iRobot files for Chapter 11 after failed Amazon acquisition

The consumer robotics company iRobot filed for Chapter 11—the US bankruptcy code allowing for reorganization—last Sunday. The filing marks the end of an era for the company, following Amazon’s decision to scuttle its $1.7 billion acquisition of iRobot in January 2024. The collapse of the deal concluded an 18-month investigation by regulators in the United States and the EU.

Founder Colin Angle characterized the regulatory opposition that blocked the deal as avoidable. The collapse followed an 18-month investigation by the FTC (the US antitrust regulator) and the European Commission (the executive branch of the European Union). During this period, iRobot was required to create and deliver over 100,000 documents to regulators. Angle, the founder of iRobot, described the process as profoundly frustrating, noting of his experience testifying at the FTC that “It felt so wrong” as an entrepreneur. Angle acknowledged that the goal of regulators is to avoid the abuses that can happen in monopolies, with the aim of protecting consumer choice and innovation. However, he argued that the acquisition would have catalyzed innovation instead of creating a monopoly. He warned that the regulatory investigation sends a chilling message to other founders, stating that risk has a chilling effect on startup exit strategies and venture capital investment.

The company, co-founded by Rod Brooks, had previously achieved significant scale, having sold over 50 million robots since its launch in 2002. In its early commercial phase, iRobot sold 70,000 robots in its first three months. However, the company struggled with inventory management, at one point manufacturing 300,000 robots and holding 250,000 robots in its warehouse before a Pepsi television commercial cleared the inventory. More recently, iRobot faced intense competition. In the EU, its market share fell to 12% and was declining. Additionally, Angle noted that Chinese competitors were excluded from the Chinese marketplace. While competitors like Roborock and Ecovacs adopted lidar navigation, iRobot committed to vision-based navigation, a strategy Angle compared to Tesla’s approach.

Why it matters

The collapse of the Amazon-iRobot acquisition, following an 18-month regulatory investigation, marks the end of an era for iRobot. It highlights the chilling effect that failed mergers and acquisitions can have on the broader innovation economy and startup exit strategies.