I made my first (small) investment in a private company

In April 2022 I was given the opportunity to invest in a private company for the first time; Not because of some special privilege nor because of my profile or skillset. Rather it is because the company in question has chosen to let its community partake in its early funding through crowd investing and truly become part of the company’s journey from the beginning. The company is called Nothing and is aptly named considered its early days.

What is Nothing?

Nothing is based in London and led by Carl Pei, one of the co-founders of OnePlus, which is a company you may actually know. Nothing was founded back in October 2020, although not announced to the public until late January 2021. So far the company has released just one product; The Nothing ear(1), a pair of wireless earphones, featuring a rather unique transparent design. These were announced in July 2021 and have done fairly well, receiving positive feedback and having sold 450.000 units.

The Nothing ear(1) features a transparent design, active noise canceling, and 34 hours of battery life at a price of $99. They also come in black and are rated carbon neutral.

If you are to believe Nothing’s latest statements, however, this first product was nothing more (pun intended) than a trial run for the company to test its production capabilities and supply chain. On March 23rd Carl Pei went on stage for the company’s first-ever public event called ‘The Truth’ to announce their next product – a smartphone to be the center of their ecosystem. The event disappointed many fans, including myself as the phone(1) has been a public secret for months and little else was shared. What they did let us know of is their grand ambitions; Nothing aims to build an ecosystem of devices as powerful as that of Apple’s – although still unlike Apple (AAPL) in the way that want to keep this ecosystem open for other manufacturers to integrate with. They also announced a launcher – ‘Nothing OS’ – a layer on top of Android which will power their upcoming smartphone and illustrate their software design language. The phone(1) is expected to launch in the summer of 2022.

This teaser image from the event is all we know about the Nothing phone(1)’s design at this point.

We also know that the smartphone will be powered by some kind of Qualcomm Snapdragon processor, announced prior to the event in the form of a partnership between Nothing and Qualcomm (QCOM). Nothing promises their smartphone will be unlike anything else, describing the industry as stagnant – The irony of this is not lost on me, considering how Qualcomm powers almost every other Android smartphone on the planet. That being said, Qualcomm is not the only interesting partner to come aboard. In its initial funding round, Nothing raised $7 million from interesting profiles such as Tony Fadell, inventor of the iPod, Steve Huffman, CEO and co-founder of Reddit, and Kevin Lin, co-founder of Twitch. Nothing later went on to raise another $15 million in its Series A, followed by its first community crowd investment round last year raising another $1 million. The company recently completed its Series B funding round raising 48.5 million and now $10 million through its most recent community crowd investment round in which I took part.

Who is Carl Pei?

A major reason why I have interest in this venture is because of its founder, Carl Pei. He is a profile I have followed for years and an interesting figure in the tech space. He is Chinese-born, yet grew up in Sweden which gives him a unique perspective on things and I believe, a richer understanding of the world. He spent some time at Nokia (NOKIA), but more importantly, he became part of OPPO – One of China’s largest smartphone makers. Here he worked directly under Pete Lau and later this duo launched OnePlus in 2013 – a stand-alone entity, yet in full support and funded by their previous employer, BKK Electronics, which also owns OPPO, Vivo, and Realme.

Carl Pei with his first product, the OnePlus One launched in 2014 at only $299 yet featured high-end specifications.

What is OnePlus?

OnePlus popularized the so-called ‘Flagship Killer’ model in the smartphone space by creating a midrange offering with flagship-level grade components and build quality. This works by cutting corners in the least important areas of the product as well as sticking to an online-only sales model. I, of course, loved this idea, the value it created, and became a huge advocate for their products. I am likely responsible for why half of my school in 2015 carried a OnePlus phone in their pocket. OnePlus catered to the enthusiast crowd and offered a clean software experience. They also became the only ever Chinese smartphone brand to truly succeed in launching in the US. Unfortunately, this success also meant a departure from their original strategy, partnering with carriers and popping up in physical retail stores. In time, OnePlus transitioned from its low-margin online-only presence into the mainstream with prices increasing rapidly with each generation.

The last OnePlus product I personally owned was the OnePlus 3 and today my desire for any of their products have disappeared. Their latest offering, the OnePlus 10 Pro (there is no non-pro variant) is priced three times as high as their original product and features bloated software and distinct branding. Eventually, OnePlus turned into a mirror of OPPO in the West launching the same products as in China under different branding. The two companies have now officially merged, but well before this Carl Pei left the company to start his own.

Why I invested despite my disappointment

There are a few key reasons for why I decided to invest in Nothing. That being said, I had originally set aside a much bigger sum for the purpose, but following the event, which gave very little else than empty promises, I decided to cut down my investment and see it as a learning experience:

  • I have never invested in private equity before, but this is something that interests me – I want to learn by doing.
  • I truly respect Carl Pei and have followed him for years. It seems him and I are aligned in our vision for the industry going forward.
  • Nothing has already launched a successful product with the ear(1) and proven to be more than just vaporware.
  • I appreciate the opportunity to become more than just a fan – I had no financial interest in OnePlus but still advocated for their products.

I had anticipated much more from their first event to guide my investment. At the very least I had expected to see a render or a prototype of the device. We did not get that – just another teaser. This lack of substance actually disappointed me so greatly that for a few days I completed shrugged off the idea of going through with my investment, despite already having gone through all the hoops of verifying my profile and uploading various documents to the crowd investing platform. But then something happened: On April 1st, a few days before the early access investment window opened, Nothing tweeted out this image:

Nothing’s April fools joke helped convince me to pursue this opportunity despite my disappointment in their March 23rd event.

Another(1) – a spoof on Apple’s famous phrase ‘one more thing’ clearly showcasing a stereotypical modern glass slap smartphone. And even though this is just an attempt at poking a little fun at Apple and likely also a marketing move to create further hype for phone(1), it still managed to convince me that Nothing is not trying to just pull off another boring phone and calling it different. At least not if they plan to keep any integrity. That was enough for me to reconsider.

Learning by doing

Eventually, when the time came and the early investment window opened up I did place a very small symbolic investment. I had reflected upon missing out on the chance of investing in private equity long enough to understand what it meant to me. I really want to learn about this matter in order to prepare myself for a day when I may get the opportunity to invest in something truly special. I learn so much from doing things in practice – Over my 8 years of investing, I have experimented with plenty of things like trading penny stocks, something alike to day-trading, and even buying meme stocks. While not all of this has worked out, common for all three are that I learned something from it – I am glad I did it and glad that I did it with limited exposure. Learning by doing is a more scientific approach to investing rather than relying on theory or other people’s experiences alone.

I joined thousands of other retail investors or fans of Nothing looking to become part of their journey. It is a little bit of a leap of faith here given the lack of detail for the company’s core product, but I hope they are able to deliver. On the last day of the crowdfunding round, which spanned about a week, and after being given access to a restricted investor pitch deck after my first bid, I decided to double my (still small) stake in the company. I shared this on Twitter and received a message from their CEO.

The potential

Of course, when it comes to investing, it cannot all be for learning. I do see some real potential for the company, I am just unsure to what degree I should set my expectations. I do not expect Nothing to dethrone Apple at any point – but one thing I do find interesting is that critics in the media have compared Nothing to Xiaomi (HK1810) – which is a company I am already invested in. If Nothing down the road could turn into a Xiaomi-like entity for the Western markets I would be absolutely overjoyed. I am bullish on Xiaomi in general, but one of their biggest obstacles lies in the name – They are a Chinese company and will always struggle with perception in the West. Nothing is based in Europe, yet Carl Pei has already proven to be able to leverage the best of Shenzhen. OnePlus did something truly unique overcoming this obstacle of perception in the West while still taking advantage of the incredible pace of innovation in China’s Silicon Valley.

I cannot wait to see how the Nothing ecosystem turns out. They are very far off matching Xiaomi’s massive product portfolio and very far away from Apple in terms of branding power – but with Carl Pei at the helm, this may eventually turn into the OnePlus I dreamed it could be. Regardless, I am happy to now be part of it and to learn along the way. Being private equity means I may never have the chance to offload my shares again – it also carries the risk of dilution and general illiquidity. But who knows? Maybe one day Nothing turns into a successful publicly-traded company and I may take away much more than just the learnings of this decision…

Disclaimer: I am not a financial advisor, the opinions expressed in this article are entirely my own – always invest at your own risk.

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