Jawbone borrows $93M to meet "crazy demand"

By Jonah Comstock
12:47 pm
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Jawbone UPJawbone has raised $93 million in debt, with an additional $20 million in equity rumored, according to a report from Fortune. CEO Hossain Rahman told Fortune that the company resorted to a debt raise in light of a much-higher-than-anticipated demand for its products, mentioning the Up activity tracker specifically.

"We've been experiencing crazy sell-through demand, particularly since the relaunch of Up," Rahman told Fortune. "It's been faster than anything we'd had before, and equity is not the most efficient way to scale all that. If you're a software company with high demand, you just call Amazon and add more servers to your AWS account. But when you build a physical good, there is a lot more that goes into it – ordering materials, manufacturing, delivery… Debt is the most efficient way to finance that."

According to Fortune, $43 million is from Silver Lake and Fortress Investment Group and the other $50 million comes from JP Morgan and Wells Fargo. The rumored equity raise is from existing backers Andreessen Horowitz, Kleiner Perkins, Khosla Ventures and Sequoia Capital, who have pledged a pro-rata investment in a future equity raise. Jawbone currently has more than $200 million in equity funding.

While borrowing money to build its product, Jawbone has still managed to find the money to buy several companies over the last few months, including wellness app Massive Health, nutrition app Nutrivise, and competitor Bodymedia.

Analysts have been predicting a boom in the demand for activity trackers like the Jawbone UP, with IMS research predicting that 56 million sports and fitness monitors would ship in 2017, up from 43.8 million this year, and trackers in general seem to have a higher profile than ever before.

Just this summer, Jawbone competitors Withings and Fitbit raised $30 million and $43 million, respectively, to support growing demand. Meanwhile, Nike recently reported that the Nike+ FuelBand app has 18 million users.

A recent report from consumer tracking site FixYa suggested that the Jawbone Up is not universally beloved by purchasers -- some have reported similar problems to the ones that caused the voluntary refund of Jawbone's first device. Judging by this latest news, however, whatever problems the tracker may have don't seem to be enough to dissuade purchasers from demanding Jawbone devices en masse.

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