Andy Rubin’s Start-Up, Essential Products, Shuts Down
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Andy Rubin’s Start-Up, Essential Products, Shuts Down

Technology|Andy Rubin’s Start-Up, Essential Products, Shuts Down

The smartphone company founded by Mr. Rubin, a dilapidated Google govt, struggled to win over customers.

Credit…Brian Ach/Getty Image

Daisuke WakabayashiErin Griffith

SAN FRANCISCO — Essential Products, a user electronics start-up founded by the dilapidated Google govt Andy Rubin, said on Wednesday that it was ceasing operations.

Once idea to be one of Silicon Valley’s most promising hardware technology start-ups, Essential had raised $330 million in outdoors funding because of the track narrative of Mr. Rubin, who is widely credited with creating Google’s Android smartphone software.

But Essential, which was once valued at $1 billion, has struggled. It released a premium smartphone in 2017 that didn’t sell well, and it later scrapped plans to acquire a smart speaker.

Essential was also dogged by news about Mr. Rubin and the circumstances of his departure from Google. The Unusual York Times reported in 2018 thatGoogle paid Mr. Rubin a $90 million exit packageafter claims of sexual misconduct with an employee have been deemed credible. Mr. Rubin has denied the claims.

Ina weblog submiton the company’s internet page on Wednesday, Essential said it had developed a unique handset, but that there was “no clear path to divulge it to customers.”

Essential’s determination to shut down illustrates the challenges facing user electronics start-ups. Now not like software companies, hardware companies need extra capital to raise substances and maintain inventory of their merchandise.

Some hardware start-united stateshave damaged by means of with hit merchandise such as the smart-home instrument maker Nest and Fitbit, which made a health tracker. But those companies have been eventually sold to Alphabet, Google’s parent company, partly because of the challenges of running a fledgling hardware business.

Money poured into Essential from both venture capitalists and companies including Hon Hai Precision Industry Company, also known as Foxconn, and Amazon, because of Mr. Rubin’s reputation as a smartphone visionary.

All told, the company raised $330 million in outdoors funding. Access Technology Ventures, Redpoint Ventures and Tencent, the Chinese internet giant, have been major investors.

Mr. Rubin helped popularize the usage of keyboards on phones when he introduced the Sidekick instrument in 2002. He went on to acquire Android, which was acquired by Google in 2005. Android software now runs on about 80 p.c of the sector’s smartphones.

In 2018, Essential got buyout interest from larger companies savor Amazon, Wal-Mart, and several telecom carriers, according to a person familiar with the situation who was no longer authorized to speak on behalf of the company. Wal-Mart and Amazon didn’t immediately answer to a question for remark.

Any potential buyout would have valued the company below its $1 billion valuation, the person said.

But interest evaporated, in part because of the danger associated with Mr. Rubin’s workplace scandals. In 2017,The Information, a technology news attach, reported that Mr. Rubin had departed Google after an inappropriate relationship with a subordinate, prompting him totake a leave of absencefrom Essential to deal with “personal matters.”

By the time The Times investigation into his departure from Google was printed in October 2018, Essential was already experiencing difficulties. The company slashed the price of its first phone after disappointing sales. It dropped plans to create a home instrument and laid off a large need of employees, reducing its workforce by the cease of the year to fewer than 50 from around 120.

Essential will probably be shutting with around $30 million in cash remaining, the person familiar with the situation said. Investors, some of whom had written off the investment after Mr. Rubin’s scandals, will get “pennies on the dollar” back, the person said.

Essential’s determination to shut down comes several months after Mr. Rubin tweeted a photo of what appeared to be the company’s next phone, which the company calledMission Gem. The elongated phone — in a variety of shiny colors — had a lengthy, thin disguise resembling a candy bar.

The handset was supposed to be a so-called companion phone, according to dilapidated employees familiar with the challenge. It was intended to free individuals from being overly reliant on smartphones and would allow them to use a smaller instrument for tasks savor sending and responding to messages using artificial intelligence and announce controls, said the dilapidated employees, who declined to be identified because they didn’t have permission to speak about Essential merchandise.

The company spent at least $50 million developing the instrument, a person familiar with the company’s effort said.

But after Mr. Rubin’s sneak see on Twitter, there was no note-up. Lauren Goode, a writer at Wired, printed awidely shared articlein response to the tweet, noting that it was hard to separate the allegations about Mr. Rubin with the usual hype surrounding a unique instrument.

“It’s getting harder to seek at user merchandise and their elegant packages without thinking about the individuals making them, and the energy behind them,” she wrote.

None of the major U.S. mobile carriers expressed interest in offering the phone, according to individuals familiar with those talks, and plans for an early 2020 release have been dropped.