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Why Withings Founder Eric Careel Bought His Company Back From Nokia

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Photo courtesy of Withings

Withings founder and CEO, Eric Careel

When Michael Dell inked a $24 billion deal to buy back his eponymous computer giant five years ago, the billionaire believed Dell could sell more PCs under his own, private ownership.

Eric Careel can relate.

Last week the soft-spoken, silver haired Frenchman bought back Withings from Nokia for an undisclosed sum, making the company he founded in 2008 private once again.

Yet while Dell had to instigate a long and unpleasant management buyout, Careel’s second chance came about almost by chance, when an irresistible opportunity presented itself.

Earlier this year, Nokia hinted it wanted to offload Withings, the startup it had bought for 170 million euros ($200 million) in 2016 and rebranded as Nokia Digital Health, to prioritize its network infrastructure business instead. Rival bidders sniffed around, including, reportedly, Google-owned Nest.

Careel, who became a multi-millionaire from the original sale, can’t remember how he found out his old company was on the block, but says he was excited by the idea of working with his old team again and building technology that could improve people’s health.

“I had to think, ‘Is it reasonable to come back to a business I stopped two years ago?’” he told Forbes. “In the end I thought, ‘Yes, I will try.’”

In terms of product line-up, little has changed at the Paris-based company since it joined the Nokia fold. It sells connected-health products like a fitness-tracking watch, and bathroom scales that send your weight and BMI to a smartphone for display on a line graph.

Image via Withings

Some of Withings’ health related products, including its smart watch and smart scale.

There’s also a blood pressure monitor, baby-monitoring camera, and a mat that tracks your sleep.

With Careel back in charge after his two-year hiatus, those products will carry on, but Withings will also focus more on releasing products that have an obvious impact on health rather that the broader topic of wellness.

“We want to go deeper in health,” he says. “We will really consider only products and features which will add some new type of measurements to help the health of people,” he says.

From the first day after the Nokia acquisition, Careel stepped down from being active in the daily management of Withings and became a digital-health advisor to Nokia’s chief executive, Raeeiv Suri.

“He was very occupied, so we didn’t have the chance to meet very often,” Careel says.

In early 2017, he left Nokia completely. Over the next year-and-a-half, he “took time for myself” and talked to friends about how he could have done things differently at Withings.

One realization hit hard. Careel had spent too much time comparing his company to Fitbit, the San Francisco-based fitness-tracker firm that IPO’d in June 2015 for more than $350 million, and this had distracted him from developing Withings’ own products.

Photo via Withings

A Withings engineer at work.

It wasn’t really worth making the comparison anyway. Fitbit had raised $1 billion from private investors before going public, well above the $34 million Withings had raised from French VCs like 360 Capital Partners and IdInvest Partners, according to Pitchbook. Fitbit was also firmly established in the US market, where Withings was trying to break in.

Withings was smaller and growing at a slower-pace. And while Fitbit was in the “wellness and sports business, we were in the health business,” says Careel. 

“It’s something that probably I didn’t explain enough to my investors,” he says adding that over time, anxieties built up about Withings’ ability to make money. “I didn’t… accept that the big revenue will come later,” he admits.

Careel says he never wanted to sell to Nokia in 2016, but when the opportunity arose, his investors and board pushed for a sale, allowing them to cash in their investments.

Careel refuses to say how much he paid to get his company back, but it’s probably safe to assume the price tag was less than what he sold it for, with little growth in sales or products under Nokia’s tutelage.

It’s the way things tend to go, and ironically, a play that Nokia’s knows well.

In May 2016, two years after Microsoft had bought Nokia’s handset business for $7.2 billion, it sold the business back to a consortium of former Nokia employees for $350 million, a fraction of the original purchase price. (Nokia’s networking business has remained independent, and was the part that bought Withings.)

Photo via Withings

Withings staff at their office in Paris.

Nokia once reigned as the world’s biggest mobile phone maker, but these days it has focused on hoovering up licensing fees for its revenue, thanks to its portfolio of 26,000 technology patents. That’s likely why Nokia’s head of technologies is also its chief legal officer, and probably why its management weren’t hungry enough to jump back into the risky business of building hardware.

Careel won’t say how he raised the money to buy Withings back, but points out that he has sold multiple companies in the past, so likely has a sizeable cash pile.

He says he’ll now refocus the company’s business model on selling Withings’ services as a collector and analyzer of health data to health providers, in addition to its consumer-facing health gadget business.

One example he points to is Withings’ partnership with the American Medical Group in 2014 to measure the blood pressure of 150 patients over 18 months.

Two years ago it was “too early” to approach insurance companies and government-backed health services as customers. “But… it’s now demonstrated that these products can help people and save money for governments,” he says.

“Countries like US and France, perhaps also the UK and Germany, will start to consider these products inside health programs, health insurers and doctors.”   

To keep things going, Careel plans to invite investors to back Withings “in the next year.”

Will he return to some of his previous backers? “Honestly I don’t know,” he says. “We have a good relationship with these old investors, but nothing is decided.”

Other entrepreneurs would balk at considering investors who pushed him to sell. “Yes,” he says laughing. “But that’s life.”

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