Deal focus: Nothing’s swift evolution into something
A global brand developed by a European-Chinese founder, Nothing has made its presence felt on the idiosyncratic edges of the smart phone market. Investors have responded positively
Has the golden age of expansive growth in smart phone sales ended? A dismal second half of 2021 continued into 2022, with shipments falling 11.3% year-on-year. A 14.6% drop in the first three months of 2023 marked the seventh consecutive quarter of decline, according to International Data Corporation (IDC). It blames lukewarm demand, inflation, and macroeconomic uncertainties.
Nothing, a brand founded by Chinese-Swedish serial entrepreneur Carl Pei, appears to be the exception to the rule. The company has sold more than 1.5m devices in the past two years. Its debut phone, launched last summer, had cleared 500,000 units by year-end; sales of its earbuds have topped 600,000 units. Design awards abound and revenue reportedly reached USD 200m in 2022.
London and Geneva-based VC firm Highland Europe recently led a USD 96m, with participation from existing investors such as Google Ventures, EQT, C Capital, supergroup Swedish House Mafia, and China-based consumer investor EverYi Capital. Nothing has now raised USD 250m to date.
“From day one, Nothing has integrated China’s supply chain and manufacturing capabilities with cutting-edge global design expertise, to cater to global customers,” said Mingming Huang, founding partner of Future Capital, which took part in an extended Series A round for the company in October 2021.
“It is a native global brand. Pei exemplifies the characteristics of a ‘super product manager’ entrepreneur who places the customer at the heart of the development process and is dedicated to attending to every single detail to meet customers’ needs.”
Pei was born in 1989 in Beijing and grew up in Sweden. He quit the Stockholm School of Economics to work full-time in China’s smart phone industry, joining Oppo in 2011 as international markets manager. Oppo is now the fourth-largest smart phone brand globally by shipments in 2022.
Pei and his immediate superior, Pete Lau, departed in 2013 to form OnePlus, a high-end smart phone brand. Oppo ended up acquiring OnePlus in 2021, but Pei struck out on his own a year earlier, establishing Nothing in the UK.
He secured GBP 5m (USD 693,000) in seed funding from 11 investors – mostly tech entrepreneurs – and then closed a Series A round in February 2021 with support from Google Ventures. Two months later, Nothing raised GPB 1m in 54 seconds via crowdfunding platform Crowdcube.
Zhihao Xu, a managing director at Future Capital, met Pei in November 2020. The investment came nearly a year later but was still a bold move, largely predicated on an assessment of the founder’s capabilities. The team numbered less than 10; the product was sketchy. Highly secretive given the competitive nature of the industry, Pei would only confirm that he would release Bluetooth earbuds first.
When the phone did emerge, it eschewed the by-the-numbers configuration. For example, the back of the device is transparent, showing internal components, a set of 900 LED lights alert the user to incoming messages and calls, and it can reverse charge external devices.
“Mobile phones nowadays are more and more homogeneous and in general over-equipped. Nothing offers a different choice. We believe that the competition in mobile phones has gradually shifted from a battle over configuration to a battle over product definition and differentiation,” said Xu, who led Future Capital’s investment in the company, which now has 450 staff in the UK, Sweden, China, and India.
Although 2021 represented a high point in terms of PE and VC investment in China and start-up valuations, it doesn’t follow that all investments of this vintage must be poor. When Xu shared information on Nothing with the post-investment team at Future Capital, they asked if he had accidentally added an extra zero to the sales figures.
Huang observed: “You can have tens or even hundreds of reasons to back or not to back a company, but product is always king.”
More on Greater China
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.