Tough week for hardware companies

In just about a week, iRobot, Luminar and Rad Power Bikes filed for bankruptcy.

They’re very different companies—they sell Roombas, lidars, and e-bikes, respectively—but as Sean O’Kane, Rebecca Bellon, and I discussed on the Equity podcast episode, they’ve faced some similar challenges, including tariff pressures, big deals that fell through, and a failure to establish themselves beyond the products that first made them successful.

You can read an edited preview of our conversation below, with Sean providing an overview of each filing, Rebecca weighing in on Roomba, and me speculating on what the popular accounts of these bankruptcies are missing.

Sean: Rad Power is big for an e-bike company, but small, I think, in most people’s minds, as it’s still a bit of a niche. They were founded a long time ago and became popular even before the pandemic, and were really considered the industry leader in terms of the quality of the bikes they make, pretty good branding and marketing, and experience connecting with customers — which is really hard to find in the e-bike world, where most of them are just like Amazon alphabet soup companies.

They rode that wave in the pandemic as micromobility really took off and people were really rethinking how they got around, not commuting to the office as often. And we see this in bankruptcy filings. It’s only showing three years of revenue, but they pulled well over $100 million in revenue in 2023 — about $123 million, I think last year it was down to about $100 (million), and in the bankruptcy this year they were only at about $63 million, so they were obviously coming off a pretty big peak. They have a pretty diverse product line, but they just never found a way to establish a foothold there.

And I think you could say similar things about these other two companies. Luminar is another company that was founded in early 2010, came out of stealth in 2017, and its mission was basically to take lidar sensors, which at the time were really expensive and big and really only used in defense applications and space. 2017 was something of the first big hype cycle for autonomous vehicles. They wanted to implement these sensors, make them more accessible for this use case. This helped them get some deals, mostly with Volvo and then some other deals with Mercedes Benz and a few other players. But they were just very focused on it and that was one of the reasons they ended up filing this week as well.

And then iRobot (was) the most famous of those three companies—a lot of people listening probably even have a Roomba at home or something very similar. It’s just another one of those situations where iRobot becomes synonymous with a certain thing, and then the advancements in the technology that builds that product move so fast that they find themselves in a situation where they’re looking for a way out. And we all saw that, they were trying to be acquired by Amazon and that deal was blocked by the FTC and here we are.

They are very different companies, but they all ran into similar problems. Do any of you have a Roomba?

Rebecca: No, I don’t have a Roomba. This freaks me out, but I bought my mom a Rad Power bike years ago and she loves it. But now, you know, not only did they have this bankruptcy problem, but they also had a battery problem – they couldn’t do their recall because they were like, « If we have to recall these bikes, we’re going to go bankrupt. » But they will go bankrupt anyway!

I’m curious about the tariffs and how much this has affected everyone’s profits. You hear a lot on social media, pro-merger people, how certain FTC blocks of (mergers) lead to companies going bankrupt or being acquired by a Chinese firm rather than an American firm.

Shawn: iRobot represents, to me, a kind of macro global trade problem: could you ever have established this company here in the United States with a localized supply chain in the last 15 years? Probably not. And so it makes sense that they became so heavily dependent on China – which, let’s be real, probably led to the ability for these other companies to come along and basically copy what they did.

It reminds me of Trump 1 when he reversed the tariffs on Chinese imports and we saw a bunch of startups like Boosted Boards and others in the micromobility space get hit. So they are certainly contributing factors. The battery drain with Rad Power was definitely, I think, more of a dagger at the end, but the tariff stuff put them on an unequal footing, making it hard for them to react to things like that.

Anthony: A lot of times when a company fails, there is (are) larger structural problems and then maybe there is a more immediate proximate problem. And especially in the case of iRobot, I think a lot of former executives and even outside commentators point to that deal with Amazon that was reached a few years ago – it looked like the EU wasn’t going to let it go through and it felt like, « Okay, well, by blocking that deal, you basically put a dagger in their heart, which ultimately killed the company. »

This narrative also perhaps ignores the fact that there were other things that made them want to be acquired in the first place.