The Engadget Interview: Fusion Garage's Chandra Rathakrishnan... post-fallout

If we learned anything from our last encounter with Chandra Rathakrishnan, it's that the Fusion Garage CEO is nothing if not candid when discussing his company's past failings. Of course, such admissions came amidst great deal of hype from the executive, who was, at the time, heralding the second coming of his company in the form of the Grid 10, Grid 4 and the innovative Grid OS that fueled the devices.

It was the latest chapter in what's proven to be a long and bizarre tale, one that began with the dream of a $200 internet tablet. After countless scheduling pushbacks, fights and price hikes, the proposed CrunchPad finally came to life as the JooJoo, a $499 device that was greeted with scathing reviews, poor timing (thanks mostly to Apple's long-awaited announcement of the iPad) and rather lackluster sales, to put it kindly. In spite of attempts to rally the line, the tablet died a lonely death, and most suspected that it had taken the rest of the company with it.

Read on for the full interview.

Fusion Garage's second coming arrived in a shroud of viral marketing, with ads heralding the arrival of TabCo, a supposed new company that offered the promise of escape from an iPad-dominated landscape. When time came for the great unveiling, we were met with a bizarre press conference led by Rathakrishnan, announcing the arrival of the Grid 10 and Grid 4, a tablet and smartphone running the company's own Grid OS, an innovative operating system built on the Android Kernel.

Fusion Garage JooJoo review

The Engadget Interview: Fusion Garage's Chandra Rathakrishnan

Grid 10 review

Along with the announcement, Rathakrishnan and Fusion Garage managed to get something quite rare in this industry: a second chance. The company drummed up a fair amount of excitement with the promise of a legitimate iPad alternative. Ultimately, however, the comparisons between the Grid10 and JooJoo proved a bit too close for comfort -- big ideas that hit the market half-baked, or at the very least, not quite ready for public consumption. The poor tablet's poor reception came to a head last weekend, when the product's site crashed, an event that led to the discovery that the company had been dropped by its PR agency. These facts, compounded with the severing of the its ties to the law firm that was representing it with its ongoing Crunchpad legal battles, fueled speculation that Fusion Garage had finally thrown in the towel, once and for all.

In the wake of all of this information, we managed to get Rathakrishnan on the phone from Singapore, to discuss what all of this means for the future (or lack thereof) of Fusion Garage.

So let's start by discussing what exactly has happened over the last few days.

We had a DNS problem and the site went down, which lead to the speculation that the company was dead. It was a DNS problem that happened and it was nothing more than that.

And your PR firm is no longer representing you.

Yes. The site went down and then news came out that they were no longer representing us, which led to the speculation that we were no longer around. The reason they are no longer representing us is due to a couple of things. One is, as they said, we've been uncommunicative for some time, because the company has been locked down, trying to figure out options that would be required for us to continue surviving. We have been trying to raise new funding and that has taken a lot of our time and focus.

So the fact that you haven't been as product focused recently is why they're no longer with you?

It was a mutual decision. We did talk about it and they made it very clear that it was difficult for them to continue, due to what happened over the last few weeks. We had been largely uncommunicative with them and they haven't been able to do their job for us in an efficient fashion. So it was totally understandable that they could no longer continue representing us.

I would assume that there are generally periods of non-communication between tech companies and their PR firms.

Sure. Well, not for a lengthy period of time. They were completely unaware of the situation. This is a transparent conversation and I want to be clear about what's happening with Fusion Garage. While Fusion Garage is not dead, [the situation] as it is right now is that we are in the midst of finding a new line of funding that we need to close to continue our existence. If we are unable to close the funding that we need, then we will certainly be in trouble. I think that it's best that the company focuses on finding the funding it needs before proceeding.

Is it safe to say that part of the reason why they backed out was that they were wary about the future of the company?

Yes. I think we are not able to say definitely that if we will close this round of funding. We've been exploring several options including the possibility of an acquisition.

Grid10 review

Do you share that concern at all? Are you also worried about the future of the company or are you confident that it will continue?

We have seen a lot of problems in the past, and this is just another challenge that we have on our hands. Over the last couple years, we've worked through the problems. But our current investors are unable to continue funding the company to a point that's required to get it to the stage where we can have sufficient market share in the industry. So, we need a new round of investment. While the traditional method of funding is one route that we will be exploring, we are also exploring every possible option that will allow us to continue in some fashion.

Is it true that the law firm that was representing you is no longer representing you, as well?

Yes, for exactly the same reason. We have been up front and transparent with everybody that we've been working with, which is why you see both the firms pulling out at the same time.

With this kind of radio silence, it certainly doesn't help that we are only a week out from Christmas. This should be a good time of year for you guys.

Well, this is a brutal industry. Even the big boys like HP have pulled out, and you've seen what has happened with webOS. So, for a company that is way smaller both in relation to manpower as well as financing, it's difficult. Couple that with the challenge that we've had, and it's a difficult position.

When you mention the concerns that the funders had. Are they the same as those of the PR and law firms? Was it also a lack of communication, or perceived lack of success of the devices?

It's not lack of communication. The investors are obviously people that keep in touch very regularly, and clearly on the list of priorities is that we get the kind of support that we need. They have funded the company to this point, most of them right from the inception, and we have raised a significant amount of money over this time. But to continue to do what we need to do, the company needs a significant round of funding.

If you look at what we were doing in hardware and what we were doing in software, we were doing the whole bit. How many hardware startups are there? There are hardly any hardware startups because the amount of financing required to play the hardware game is significant. And then when you couple that with an industry like the kind that we are in with clear leaders, to try and do hardware, software and then marketing, the amount of funding required to sustain itself, to give it a shot at success is fairly significant. And the current investors are unable to continue funding at that range. With the reviews that we received, coupled with the fact that we need a large amount of funding to sustain ourselves, they are of the opinion that they are not the right players to help out. Once that opinion was made known to us, we began the process of trying to find the funding we require.

The last time we spoke, we covered the JooJoo a fair amount. You told me that you thought the reason the device wasn't successful was that it was delivered too early and there were too many issues with it. Are you seeing a reflection of that at all in the Grid 10?

I think it is sort of the same. I believe that the Grid 10 was in a far better state than the JooJoo ever was, when it was released. But I think that in an industry where the benchmarks benchmarks are the high test of the world, we fell short.

Do you feel like the reviews have been at all unfair to the device?

I think the reviews were harsher than they should have been, but I do agree with a lot of the points that were made. Clearly the production had shortcomings. There's no denying that. When compared to what the big boys had to offer, it wasn't good enough.

You launched a big viral campaign ahead of the announcement and threw that press conference. Do you think that you may have oversold the device?

Yeah, I think we were responsible for raising the hype around the product. I think we needed to, to ensure we were noticed in a very crowded market. I guess that the product not being ready at the point when it was given to reviewers, coupled with the hype that was created, wasn't a good combination. The expectations were high. It was like a good movie trailer with a movie that couldn't live up to it.

You mentioned before, the concern about funding, since it costs a lot of money to simultaneously develop hardware and software. Do you worry that the company took too much on?

We've certainly been trying to do a lot for a small product, and the funding required for that is significant. I think it's worth considering that if we were just doing software itself and not hardware, we would do an Android solution. When we don't have an Android solution, it becomes hard to compete in a market where it's Androids and the Apples only. So I think it was the best solution, in trying to do what we did, to be able to compete. And the moment you get into the hardware space, regardless of what you do with software, the amount of financing required is significant.

There have been some issues with users attempting to return Grid 10 devices.

There were several categories of customers: customers who ordered the device and got it -- this is largely in the US. Then there are people who ordered their device and did not get it -- this is the case in the European market, where they did a pre-order but we did not launch in time, and the delays meant that the customers did not get their device as of yet. Then there was a third category of customers who bought the device, did not like it, and returned it, but have not had their refunds credited yet. The second two situations need to be resolved, and we will ensure that they get resolved by providing refunds for those people.

Can you shed any light on how many devices have been sold?

We don't discuss numbers but it is safe to say that it is a fairly small amount.

I know that you never discussed the number of JooJoos, but is it larger than that number?

Yes, it is larger than the JooJoo numbers, yes, but it is also worth mentioning that the JooJoo sales numbers that were reported on the web -- 93 units or something like that -- were fairly inaccurate.

How are the return numbers looking?

They are fairly small as well.

They are small overall in proportion to the actual devices being sold?


Is it possible to buy a device right now? Can I go on the website and buy a Grid 10?

No. We've stopped selling the device at the moment. We think that until we resolve the future of the company, it's not fair to continue selling it. Until this situation with the existing customers has been resolved satisfactorily from their point of view, and until the future of the company is decided one way or the other, I do not think it's fair to continue selling the device.

Will everybody who already ordered a device get a device?

That is one of the options that we are clearly working on, but it is conceivable that if that option does not pan out then we will give them a refund as well.

I know that you were working out a deal where people who bought JooJoos got a Grid 10 as well, have those been delivered?

Yes, people in the US who bought a JooJoo and verified their addresses with us received their devices. So the US customers who have bought a JooJoo have been taken care of. This isn't the case for Europe yet, because we've not launched in Europe. The European launch has been delayed. That means the customers in Europe who ordered the JooJoo before have not received their Grid 10.

We talked about the legal firm earlier, are you able to discuss the ongoing lawsuit?

The case is still ongoing and there's nothing more to that than what we have discussed before. I have no new information.

Ok, but I assume that you will be getting new representation?

Getting counsel is something that we are working on right now.

During our last conversation, we discussed how rare second chances are in this industry. Do you feel like you are running out of chances?

If we don't get the funding that we need, and if none of the options work out, then it's obvious there's not going to be a third chance. We were given a chance after the JooJoo did not succeed, and we gave it our best shot. We could have taken the easy route and done something simple, but instead we chose to try and do something different. But the scale of it and the resources just didn't measure up. I think that is ultimately why we are in the situation that we are in right now. Having said that, we do have options on the table and we are exploring those options. These options are really taking longer than we would have liked, but we will have them figured out soon.

Are potential funders receptive now? Are you hopeful?

We are in discussions. Clearly being in discussions means that we have a shot. But it's still early. I've been here before, where it looks like we're going to complete something and it breaks. We're doing everything we can to close this quickly, since there's just too much at stake.

Disclaimer: Engadget's parent company, AOL, is currently involved in a lawsuit against Fusion Garage.