Jolla: where did the money go? [answered]

asked 2015-11-20 14:49:01 +0300

bilgy_no1
7008 ●55 ●100 ●104

updated 2015-11-20 15:35:35 +0300

hannakala
828 ●11 ●14 ●17

As we all know by now (in typical fashion: no word directly to the community, but we have to hear it through an obscure Finnish news outlet), Jolla are in financial trouble. On this page, however, Antti Saarnio claims that $50 million was raised by Jolla over the years. Even if I assume they made no margin at all on selling phones and tablets, this is a large amount of money. So where did it all go?

Jolla has been working since mid 2011, but started with a small team. They grew to 100+ people in 2014, but then let some people go in 2015. Part of the team is in Finland, while another part is in Hong Kong (lower wages). Even if we assume an average of 4 full years of 100 FTE x $75k per year on average (paying around $4000 per month wages + office costs + taxes and social security), that would amount to $7.5 mln per year, or $30 mln in total. Let's say there was a $5mln budget for R&D over those years and there should be $15 mln left. And I think my estimate is quite generous, since in the early years there were only dozens of people, nowhere near 100.

If I underestimated, it seems Jolla have been spending a lot of money... If my calculation is anywhere close to reality, I can only assume that the company has failed to achieve the milestones to get the next tranche of the funding (VC's usually provide funding in tranches with milestones to have some grip on the company). In such a situation, there will be strategy reviews, management changes, lowering the burn rate and operational problems. We have seen all of these symptoms in the last few months. If they can agree on a plan in which the investors believe, the next tranche can be paid, but usually against new terms and conditions. So, maybe that's where the delay is right now.

I wonder what you all think about this...

PS I'm calculating with 100 FTE per year (= 400 man years in total) since the real start of the company in the second half of 2011. More likely is something like this: 25 FTE in year 1, 50 FTE in year 2, 100 FTE in year 3, 125 FTE in year 4, or a total of 300 man years. I think my assumption of 400 is quite generous.

I also calculate with $4000 on average per employee. This is a reasonable amount for a programmer in Holland, and I assume also in Finland. Taken into account that Nokia has laid off many developers, it should not be an unreasonably low amount. Jolla is also an ideal driven company, so most people don't work there for the big bucks. Also, part of the team is in Hong Kong, where wages should be lower. Adding 50% for overhead, wage taxes and social security is a good estimate in Holland, and I assume also in Finland.

Finally, I don't think there are many other cash expenses, perhaps some material costs for prototyping, travel expenses and marketing costs (participating in Slush, MWC etc.), for which I assume $5mln in 4 years, or 15+% of wage costs.