Android creator's new smartphone raises US$300 million with backing from Amazon, Foxconn and Tencent

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Android creator's new smartphone raises US$300 million with backing from Amazon, Foxconn and Tencent

Essential Products, the smartphone startup founded by a co-creator of the Android mobile operating system, has raised US$300 million in new funding and signed up retailers to sell its first device, it said on Wednesday.

The US$699 phone, with a titanium and ceramic case, will compete directly against new devices from Samsung and Apple this holiday season.

The company, founded by chief executive Andy Rubin in late 2015, said Access Technology Ventures led the funding round, which brought its total investment raised to US$330 million.

Strategic investors also included Tencent Holdings, electronics contract manufacturer Foxconn and Amazon.com, which participated via its Alexa Fund. Previous investors Redpoint Ventures and Playground Global also participated.

A release date for Essential's phone will be announced next week, president Niccolo De Masi said in an interview.

The timing and distribution of the new phone could be critical during a year with many new releases. The Essential phone will only be displayed in Sprint stores in the United States, compared with the vast distribution network of the market leaders. In September, Samsung is expected to unveil its Galaxy Note 8, and Apple is expected to announce its highly anticipated 10th anniversary iPhone.

Some of the Essential phone's features, like a detachable 360-degree camera, are also available on Samsung models, which are bulkier.

"It's going to be extraordinarily challenging," Bob O'Donnell of Technalysis Research said by phone. "The initial specs of the phone look good, but not necessarily unique."

Amazon, Best Buy and Essential will sell unlocked versions of the phone that can be used on any network. But carrier discounts could encourage buyers, R. "Ray" Wang of Constellation Research said in an interview. He said he expected Sprint to charge US$300 with a two-year contract.

Sprint did not return a request for comment.

Wang also said the presence of two strategic investors from Asia signals Essential's broader goals.

"It's not just about US distribution. This is going to be a global phone," Wang said. "The biggest phone markets are China, India and the US."

Essential will focus on "building a brand in the Western World" before expanding to other countries, De Masi said. It would consider sales of "low single-digit millions" of phones in its first year a success, he added, noting that production was limited by the unusual materials of titanium and ceramic. Most phones have aluminum or plastic casings.

"Over the next five to 10 years, we will have the same retail footprint and product diversity as Samsung and Apple," he said.

 

(Reporting by Aishwarya Venugopal in Bengaluru and Jeffrey Dastin and Stephen Nellis in San Francisco; Editing by Shounak Dasgupta and Richard Chang)

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