Does The Beats Aftermath Usher The Next Episode For Wearables?

Editor’s note: This is a repost of a TechCrunch article written by Jon Shieber.

As Beats potentially prepares to move on to the next episode, there are a few things about the news that should have tech investors’ ears ringing.

One, Dre may hate embargoes more than reporters do.

But beyond Dr. Dre’s non-announcement announcement (booze-fueled, but who could blame him?) is a potentially $3.2 billion validation that even the most basic form of wearable technology is worth a lot of money to the right company. There’s no doubt that headphones are wearables — and if the future envisioned by “Her” wins, then the earbud or headphone could be a gateway to an entirely new form of computing.

Setting aside music streaming, Apple’s acquisition of Beats could represent the company’s take on one version of the future user interface for computing — Google Glass and Facebook’s $2 billion Oculus are another. In some ways it could be a philosophical split on whether users will interact with data aurally or visually in the future.

To be sure, streaming music is another (possibly the primary) component of any potential Beats deal. Streaming music service Pandora Media, which went public last June, has a market cap of $4.5 billion. Venture backed startups offering streaming music services like SoundCloud, Spotify, Rdio, Deezer and Songza have raised well over $500 million since 2011.

As the debate plays out in the marketplace, one thing is certain — venture capitalists haven’t lost faith in the wearables market, despite the spate of recent negative headlines predicated on Nike’s decision last month to shift its emphasis from hardware to software in its popular FuelBand business.

Beyond Carlyle Group’s private equity investment in Beats — which was the largest commitment to the wearables market, according to CrunchBase data (and should the Apple deal close, one of the largest exits) — a number of venture capital’s top firms have placed their own significant equity and debt bets on wearables.

These venture investors have invested over $1.1 billion in wearable technologies — and that doesn’t include money spent by private equity shops like Carlyle or the secretive investor Rizvi Traverse, which recently invested in Jawbone. Beyond the big dollars, investors are backing more and more companies that define themselves as wearable, according to our data.

Certainly Apple believes in Beats’ online music service and headset business enough to make it the company’s largest acquisition ever — should the deal go through.

Here’re Apple’s disclosed deals by purchase price in terms of their relative size. The Beats deal would dwarf them all, ensuring that no matter what else he does, it’s doubtful anyone will ever forget about Dre again.

  • Originally published May 11, 2014, updated April 26, 2023