Make way for one more pivot from Jawbone. The fitness band maker that originally started out in headsets and later made speakers, has abandoned selling and supporting consumer hardware following a deluge poor reviews and media reports that it has run out of money.

TechCrunch has learned and confirmed that Jawbone is preparing to shift its business yet again — moving from a focus on low-margin fitness bands sold directly to consumers, to a high-margin business to business to consumer model: a health product and accompanying set of services sold primarily to clinicians and health providers working with patients.

As part of that change, Jawbone is trying to raise more money. Sources tell us that it’s been in conversations with its current roster of backers, plus potentially new strategic investors in the wider medical sector, along with new investors outside the U.S.

We do not know how much Jawbone is raising — Jawbone declined to comment for this article — but from what we understand, those deals are still in progress. That is to say, funding is not closed, although two sources claim it’s at an advanced stage.

The company to date has raised what looks like $951 million from a storied list of investors that include Andreessen Horowitz, Sequoia, Kleiner Perkins, JP Morgan, Mayfield and Khosla. But it has also burned through most (if not all) of that, with very little to show in returns, as it has found it hard to make a lucrative dent in an already challenging climate for wearables.

Its last round of $165 million a year ago was made at a valuation of $1.5 billion — half of its peak valuation of $3 billion. Filings from investment firm Blackrock, which had provided to Jawbone last spring around $300 million in the form of a convertible note, seem to indicate that the firm ascribes no value to its stake.

Of course, it’s not just Jawbone that has felt the heat. A recent report from eMarketer revised down growth estimates for the whole sector by nearly 40-percent, with many products failing to find a critical mass of users beyond early adopters; you can see the fallout also in rocky results from Fitbit (along with its recent acquisition, Pebble).

There have been leaks going back to last year about a shift to the clinical market. Signs of empty promises or just that it’s really working hard at the pivot? In either case, Jawbone believes that it might have an advantage. Two companies — Omada and Forward — have created interesting models that could offer Jawbone a model for a way forward, moving beyond the simplicity of consumer wrist-worn trackers.

“There are a lot of things to learn about the interactions between health wellness and consumer electronics,” one source close to the company said. He added that consumer hardware is just too challenging, except for the very biggest companies.

“If you think about what a good consumer electronics company looks like, it’s 30-percent margins, annual release cycles and huge risk. It’s turned into a blockbuster game,” he said. “But folks in this other area, like Omada and other services, they have a human involved but with a nearly 100-percent contribution margin. It’s wildly different economics. Every wearable company today will be posed with this question: Do I want to play in consumer and narrow margins, or healthcare and service and make incredible margins but with possibly a lot of upfront fixed cost.”

‘Still committed’?

A look at Jawbone’s public profile today shows not only how the company has been failing a lot of consumers of late, while trying to keep the business running until it can catch the next moving train, its newest pivot.

Jawbone’s social media accounts offer what you’d more or less expect from a health startup: fit people rock climbing or doing yoga. In one image, two women are tossing snowballs at one another, on either side of a snowman. Another two are laughing while drinking beers on a couch. Just happy, healthy people enjoying their lives. A fitness band is rarely pictured, but always implied.

But scratch the surface on any of the placid stock images and you’ll find something more telling: an army of people who use every post as an opportunity to express their frustration with the company and its lack of response about its faulty products, responding with angry emojis, barbs about the company and pleas for help.

Jawbone has seemingly gone silent over the course of a year, a far cry from the company’s last blog post of substance, dating back to June 2016, when CEO Hosain Rahman asserted, “We’re Still Committed.”

The executive’s assertions were an attempt at addressing growing pushback from customers and press, following reports that the company was unloading assets ahead of a sale or liquidation. “Unfortunately, not everyone has access to what we witness everyday,” Rahman stated. “As some of you may have recently seen, there have been a few incorrect media reports that Jawbone is exiting the wearables business or going out of business altogether. These reports are unequivocally false.”

However, it turns out that Jawbone has been quietly selling off some assets, specifically part of its once-popular Jambox speaker business, as Business Insider reported in September 2016. A source tells us it is now completely gone.

Its fitness bands have similarly been wound down. The last time Jawbone shipped a major upgrade to its wearable line was April 2015, with the UP4. In the meantime, those who have been trying to work with customer support over previously purchased faulty bands have found their questions left dead in the water. And then there’s the company’s “F” rating on the Better Business Bureau’s site.

Beginnings

Jawbone’s origins date back to 1998/1999, founded by Rahman and fellow Stanford student Alexander Asseily, a serial entrepreneur who also helped launch the consciously minded social media app State.com and Elvie, “an activity tracker and app that is transforming how women do their Kegels.” He’s also the non-executive chairman of Azimo, a money-transfer service.

The company began life as Aliph/AlipCom, derived from Aleph/Alif the first letter of Semitic writing systems, a nod to the company’s language roots. The pair would soon secure DARPA funding to design communication equipment for noisy field environments, leveraging that research to create a noise-canceling headset for phone calls.

An early prototype reportedly scored the Aliph team an audience with Steve Jobs, though the late-Apple founder’s response to the wired system was typically blunt as Rahman remembered it in a 2015 interview, saying, “The only place anyone would ever use a clip like that is in your mind.”

The company’s innovations did manage to capture more ardent support of designer Yves Behar, who would come on board as VP and design many of much of the company’s products and packaging. The company debuted the Jawbone headset at CES in 2007. They branched out from headphones in 2010 with the hybrid Bluetooth speaker/speakerphone, the Jambox, releasing the first UP fitness band in 2011 — the same year it officially adopted Jawbone as its company name.

Growing pains

In the decade since the company released the first Jawbone headset, it’s quickly enamored itself among Silicon Valley startup culture. It was at the forefront of a number of growing spaces, most notably wearables.

But in a classic case of being first possibly being too early, Jawbone has had a hard time staying at the top of the wearables market, and it’s been lagging for a while: back in December 2015, IDC didn’t even rank Jawbone in its top five wearable vendors, giving Jawbone less than a 3 percent share in a massively fragmented (and, don’t forget, small) market.

No surprise that its valuation has been hurting so much.

The funding that we’ve heard Jawbone is trying to close now would match up with reports from last year also noting that it was looking for more cash. But more skeptical insiders say that the bigger and more optimistic story about a pivot also belies some of the dire business problems that the company has had. One claims that at its peak the company was burning $6 million a month, and that more recently it has received bridge loans from current investors to meet costs.

The company’s reportedly dire financial straits were again brought to light in the wake of an ongoing patent suit with arch-rival Fitbit, which sought to block Jawbone from selling its devices stateside (itself following a suit that accused Fitbit of stealing Jawbone trade secrets). Fitbit ultimately dropped the suit, citing Jawbone’s precarious finances.

“SEC filings of one of its biggest investors now value Jawbone shares as worth nothing,” the company said in a filing with the ITC, “as well as indicate that Jawbone has filed for bankruptcy or is in default.”

Rather than let sleeping dogs lie, Jawbone fired back by way of lawyers, calling the suit “baseless” and essentially accusing Fitbit of keeping things going for financial gain and to gain insight into unreleased devices.

Fitbit calls into question the financial stability of Jawbone by relying on speculative press reports and third-party sources rather than any information directly from Jawbone. The publicly filed motion even goes so far as to assert that Jawbone has declared bankruptcy, despite the absence of any bankruptcy petition to cite and the fact that discovery obtained in this Investigation even in the last week is inconsistent with a company that has declared bankruptcy.

One source tells us that Fitbit tried to acqui-hire Jawbone very recently — a conversation that never went very far because of the animosity between the two and the fact that Jawbone believes that there is still value to its business. Earlier, such talks were dismissed by a source as being “low-level.”

But the story doesn’t seem to end there. Whether it’s keeping up appearances in hopes of securing more funding for a pivot or genuinely building the next phase of the company already with money it has held back from putting into its current “live” business, or something between the two, apparently there is more to come.