Venture capital might be the only way to fund a moonshot-style startup but it seems to be the kiss of death for already-established, already-profitable businesses.
Smartwatches are not "moonshots". They shouldn't be treated as such. They could be a component of one, though, and society would benefit from components being economically stable, instead of imploding after few years. Pebble was arguably the sanest smartwatch design out there - long battery life, power-efficient screens, hackable[0]. Because they suddenly wanted to get too big too fast, the world today does not have any smartwatch of comparable quality and utility.
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[0] - not just in terms of writing watch faces; people did try to use them as medical devices[1], and they even had a protocol for attaching custom hardware that didn't go anywhere, but probably would if the company was still around
I think you're spot on here. They had a perfectly viable 20-30 person company going in a nice stable little niche, and then the smartwatch hype cycle reached its peak and VCs threw a ton of cash at them along with a mandate to become the Next Big Thing. And so they hired way too many new people, churned out too many new models, and collapsed when the market just wasn't there.