Failure Analysis
Essential died from a combination of execution failures and market timing miscalculation, but the root cause was a fundamental misunderstanding of what drives premium...
Essential Products \USA
Essential promised a premium, modular smartphone ecosystem that would eliminate device obsolescence through swappable components and a beautifully designed titanium-and-ceramic flagship phone. The 'Why' was aspirational: Apple-level design married to Android's openness, with a magnetic connector system that would let you attach accessories without dongles or cases. Andy Rubin's vision was to create the 'anti-iPhone'—a device for people who wanted premium hardware without walled gardens, and a phone that could evolve over time rather than becoming e-waste every two years.
Discover the reason behind the shutdown and the market before & today
Market Analysis
The 2024 smartphone market is a mature oligopoly with near-zero growth in developed markets and intense competition in emerging markets. Global shipments have plateaued...
Startup Learnings
Hardware requires 'whole product' from day one—you cannot iterate your way to a great camera or carrier relationships. Software startups can launch with 70%...
Market Potential
The premium smartphone market has calcified since 2017. Apple's ecosystem lock-in is stronger (AirPods, Watch, iMessage), Android flagships have commoditized (OnePlus, Xiaomi offer 90%...
Difficulty
Building consumer hardware at scale remains brutally difficult today. The supply chain complexity, manufacturing partnerships, carrier relationships, and capital requirements are identical to 2015....
Scalability
Consumer electronics scalability is a paradox: you need massive scale to get unit economics that work, but achieving that scale requires capital that only...
Rebuild & monetization strategy: Resurrect the company
Execution Plan
Phase 2
Sign 2-3 pilot customers in different verticals (logistics, retail, field service) who have existing custom hardware pain. Offer the reference device at cost in exchange for case studies and feedback. Goal: prove that modular approach reduces their total cost of ownership by 30%+ over 3-year lifecycle.
Phase 3
Build the module certification program and recruit 5-10 module manufacturers (existing hardware component makers) to create additional modules. Provide them with connector specs, testing protocols, and access to pilot customers. Goal: expand module catalog to 15+ options.
Phase 4
Launch the platform marketplace and SDK. Enable customers to configure devices online (select modules, customize software, order in quantities of 100+) and manage deployed devices via cloud dashboard. Charge 8% platform fee on hardware sales plus $5/device/month for software management.
Phase 5
Scale to 10 enterprise customers and $5M ARR by focusing on verticals where custom hardware is common but fragmented: utilities, healthcare, logistics, hospitality. Use case studies to drive inbound sales and establish Modular as the standard for enterprise modular hardware.
Monetization Strategy
Three revenue streams: (1) Platform fee of 7-10% on all hardware sales through the marketplace (customers buy modules from manufacturers, Modular takes a cut), (2) Device management SaaS at $3-8 per device per month for cloud-based fleet management, remote updates, and analytics, (3) IP licensing of the connector technology to module manufacturers at $50K-200K annually depending on volume. Target economics: Year 1 with 10 customers deploying 500 devices each = 5,000 devices. Assume average device cost of $600 (modules + assembly), platform fee of 8% = $240K revenue from hardware. Device management at $5/device/month = $300K ARR. Module licensing from 10 manufacturers at $75K average = $750K. Total Year 1 revenue: ~$1.3M. By Year 3 with 50 customers and 50,000 deployed devices: $2.4M from platform fees, $3M from device management, $2M from licensing = $7.4M ARR at 60%+ gross margins (software + IP licensing are high-margin). Path to $20M+ ARR by Year 5 as installed base grows and customers expand deployments.
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