By Chandra R Srikanth & Vikas SN
OnePlus cofounder Carl Pei surprised the world when he named his consumer technology startup as Nothing in January 2021.
Two years later, the company has shipped two audio products - Ear (1) and Ear (stick) - and more importantly a smartphone called Phone (1), to take on deep-pocketed incumbents such as Apple and Samsung in an intensely competitive mobile phone market. It claims to have sold one million products across its product portfolio as of December 2022.
Nothing has also raised about $144 million in funding from high profile backers such as Alphabet's venture capital arm GV, iPod inventor Tony Fadell's Future Shape and Animoca Brands among others.
Among its Indian backers include Cred founder Kunal Shah, prominent filmmaker and producer Karan Johar, former cricketer Yuvraj Singh, fashion designer Sabyasachi Mukherjee, digital content creator Ranveer Allahbadia, and singer Jasleen Royal among others.
In an interaction with Moneycontrol, Pei talks about the various challenges the company has faced in its journey, why he is bullish about the Indian economy, and the perceived lack of innovation in the consumer technology sector.
Pei also weighed in on OpenAI's viral chatbot ChatGPT and the impact of artificial intelligence on the way people are consuming technology, saying that he is yet to see a killer AI app,
"I think chat is a cool proof of concept... By this year, maybe one company or one team will find one killer use case" he said.
It's going to be nearly three years since you decided to start up again. Are things progressing the way you thought they would. How has your second journey as an entrepreneur been compared to the first one?
I actually see this as my first journey as an entrepreneur, because this is the first time we have a startup company that started from scratch, we had to raise money, we had to build a team.
So I think this is the first journey. And so far it's been ups and downs. But overall, we're moving in the right direction. I'm happy that we just went with it, because we found out that it was a lot harder than we expected. And if we knew about all the challenges we would have faced, maybe we would have had some second thoughts.
What in your mind were the biggest challenges? Was it on the funding side? Was it on the product side itself? Because one would think that this was already a very saturated market. And it's very hard to succeed.
I think for me and my team, the biggest challenge has been supply chain, because that's not something that we had to deal with in our past experience. It's just been a very steep learning curve.
On the other hand, I think the product side has been slightly less of a challenge than some people believe. Like you say, Oh, it's a saturated market, but according to us, it's not very saturated at all. And the way we see it is that - sure, there's a lot of big companies shipping a lot of volume but all their products are very similar to each other.
Nobody's trying to do anything different. So being the only company that's trying to push the needle, there's actually not a lot of competition.
Are you happy with the feedback and response you've seen so far?
We can always do better. I think the feedback we've gotten so far is okay. Recently, we also pushed an update in terms of our software on our phone and the feedback has been better than what we got previously. But we need to keep improving ourselves. So looking forward to better reception for our products.
If I look at your captable, the investors that you have are very interesting. At one end, you have your classic VCs and founders like Google to Kunal Shah who have come in. At the other end, you have prominent creators and people from the creative field from Karan Johar to Ranveer Allahbadia. So was there a thought behind this?
It was quite strategic. This is the way we planned it. In the beginning, we wanted more individuals to be a part of the journey because they could contribute their experiences and they could help us when we had problems and fields that they're experts in. Over time, we took on more institutional investors. So this was always the plan.
We're building tech products for the young and the creative, so having that creative element is also really important for us, because we want our users to be people with ambition, with creativity, who are looking to make something in this world and having people who have already done so on our captable is really helpful.
In your previous conversations, you spoke about how the name Nothing came about, it came from your sister. But was their concern among your investors about naming your company Nothing, because it has a very negative connotation
It was controversial for sure within our team, as well as within some of our investors, but I just had to meditate on it. Ultimately, I think it turned out pretty good.
When you started OnePlus, you didn't have anything to lose. But when you started Nothing, it was always going to be known as OnePlus founder Carl Pei's new startup. Is that constantly running in your mind in the way you evaluate risks or decide to take risks?
There's a lot of anxiety around failure, but not because of the past. It's more because we have a lot of people who believe in us, we have our team members who decided to give up their previous careers to join us, we have investors who put their money into our company.
So the pressure to perform comes from there rather than the past, because I think our future ambitions are much bigger than what we've accomplished in the past. So that's not a concern.
The way you look at the product development process or managed to galvanize the community of fans or people who liked the product, tell me how you go about doing that in terms of building a brand and developing a community around a brand, something that you've done right from the OnePlus time.
So I think we get too much credit for building a brand and building a community. I think the fact of the matter is, it's quite easy in our industry, because most people are quite bad. The barrier to entry to our industry is very high, so to have the resources to be able to play in our industry, there's only a handful of companies.
So let's say you're creating a CPG (Consumer packaged goods) company, then the bar to marketing, branding and community is much higher, because everybody can make those products.
So if you zoom out and look at the macro, and among different industries, we're pretty average, but because in our industry people put more emphasis on supply chain and on engineering, just being a little bit better than the rest of our industry makes us stand out.
What would your advice be to an entrepreneur who wants to build that kind of brand and wants to build a community around the brand? What are the 2-3 things that they perhaps need to get right.
The way I think about it is I look a lot at best practices, and then see what we can do better. So first of all, to have a deep understanding of each field that we're trying to play in.
So let's say community management, what are the best brands in the world doing in terms of community management? How are we different from those brands? And how should we adapt those methodologies to ourselves. So it's quite general feedback. But I think that's the way I kind of go about thinking about solving problems.
The reason why I don't want to give any specific feedback is other entrepreneurs, their businesses might be quite different from ours. So they should look at fields that have more relevance to them.
I also want to understand in terms of the way you see the India market. From a consumer perspective, it’s clearly a big focus market for you. But from a manufacturing, investment, and supply chain perspective, what plans do you have for India, since people are now talking about a China+1 strategy. How do you evaluate the India market in terms of the manufacturing ecosystem. Is it much better than what it was a few years ago?
Long term, I'm quite bullish on the Indian economy, because it's still a young nation, and it has a lot of future potential. It's also a big market for us. So we're manufacturing all the products we sell here in terms of smartphones locally, we're also looking at diversifying the other product ranges, whether we can manufacture them over here. So we're talking to multiple suppliers.
Currently, the ecosystem is still nascent, it's still developing. So in terms of the efficiency of the output and the cost, it's still not as optimized as other regions. For instance, the cost per man hour is lower, but the output per man hour is also lower. Also the quality is not on par with other regions.
Other brands are manufacturing the low end products here but our products are more on the mid to high end (range). I think with the involvement of top tier brands or brands with high requirements like Apple manufacturing more of their products here in the market will make the entire ecosystem improve faster.
By when do you think you will Make in India?
We are already making all our phones here. I think our involvement in the ecosystem here is actually making the entire ecosystem better. We're training people to be much better about the factory management, the management of the manufacturing, the quality management, etc.
In terms of a single country, it's our biggest single country.
Does that surprise you?
It was within our plans in the stage of our development, because we didn't launch the US market for our first phone. So we knew India would be the biggest.
Carl, in terms of new products that we've seen in the consumer tech space, it's been a long time since we've seen something that's radically new. Apple is focusing on vertical integration on how to make their supply chains more efficient. Why do you think that is? Is there a certain level of saturation in the consumer tech market? What are your own thoughts about this?
I think Apple is doing the right thing for their business. They're very mass-market already. So they don't need to change what already works. Instead, they should make it more efficient in terms of the tech stack, in terms of their margins.
I think the reason why consumers perceive a lack of innovation is because there are no smaller brands in our industry, apart from us trying to do things a little bit differently, because big brands are just not going to take the risk.
But in terms of new breakout categories, I reserve my opinion, because every year there's some new hype, and none of it has become the real breakout category. It's been VR (Virtual Reality), there's been drones or crypto, there's been a bunch of stuff. So I don't know.
But nothing's really gone mass market, right? I mean, after the watch?
I would argue that the watch (Smartwatch) hasn't really gotten mass market either.
Where would you like to see innovation happen? In the wearable category, VR Or drone? Or where do you think there is scope.
I think for us, it's not the right time to think about it, because we're in the very early stage of our company development. So we're not the ones who have the burden of responsibility to invent the next category. We're here to take market share through a differentiated approach in the current category.
One day when we have more free cash flow, then we should also invest and find innovation in new categories, but today is the wrong timing. Having said that, I think the overall direction of technology should be to enable humans. So it should enable us to do things more efficiently, faster, easier, and not cause additional work or burden for us.
After headphones and smartphones, what can we expect next from Nothing? I know, the version two of the smartphone is coming, but what next? What product will you look to adapt?
I think we just got to keep making our products better and better. This year, what I'm really excited about is that we're starting to innovate in terms of software. So I'm really looking forward to seeing how the market is going to react to some of our ideas when it comes to software.
Have you been using ChatGPT? Have you been playing around with it? What do you ask ChatGPT?
Yesterday, I asked ChatGPT to write a keynote script, as if Apple was launching a beer. It did a really good job. It sounded like an Apple Keynote, but it was launching a beer.
Will you get ChatGPT to perhaps write your next speech?
No, it's kind of boring because it just analyzes the past and creates a version of that. I think we want to be more fun. I think keynotes are really boring. So hopefully we can do something more interesting.
Carl, people have been talking about AI for a really long time. But this is perhaps the year when we are actually seeing this because of ChatGPT and generative AI and Google's talking about it, what impact will this have on the way people consume technology? Have you been thinking about this? What are your thoughts?
I think AI is just as groundbreaking to technology as the invention of the smartphone is. But still today, we haven't found the killer app. I mean, as a society, we haven't found the killer app. We're trying to force AI into everything right now. And I think by this year, maybe one company or one team will find one killer use case. I haven't seen it yet. I think chat is a cool proof of concept, but it's not really utility.
Is there an Indian consumer tech company that you like or that you're impressed with?
I haven't really been paying attention if I'm honest, I've been really heads down building this company.
Is there a gadget that you bought recently that you liked? I know you bought a Samsung watch, but you were not impressed.
Yeah, I am not wearing it. Nope, not really. Nothing.