More money for Nothing

  • Consumer wireless device market challenger is making the headlines again
  • Nothing has secured a financial injection prior to new smartphone launch
  • While this is an endorsement of the startup’s progress, it’s still just a drop in the ocean, argues analyst Ben Wood
  • To succeed, the company is advised to rely on “edgy marketing” and the essential support of partners such as Qualcomm

London-based wireless device startup Nothing believes… well, that nothing will stop it from becoming “an innovative challenger” in the consumer tech industry following the news that the company has raised $96m to further its ambition to offer an alternative portfolio of smartphones and other consumer devices and challenge the established tech giants.

The new financing round was led by Highland Europe, a London-based venture capital firm, and included participation from existing investors GV (Google Ventures), EQT Ventures, C Capital and electronic dance music trio Swedish House Mafia.

Nothing will use the proceeds to scale its product and technology portfolio, as well as to “make tech fun again”. It plans to do so by creating “an ecosystem of tech products for the young and creative”, sporting “cutting-edge design”, user interface innovation and community collaboration.

The company claims its product innovation is driven by consumer insights and feedback from its community. So to help it “bridge the gap between the company and its users”, it has held two community financing rounds and attracted more than 8,000 private investors. According to data from Crunchbase, Nothing has raised more than $250m in funding since its launch in October 2020.

Its portfolio currently comprises two earbud models and a semi-transparent smartphone, dubbed Phone (1), with its second handset, Phone (2), due to be launched on 11 July 2023. And while official information about the device is limited, Nothing has already boasted that Phone (2) will have a “lower carbon footprint than its predecessor as a result of the company’s ongoing sustainability initiatives”. 

“In just over two years, we’ve assembled one of the strongest teams in the industry and sold over 1.5 million devices worldwide. It’s clear that there’s real demand for an innovative challenger in the consumer tech industry, and with this new round of financing, we’ve never been better positioned to realise our vision to make tech fun again”, commented Nothing CEO and co-founder, Carl Pei, whose endeavour prior to Nothing was to co-found Chinese smartphone maker OnePlus.

“In an industry as challenging as this, it has been quite some time since a new company of this scale and ambition has reached this stage, given the difficulty and complexity of surviving in such a competitive environment. We firmly believe that Nothing has something truly distinctive to offer, coupled with an exceptional team,” said Tony Zappalà, partner at Highland Europe. 

He also expressed support for Nothing’s aim to “take on the consumer tech giants and challenge the prevailing norms”.

Punching above its weight

So far, so good – but will investments of tens of millions of dollars be enough to enable Nothing to compete in an industry that is predominantly led by Apple and Samsung, both of which commanded a 20%-plus market share in the first quarter of this year?

While signalling “a huge endorsement of the progress Nothing and Carl Pei have made over the last 12 months”, the funding milestone “needs to be seen in the context of the multibillion-dollar smartphone market where it is a mere drop in the ocean”, Ben Wood, chief analyst and CMO at CCS Insight, told TelecomTV.

As it stands, Nothing’s team “are unquestionably punching above their weight” and will have to continue doing so to ensure a long-term future for the company, he said.

“Despite its recent success in securing more funding, Nothing needs to punch smart in the highly competitive smartphone market. $100m is a drop in the ocean compared to the investments that Apple and Samsung put into product development and marketing. Grabbing the headlines with edgy marketing and relying on the support of partners like Qualcomm will be essential,” the analyst noted.

According to CCS Insight’s estimations, Nothing has only sold “a few hundred thousand phones” since the launch of Phone (1) in July 2022, against a market total of 1.5 million devices sold. However, its position could change as the team at Nothing is developing a “loyal, almost evangelical base of users who will help grow the brand and sales over time,” predicted Wood.

The next “critical milestone” for the startup is to make it big in the US. “Phone (2) has been designed to break into that market, but given the fact that Apple is so dominant in North America, it is hard for any Android smartphone player to grab share. Ultimately, it will come down to the volume expectations for the device. However, even if Nothing can get a tiny sliver of market share, it can be regarded as a success,” said Wood.

It remains to be seen whether Nothing has something truly transformative in its arsenal that can pose a significant challenge to big device manufacturers, but Pei’s ambition is apparently unwavering – as he told Forbes this week that “we’re not trying to be Apple 2023. Were trying to be the Apple of the 1980s.”

- Yanitsa Boyadzhieva, Deputy Editor, TelecomTV