For Ken Fairbanks, CEO of Insteon Technologies Inc., the last 60 days have been a rush to find office equipment, reestablish supplier relationships and figure out who his customers are. The former Insteon employee turned business consultant purchased the assets of SmartLab Inc. through a unique process that has left him and his investors scrambling to rebuild a company as quickly as possible. Along the way, he’s learning how hard it can be to restart a smart home company after it has essentially shut down.
On April 15, Insteon users noticed that their hubs weren’t working. Their connections to services such as Alexa and Google were broken and their mobile apps could no longer connect to their hubs. A few days later all was explained via a note on the Insteon web site saying that the company has failed to make it as a business. Customers also received an email from a company representing Insteon creditors noting that they would be paid after the sale of the assets by a trustee.
For a while, Insteon’s users spent their time investigating other options. But on June 7, their hubs mysteriously turned back on. Two days later another message on the Insteon web site introduced Ken Fairbanks as one of the new owners and said that the new owners would be in touch. And on June 9 the formal sale of the assets closed leaving Fairbanks and others free to start talking about the deal and plans for Insteon’s future.
This week on the podcast, Fairbanks spoke with me about what was happening behind the scenes, SmartLabs odd bankruptcy, and his plans for the next iteration of Insteon, which includes an annual fee, eventual support for Matter, and investment in new products.
Triage and triumphs
When SmartLabs found itself in trouble the management decided to close down and liquidate the business through what’s known as an ABC (assignment for benefit of creditors) that allowed management to assign the assets to a trustee and walk away from the mess. Any eventual sale of those assets would go to pay off creditors. Fairbanks noted that it was made popular in California during the dot com era as a way to shut down businesses without a lot of publicity.
But for Fairbanks, the downside of that process is that it was pretty chaotic to come in trying to purchase the assets. Before the deal closed in June he was so stressed about getting the hubs turned back on that he ended up paying off some of the creditors just to get the servers running. “Every day the hubs were down we lost customers,” he said. He said that most creditors didn’t want to understand that Fairbanks as the new buyers of the assets wouldn’t be responsible for the debts accrued by the old Insteon run by SmartLabs. And since the transaction hadn’t closed yet, he e didn’t have paperwork documenting his new ownership position.
Finally, he ended up paying off some of the debt just to get the servers back up. But it was awkward because he still didn’t have the assets, which meant he didn’t have the list of customers. So instead of notifying anyone that their hubs would start working soon, it just happened. Even today, Fairbanks said he doesn’t know who the current Insteon users are because he still hasn’t found a list of current customers among the assets.
The jumbled state of the assets is a function of the liquidation efforts. Some equipment was sold before Fairbanks could buy the assets and some of it is simply sitting in storage units and on random computers that employees may have brought home after SmartLabs shut Insteon down. “We just found a storage unit with some equipment in it last weekend,” he told me on the podcast.
While trying to get the assets together and figure out the current status of the company, he’s also negotiating for new orders of Insteon devices so he can stock the store and make sure customers can add to their Insteon systems (and generate revenue for the new business). Because of supply chain issues, he’s not sure when orders will be fulfilled but they are now in place. He did say that a small order of product is coming in this week and should be on the store web site later this month.
Building a roadmap
Since selling Insteon gear wasn’t enough to keep SmartLabs in business, Fairbanks is also trying to generate revenue with a cloud-based subscription that will help support the ongoing costs of operating a connected hub. Users can pay $39.95 for a year of cloud support for their Insteon hubs. This gets them cloud integrations such as Alexa and Google Assistant, as well as mobile app control. Stuart Mathews, an Insteon customer is happy to pay that fee if it keeps his Insteon system working.
When his hub shut down in April he was upset, but as he tried to find alternatives he realized he would have to spend hours figuring out how to keep his system up and running if he wanted to work with a DIY solution such as Home Assistant or Hubitat. That didn’t seem worth it to him, But before he had to make a choice, his hub came back online. When he discovered the new owners were trying to keep the systems up and running, he was happy to pay a fee.
Jeff Charon, another Insteon user who is willing to pay the annual fee, worries that it might be too low to ensure the new Insteon team has enough revenue to keep the company operational while it tries to invest in new products and services. When I asked Fairbanks if he had plans for graceful degradation of the equipment and services if the new Insteon couldn’t make it, he said that he didn’t have specific plans but that he would be more forthcoming about letting users know if the new Insteon were going to go out of business.
To ensure that Insteon doesn’t go out of business, Fairbanks has longer-term plans such as supporting the new Matter smart home interoperability standard with a next-generation hub. He also hopes to introduce new types of Insteon products once the store is stocked with existing devices. And he’s almost begging customers to call him and tell them what they want from the new company as he tries to strike the right balance between rescuing the mess of a failed business and building that business back up again.
I don’t know if Fairbanks will succeed, but I do think his journey will be an important one for the overall industry because it will show how hard it is to buy the code from a defunct smart home company and rebuild a business. We often say that’s what we want to see happen when a connected device company goes out of business and bricks its devices. Watching Insteon we can learn if it’s really possible.