Carl Pei’s smartphone startup Nothing raises $96 million from investors for U.S. expansion

Nothing, the hardware startup from OnePlus co-founder Carl Pei, raised $96 million from investors in a new round of funding to fuel an expansion of its business into the U.S. and the launch of its new smartphone.

The London-based company raised the fresh cash in an investment round led by European venture capital firm Highland Europe, with existing investors GV, EQT Ventures, and C Capital also investing, along with house music supergroup Swedish House Mafia.

Tony Zappala, a partner at Highland Europe, led the round and will be joining Nothing’s board, the company announced.

Nothing said it has now launched more than 1.5 million products to date. With another $96 million in the bank, the company plans to scale its operations further so that it can produce more products and ramp up sales.

Nothing has launched three products to date — the Ear 1, Ear 2 and Ear Stick wireless earbuds, and the Nothing Phone, its first smartphone. It is planning to launch a new smartphone, the Phone 2, on July 11, which will come with a processor from U.S. chip company Qualcomm.

The funds will be used to invest in the company’s expansion into the U.S. market, which would put it in more direct competition with U.S. tech giant Apple. Pei first disclosed plans to expand its business in the U.S. in December 2022, in an exclusive interview with CNBC.

In March, Pei told CNBC the expansion is already getting off to a good start. The firm has a team up and running there, and feels “confident” it will make headway in launching its first phone in the U.S. market this year.

“The product is progressing very well,” Pei said at the time, on the sidelines of Mobile World Congress in Barcelona. “In year one, we barely had any engineers. We had like three engineers. And the factory did all the work. So there were a lot of things that we couldn’t realize.”

At the same time, Nothing has had to cut costs where it can to ensure its survival in the current economic environment.

Pei said the company has been reviewing employees’ performance and letting some individual staffers go on a case-by-case basis when unhappy with how they’ve performed versus its expectations.

“It’s very hard,” Pei said at the time. “Hardware is hard. The macro is hard. Our industry is hard.”

“So if there’s people who just want to be a part of a cool company and enjoy tech company perks it’s not the right place. It’s not a place to come if you just want to tell your friends you’re working at a cool company. It’s really if you want to build something together with the rest of us, it’s a really good opportunity.”

It’s been a tough environment for startups to raise capital, as venture capitalists have tightened their belts in response to rising inflation and a souring outlook from investors when it comes to technology

That’s as rising inflation, higher interest rates, and a softer economy have led to something of a reset in tech valuations.

Meanwhile, smartphone sales have been under pressure, with global shipments falling 14% year-over-year in the first quarter of 2023, according to Counterpoint Research.

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