How much should it cost to make a nice smartphone?
For Essential, the startup founded by the creator of Android, Andy Rubin, it was apparently $100 million. Bloomberg reported today, May 24, that the company has canceled plans for a follow up to its first phone, released last year, and is mulling whether to sell itself.
At one point, the startup was valued at around $1 billion—”unicorn” territory—and raised over $300 million to build a hardware empire. It burned through about one-third of that cash, which it raised from firms including Amazon, Tencent, and Redpoint Ventures, developing its first phone, a few accessories, and a smart-home hub that it has yet to release. According to Bloomberg, it still plans to release the hub, which would rival Amazon’s Echo Show, but a product roadmap beyond that now seems unclear.
An Essential spokesperson told Quartz:
We always have multiple products in development at the same time and we embrace canceling some in favor of the ones we think will be bigger hits. We are putting all of our efforts towards our future, game-changing products, which include mobile and home products.
The first Essential phone, which was released with great fanfare, with many “first looks” from influential YouTubers and breathless gadget bloggers, seemed doomed from the start. Although the $700 phone featured a sharp design, it didn’t really offer anything that the flagship phones from established manufacturers didn’t, and, as it was produced by a startup, there was no guarantee the company would even be around to support the phone for very long. It also didn’t seem to add much utility over cheaper Chinese brands, like OnePlus, for the added cost.
The promise of the phone was the modularity—it featured a magnetic connector at the back where add-ons could be attached, but the company only developed one, a $50 360-degree camera. The promise of the company as a whole, however, was to leverage Rubin’s software background: Essential would have a range of design-minded products that would create an entire ecosystem, much like Apple has done, but built around Android and Rubin’s know-how.
While investors seemed to have liked that idea, consumers did not. The Verge reports only around 150,000 phones were sold. Perhaps taking on the companies that have spent over a decade developing smartphones, or the affordable Chinese suppliers, wasn’t the best investment. Then again, maybe it shouldn’t cost $100 million to make a new smartphone, either.