First smartphone by Android creator's due soon as startup raises hefty funding

SAN FRANCISCO: Essential Products, the smartphone startup founded by a co-creator of the Android mobile operating system, has raised $300 million in new funding and signed up retailers to sell its first device, it said on Wednesday.

The $699 phone – with a titanium and ceramic case – will compete directly against new devices from Samsung Electronics and Apple Inc this holiday season.

Retailers include Best Buy, Amazon.com, and carriers Sprint Corp in the United States and Telus Corp in Canada, Essential said in a statement.

The company – founded by Chief Executive Andy Rubin in late 2015 – said Access Technology Ventures led the funding round, which brought its total investment raised to $330 million.

Strategic investors also included Tencent Holdings Ltd, electronics contract manufacturer Foxconn, and Amazon.com, which participated via its Alexa Fund. Previous investors Redpoint Ventures and Playground Global also participated.

A release date for Essential's phone will be announced next week, President Niccolo De Masi said in an interview.

The timing and distribution of the new phone could be critical during a year with many new releases. The Essential phone will only be displayed in Sprint stores in the United States, compared with the vast distribution network of the market leaders.

In September, Samsung is expected to unveil its Galaxy Note 8, while Apple is expected to announce its highly-anticipated 10th anniversary iPhone.

Some of the Essential phone's features – like a detachable 360-degree camera – are also available on Samsung models, which are bulkier.

"It's going to be extraordinarily challenging," Bob O'Donnell of Technalysis Research said by phone. "The initial specs of the phone look good, but not necessarily unique."

Amazon, Best Buy, and Essential will sell unlocked versions of the phone that can be used on any network. However, discounts offered by carriers could encourage buyers, R. "Ray" Wang of Constellation Research said in an interview. He said he expected Sprint to charge $300 with a two-year contract.

Sprint did not return a request for comment.

Wang also said the presence of two strategic investors from Asia signals Essential's broader goals. "It's not just about US distribution. This is going to be a global phone," he stated. "The biggest phone markets are China, India, and the US."

Essential will focus on "building a brand in the Western World" before expanding to other countries, De Masi said.

It would consider sales of "low single-digit millions" of phones in its first year a success, he added, noting that production was limited by the unusual materials of titanium and ceramic. Most phones have aluminium or plastic casings.

"Over the next five to 10 years, we will have the same retail footprint and product diversity as Samsung and Apple," he said.