

Otto

Would you buy a $700 lock for your front door? Some people would -- but they may never see the lock they preordered from a tiny Silicon Valley startup named Otto. 

Just four months after the company revealed its remarkably compact, meticulously designed Bluetooth- and Wi-Fi-enabled luxury lock, CEO and founder Sam Jadallah says his company has suspended operations indefinitely, won't meet its planned January ship date, and probably won't ship at all. 

Which makes Otto the latest in a line of luxury gadget flops in 2017, including the $700 Juicero cold press juice machine, the $1,000+ Teforia robotic teamaker and the $500 Pearl backup camera license plate frame.  

On Dec. 28, Jadallah wrote an obituary of sorts for Otto for Medium's HackerNoon blog, where he blames an unnamed company for Otto's failure -- a company that offered to buy Otto, but backed out at the last moment.

"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 [...] On Dec. 11, 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," writes Jadallah.

According to Jadallah, Otto agreed not to pursue any other funding while it secured a deal with the unnamed company. (Remember the saying about putting all your eggs in one basket?) 

When it fell through, Jadallah says the company had no choice but to cease operations -- despite the fact that the company managed to manufacture a batch of hardware. Frustratingly, the locks are just sitting in a warehouse right now, according to an interview with TechCrunch

More frustrating for Otto's employees and contractors was the sudden holiday layoff. In an interview with CNET, Jadallah admits that he gave employees only two days notice and no severance pay, as alleged by former employee Ben Havilland. (Havilland wrote his own Medium post on the matter, which you can read right here.) 

He also admits that contractors, including server software engineer Kevin Burke, went unpaid for months. "We are actively working to resolve," says Jadallah. (You can read Burke's accusations against Otto in this post at Hacker News.)

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Otto's most recent team photo, volunteering at a Redwood City food bank in December.

Otto

In interviews with Burke and Havilland, both former employees say they mostly just wish they'd been told sooner so they could have left. "My ultimate goal is to pay my mortgage this month and put some food in my kids' mouths," Havilland tells me. "With two days' notice and a holiday approaching it's impossible to land a new paycheck to instantly fill the void."

Jadallah argues there simply wasn't time. If the deal had gone through, the money would have immediately been there to pay everyone, he says. "I acted as quickly as possible once the facts changed," he says. "I found out on Monday night and told the team Wednesday. It was incredibly painful -- I can't begin to describe."

Still, Jadallah won't say who the company's mystery benefactor would have been. "It's not relevant," he tells CNET. 

According to Jadallah, if Otto's locks do ever make it out of a warehouse, there's a possibility they could still work. While they do need Otto's online service for full functionality, he says they still have basic lock and unlock functionality with a paired phone. By the way, the CEO says that customers aren't out any money for the locks they pre-ordered -- their credit cards were never charged.

"It wasn't the same as Juicero or Teforia," he says of his company's sudden collapse. "It was about to be a big win for hardware startups, and it flipped at the last second."