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Andy Rubin’s new company already got screwed by Apple

May 31st, 2017 at 5:31 PM
Essential Smartphone vs Apple

Andy Rubin, the former Googler who founded Android, is no stranger to fighting with Apple. After all, he and his mobile platform have been locked in an unending battle with the iPhone for the last ten years. But even though his new company doesn’t have much to do with mobile operating systems, it’s already lost out because of Apple.

During a talk yesterday evening, Rubin confirmed that Essential, his new company, lost out on a $100 million investment because of a perceived conflict with Apple. For a company that’s technically a startup, a $100 million investment is nothing to laugh at.

Rubin basically confirmed a story first reported by the WSJ in March: Essential was close to a deal with SoftBank’s Vision Fund for a $100 million investment, which would have valued Rubin’s startup at $1 billion. The paperwork was reportedly in the final stages when SoftBank decided to pass, thanks to SoftBank’s ties to Apple.

The Vision Fund is a $100 billion fund that invests in new technology, and Apple has previously put $1 billion into the fund. If the deal between Essential and SoftBank had gone through, that would’ve meant that Apple would have a (tiny) stake in a rival smartphone maker. Although Apple didn’t object to the investment, SoftBank didn’t want the conflict to happen.

The deal mattered less for the money, and more for the platform that SoftBank could have provided. Essential found investment cash elsewhere, but SoftBank had promised a major marketing push for the new Essential smartphone in Japan. As is, Essential is launching worldwide with zero support for major carriers.

It’s difficult to overstate how hard it is for a luxury smartphone manufacturer to crack the market in the US. Apple and Samsung have near-total control over the luxury smartphone market, thanks to the long-established recognition the two brands have. The only hope a competitor has is to sell through carriers: virtually no-one buys a smartphone up-front off the internet, so sales through carrier-owned retail stores are often the only physical push a new phone has.

A deal with SoftBank could have given Essential an in. SoftBank is the second-largest carrier in Japan, and also owns Sprint. A deal might have pushed Essential as the new kid on the block through SoftBank’s retail stores, giving the phone at least a chance to take on Apple and Samsung.

As is, it looks like the Essential smartphone — which appears to be technologically stunning — is an expensive, splashy way of launching Essential Home, the company’s smart home play. Internet-connected gadgets are all good, but the big money is still in smartphones, and I’m not sure Essential would have spent all the money to develop a new flagship and not bother working with any carriers. Reading between the lines, it seems like Apple’s mere reputation might have killed a new competitor before it launched one single product.




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