Essential Products
The hardware start-up from Android co-founder Andy Rubin that only ever shipped one phone
- Founded
- 2015
- Closed
- 2020
- Lifespan
- 5 years
- Total funding
- $300 million
- Peak valuation
- $1.2 billion
- Country
- United States
- City
- Palo Alto
- Sector
- Hardware
- Founders
- Andy Rubin, Matt Hershenson
- Investors
- Playground Global, Amazon, Tencent, Foxconn
- Cause of closure
- Lost to competitors
What did it do?
Essential Products was a smartphone and hardware company founded in Palo Alto by Andy Rubin, one of the co-founders of Android. In 2017 it released the Essential Phone and its accessories, and announced the Essential Home smart speaker, which was to run on an operating system called Ambient OS. The phone was sold only in the US and Canada.
Why did it shut down?
The Essential Phone arrived later than the June timetable announced for it, and in 2018 Forbes pointed to signs that the company's end was approaching. In May 2018 the company cancelled its next flagship phone and was reported to be up for sale. The Essential Home never reached the market. In December 2018, instead of a new phone, the company bought the owner of a defunct email app. Unable to find a clear way to get Gem, the new device it announced in October 2019, to customers, it ceased operations on 12 February 2020.
The story
In August 2017 Essential joined the ranks of companies valued at more than $1 billion without having shipped a single phone. According to The Verge, a $3 million investment from a Foxconn subsidiary revealed that the company was valued at around $1.2 billion. Behind that valuation stood one name: Andy Rubin, one of the co-founders of Android. As early as January 2017, Bloomberg had reported that Rubin was preparing a comeback with a new phone.
Rubin founded Essential Products in Palo Alto on 9 November 2015, with funding from Playground Global. On 30 May 2017 the company announced two products at once: the Essential Phone smartphone and the Essential Home speaker, which was to run the home through an operating system called Ambient OS. The Mercury News presented the phone as a rival to the iPhone. In August 2017 Amazon, Tencent and Foxconn were reported to have invested in the company; reports put the round at $300 million.
The products, however, fell short of expectations. The phone arrived later than the June timetable first promised and was sold only in the US and Canada. The Essential Home, despite being planned for the end of 2017, never reached the market. In summer 2018 Forbes read the phone going on sale on Amazon as a sign that the company's end was approaching. In May 2018 Essential cancelled its next flagship phone and the company was reported to be up for sale. In December 2018, in The Verge's words, instead of making a new phone it bought a defunct email app: CloudMagic, the owner of Newton.
In October 2019 the company unveiled Gem, a slim, voice-controlled phone. It proved to be the last attempt: on 12 February 2020 Essential ceased operations, saying it had no clear path to delivering Gem to customers. Security updates for the Essential Phone stopped, and Newton Mail closed in April 2020. The Essential brand was acquired in February 2021 by Nothing, the company founded by Carl Pei.
Essential shows that a famous founder and a big valuation cannot stand in for sales and distribution muscle in a hardware market dominated by giant rivals.
Lessons for founders
- A big-name founder and a billion-dollar valuation are no substitute for distribution and carrier relationships; build your sales channel before your product.
- In hardware, if your first product does not sell, raising capital for a second one gets harder; plan the unit economics of your first device realistically from the start.
- Losing focus is expensive; resources split between a phone, a smart home device and an email app may not be enough to keep any of them alive.
Sources
- Essential Products (Wikipedia)
- Andy Rubin's Start-Up, Essential Products, Shuts Down (The New York Times, 2020-02-12)
- Andy Rubin's Essential is now valued at over a billion dollars without shipping a single phone (The Verge, 2017-08-14)
- https://www.wikidata.org/wiki/Q30093000
- Wikipedia (Turkish)
- Wikipedia (English)
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