Pebble is laying off 40 employees, or about 25 percent of its staff. In a conversation with Tech Insider revealing the layoffs, Pebble CEO Eric Migicovsky suggested the cuts were necessary because of a lack of funds. "Money is pretty tight these days," he says, referring to current difficulties raising money in Silicon Valley.

Pebble is now in a very crowded market

Venture capital firms are in a slowdown right now, but Pebble has managed to raise some money. Tech Insider says that it raised $26 million over the last eight months. And while we don't know specific sales figures for most of the year, we know that Pebble sold $20 million worth of smartwatches during a Kickstarter campaign at the beginning of 2015.

Still, there's a clear suggestion that Pebble's business is not in perfect shape. Migicovsky suggests that its future products could shift their focus toward health and fitness features, which he sees consumers having more interest in. Pebble already offers some fitness features, but it doesn't explicitly offer a sport model of its watch, nor a dedicated fitness tracker.

Beyond today's layoffs, Pebble also lost at least one key employee this year: Itai Vonshak, who was hired as head of product in 2014. Vonshak was responsible for Pebble's Timeline interface, and has since moved to Intel.

Pebble entered the spotlight in 2012 after a wildly successful Kickstarter campaign for the initial Pebble watch. At the time, there were no compelling smartwatches on the market; but by the time Pebble launched its second generation watch last year, it was entering a much more crowded field. There were a few watches running Android Wear, some strange inventions from Samsung, and the impending launch of the Apple Watch, which had been unveiled months earlier — not to mention a saturated market of increasingly stylish fitness bands.

Though Pebble did well during its Kickstarter launch, this week's layoffs indicate it may not have done as well in the year since. Migicovsky, however, tries to make the layoffs sound like a preventive measure. He tells Tech Insider, "We want to be careful."

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Update March 23rd, 10:42PM ET: This story has been updated with additional context around Migicovsky's quote about funding, following an amendment in Tech Insider.