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Comment by wpietri | Hacker News Reader

I'm all for audacity, but I think it's better to have at least a few stones. It surprises me that they only raised enough money for one throw.

I believe there's still a lot of room for innovation in smartphones. But if your whole company is riding on your first product, I think it produces a lot of weird design pressure. You simultaneously want to be low risk and super edgy. While trying integrate a lot of new people, new partners, and (hopefully) new tech. Getting an industry-beater in one go under those conditions seems like winning the lottery.

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They spent $100M on the first phone, and $200M left over. They had capital for multiple throws, and even started working on them.

What still puzzles me then is why they didn't keep throwing. Did they really only have one product hypothesis that they thought was worthwhile? What lesson did they learn about phones here that was enough to kill the business? And did they really have to spend $100m to learn whatever that was?

Actually there were a couple of reasons for this:

1. Not falling behind the curve. It seemed they couldn't stick to a deadline because each time they tried to, they would identify a newer cooler hardware feature that "had to be in". Doesn't help to do this when you don't have an established brand.

2. Incestuous hiring practises where it was based on brand name of canditates' school and past companies instead of focussing on indicators of execution and expertise!

3. No sense of urgency. In Andy we Trust!

Ah, interesting. That's a good example of something I think about a lot. Startups mainly focus on testing product hypotheses, but they also test organizational hypotheses, like ones about who to hire, how to organize people, and how to approach the work. This is a good reminder that you need to have enough of your organizational stuff right just to usefully test your product hypotheses.

Their one throw took a notch out of every major smartphone.

Except it didn't, and that's why they are selling the business:

https://www.theverge.com/2018/2/12/17004278/essential-phone-...

It was a joke. Essential introduced the "notch" in the phone around the camera. And it was a well-designed implementation.

I don't understand how selling 88,000 phones isn't considered a success. That's $44M in revenue, assuming the phones sold for $499 each. For a startup, even one founded by a Google veteran, like Rubin, this seems like a home run for a first product offering.

The comment above says they spent $100M to make that $44M revenue.

Going up against major players typically starts with a massive cost, consider the losses that Tesla is taking on. As per my other comment [0] from the article it's more like $89M in revenue.

[0]: https://news.ycombinator.com/item?id=17152056

The phone selling business is not as clear cut as selling oranges at the market. There are deals with carriers and other infrastructure stake holders that cloud the view significantly.

What that means to Essential's bottom line is not clear. It would be difficult to even consider the assumption of the revenue of $44M for them.

>The phone selling business is not as clear cut as selling oranges at the market. There are deals with carriers and other infrastructure stake holders that cloud the view significantly.

My personal experience is a polar opposite of this.

I myself worked with few companies doing private label handsets. It is a near foolproof business.

You go to an ODM, put money first for a respin of a successful product under your brand, then you dump the batch on TaoBao, Aliexpress, and trade companies. This will stably gain you profits in single digits, and at about %15 if you have some luck along with real insight into doing things like that.

Should Andy be more easy on pricing, and also "simply dump the product off an online marketplace," he would've been in black by now.

More proving your point, but from the article:

> The phone’s initial price was $699, the same as an iPhone viewed as a competitor. At that price, the company sold as few as 20,000 units across its website and third-party distribution partners, one of the people said. Last October, Essential lowered the price by $200, which boosted sales. The company has sold at least 150,000 to date, according to the person familiar with the company.

So that's 20,000 * $699 + 150,000 * $499 ~ $89M

That's total sales, but probably not total revenue, in that third-party distribution partners (that is, stores) will take a slice. Possibly a big one given Essential's relatively poor bargaining power.

>assuming the phones sold for $499 each

Except it isn't. Many were sold at heavy discount.

More than 100,000,000 units is a one quarter at Chinese market. How 88,000 is even something to talk about.

It’s one thing to try to enter a difficult market. It’s a complete other to enter a market with an inferior product.

...and overpriced for what it was.

Perhaps if they hadn't hyped it up so much before release, there would have been less disappointment.

> It’s a complete other to enter a market with an inferior product.

It's completely natural and sensible to enter a market with a product that is inferior in some aspects, but has a huge USP, which this phone had.

It's not really his first product, Andy has a ton of experience with all the generations of Sidekicks + Android partnerships(one could argue the G1 was almost a spiritual Sidekick hardware wise).

I wonder if it might be time for him to branch out into a new domain, I feel like there may just be too much common ground that's already been covered before.

Andy Rubin was tasked with heading up Boston Dynamics at Google, who desperately needed leadership and guidance. but he ditched them to go do Essential.

Soon after he left, Alphabet sold BD to Softbank.

You make good points for sure. I wonder how much it takes to bring one phone to market compared to 2 or 3. In other words, how possible/practical is it to try for 2 or 3 bites at the apple compared to simply focusing on getting the first one right enough to keep going.

OnePlus started with one stone and it seems to be doing quite well. I guess the business model is different though.

OnePlus is one of many many brands run by a Chinese electronics behemoth: https://en.wikipedia.org/wiki/BBK_Electronics

Key reason for success for OnePlus had been price point. It's enormously popular in 3rd world because you can get specs that used to be 2X expensive from other. If you can keep quality same while reducing price by half, chances are that you are going to be very successful. Chinese company can do that but US company cannot because if they can then there will a Chinese company directly competing with them. Essential understood this and so never wanted to compete on price. You cannot win price war with Chinese company.

OnePlus wasn't an individual company working from scratch, they have immense support from Oppo for R&D.

Yes, because if a small company can't successfully make one product, they should instead make 3.

Translated to the standard startup-speak: they should have enough runway for two pivots.

Yes, because they will learn from the failures of the first, and make the second better. Then learn from the failures of the second-system-syndrome and make the third genuinely better.

Which is more likely to succeed, 1 attempt or 3 attempts?

We're talking about a small company here. Sometimes small companies don't have the resources to move forward with a 2nd product if the first one didn't pay off.

Ah, this poor, tiny company that raised only $330m: https://www.crunchbase.com/organization/essential-2#section-...

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