Stretchsense culls 145 staff after $US92m buyout falls over

Stretchsense co-founder and chief executive Ben O'Brien saw Start Today deal as a perfect marriage.

Smart clothing startup Stretchsense has laid off about 145 of 180 staff after a buyout deal with a Japanese retailer fell over.

The cuts were confirmed to NBR by a manager who is one of those laid off this month (chief executive Ben O’Brien did not immediately respond to a request for comment).

Last November, Smart Today – which bills itself as Japan’s largest online retailer – paid $US20 million for the option to raise a 40.44% stake in StretchSense to 100% for $US92m.

The option did not expire until September 30 this year.

But on April 27 Start Today said it was calling off the deal – triggering Stretchsense to lay off most of its staff this month.

The Auckland-based startup and the Japanese retailer were collaborating on the Zozo Suit, a stretchy suit with smart sensors for measuring your body shape – helping you to buy clothes online that are an exact fit.

But the April 27 market announcement by Start Today says it has now turned to an alternative manufacturer for “purchasing a more easier [sic] and low-cost body measurement solution than the solution using the technology of Stretchsense.”

A separate announcement, dated the same day, said Start Today reported an "extraordinary loss" of 1486 million yen ($20 million), due to a writedown of its investment in StretchSense.

The Kiwi affiliate “has been struggling compared to the original plan,” the statement said.


The Zozo smart suit, which used sensors in its fabric to take exact body measurements for easier online clothes shopping. Smart Today has replaced it with a camera-based system sourced from China.

Founded in 2012 by Auckland University students Todd Gisby and Mr O’Brien plus bioengineering Associate Professor Iain Anderson, Stretchsense to commercially exploit sensors that can be used in “smart clothes".

Smart Today was the company’s first major deal.

Last November, Mr O'Brien pitched it as the perfect marriage of Kiwi geeks to an online retailer with the distribution and marketing muscle to get product sold.

The startup has received four rounds of founding from Crown agency Callaghan Innovation, including a three-year Growth Grant worth up to $15m that runs until 2019.


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16 Comments & Questions

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This is a shame as it did sound like a great outcome for all those involved. My guess is they will still have some of the US$20m option fee so can keep going forward - and investigate other potential applications.

would be interesting to know if the Japanese have just taken the option fee as an expense (which is obvioulsy of no value if you do not exercise) or if they have also written down the value of their 40%.

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Lets hope they can re gather quickly and generate some new business

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Such is the life in the high-risk, high-reward life of start-ups. Highly volatile valuations and within months to weeks you can go being a Xero to a zero.

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well that still got $20 mil cash out of it and now have majority control of their company - so not exactly a total failure. But will be hard to find another lead investor with such a public no vote

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The company is founded on world-leading research brought into the commercial arena as a new product platform a gifted and tight-knit team. This is not a one-product or one customer company by any stretch.

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Another example of a small Kiwi enterprise not being able to manufacture at scale??

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No. Just an example of people expecting businesses to be able to scale product to quickly. Tesla is having similar issues with being too popular to quick.

I am sure they will regroup and expand again as this wasn't a failure in tech.

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From another article it indicates a cheaper and easier solutuon was found in China.

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A case of a product that you didn't know you needed... and didn't.

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Probably hard to find out but in another article it seemed to imply that the cash had been cut off.

The $20m has been talked about as an option payment so normally that is up front. But looking at the Zozo suit site etc these where being given away for free. They said over 2 million had been ordered.

I wonder if the option fee might have been tied to delivering the product and if the product has not been delivered if that impacts on the cash.

Having said that they still have 30 odd employees so must have some money in the tin.

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1 million not 2.....fat fingers on a small cellphone

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Newstalk ZB reported O'Brien saying all investment had been withdrawn. I suspect you're right about the option fee being tranched and aligned to performance/production volumes.

Genuinely hope these guys find a way through.

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The Zozo suit is just one application of this technology... and probably in hindsight, not the most elegant solution to the problem of people not knowing what size clothes to buy online! Isn't hindsight wonderful! BUT the tech is still there, and still smart... just need to find the market fit!

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Yep and 145 people have lost their jobs but all good the investors might still make their money.

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Maybe shows the real lack of ambition and confidence of the company.....the first offer to buy the company from one potential application and it is head fir the exit.

Why not just license the technology for a defined sector? Raise capital and execute on a range of applications.

Don't blame investors US $150m would have been a good exit but maybe our sights are set too low.

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Gutting. I feel for the 145 being made redundant and it must have been tough delivering that news.
Also painful having the major shareholder now buying from a competitor.

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