The credit crunch and the subsequent economic slowdown has everyone — from large corporations to individuals — reassessing their fiscal future, and many are taking drastic actions. The latest moves from the world of Silicon Valley startups comes from Dash Navigation, whose platform marries Web 2.0 services with a GPS-based navigation system for cars. The company is expected to announce a big reboot of its strategy sometime today. Among the changes the company is due to unveil:
- It’s changing its business model from consumer-focused to business-to-business.
- As part of this change, it will stop making and selling its hardware.
- Instead it will license its platform to makers of automobile on-board navigation systems, smartphones, netbook-style mobile Internet devices and other consumer electronics.
- COO Rob Currie will replace current CEO and founder, Paul Lego.
- It will cut 50 jobs, or roughly two-thirds of its workforce. After the cuts, Dash will employ 30, mostly in engineering and support. Current Dash owners will continue to get their software updates and the Dash Driver Network will stay up.
Sunnyvale, Calif.-based Dash has raised $42 million in two rounds of funding from venture investors including Sandhill Road titans Kleiner Perkins Caufield & Byers and Sequoia Capital. The cuts will leave the company with enough cash to last through 2009.
Dash started selling its hardware online (via Amazon, Crutchfield and Dash.net) earlier this year. At $600 a pop, the device and the monthly subscription service were too expensive, and in the spring, the company cut prices by 33 percent to $399. I suspect even that didn’t do the trick.
Dash found itself in a tough place: The navigation devices business was being rapidly commoditized and had too many players, among them Garmin and Tom Tom, both of which were bigger and had deeper pockets. At the same time, the newer, more power mobile phones were cutting into the demand for discrete portable navigation devices (PNDs.) CEO Currie declined to offer any details on how many devices were sold.
I am a firm believer in Internet-connected consumer-focused devices that use the web to enhance the user experience, which is why I always thought Dash was a nifty idea. But I felt that as a hardware maker they had an uphill battle. As I wrote back in June, Dash “can’t play the hardware game and may need to partner with the bigger device makers. After all, Dash needs to worry about the cell phones-as-PND platforms, too.”
“We wanted to launch our device in the retail channel, but the economic changes made us rethink our business focus,” new CEO Rob Currie told me as we chatted at length about the changes to Dash’s game plan. Expanding into retail is expensive, not to mention that larger chains expect to see more than just one device. “It needs a lot of resources to launch in retail,” he said. There is also the question of demand. In these days of tight budgets, not many people are keen on the idea of buying gadgets.
“Inside the Dash device we have a 400 MHz ARM processor and a GPRS connection,” said Currie. “Most smartphones have a processor stronger than that and faster 3G connections.” In other words, Dash is about to make a big push into the mobile phone business. The emergence of new app stores – Apple, Google and soon BlackBerry – means that Dash could release apps for these platforms as well.
“(The) Cell phone is a big opportunity but it is not the only opportunity,” said Currie. “Most car makers are putting two-way radios into their cars.” That makes them likely customers of Dash. According to ABI Research, real-time, two-way (RTTW) connected navigation is expected to show strong growth in the next five years, with more than 62 percent of all navigation devices forecast to feature RTTW connectivity by 2012 and nearly 170 million units shipping worldwide.
The big job cuts are part of this refocus, Currie said. The company will cut positions in sales and marketing because it won’t be focusing on the consumers, he said. When I asked him why Lego had to go, he explained that a smaller company doesn’t need a CEO and a COO. Since the focus is more on engineering and operations, Currie got the top job. It was a tough decision, but Lego made it, laying himself off.
Bottom line: The economy might have forced their hand, but Dash had to come to this realization sooner or later. If they succeed, they will become a case study for Harvard Business School on the art of rebooting. If they fail, they will join a long list of Silicon Valley’s failed attempts at consumer electronics success.