China’s most successful startup?
Ask people in China to name the country’s most successful and innovative new mobile phone brand and most will immediately declare Xiaomi. Ask tech-savvy Americans and Europeans and they will just as quickly suggest OnePlus. Though largely still unknown in China, Shenzhen-headquartered OnePlus, established less than 18 months ago, has achieved more success more quickly in US and European markets than any other Chinese mobile phone company. It is also possibly the China’s most successful start-up since Xiaomi was established five years ago.
OnePlus, by my estimate, has now joined the most exclusive club in the technology world, a “unicorn”, meaning technology start-ups with a valuation of over $1 billion. Other Chinese unicorns besides Xiaomi are China’s Uber, Kuaidi Dache and group buying site Meituan. Unlike those other Chinese companies, OnePlus has not yet raised any money from venture capitalists. OnePlus is also the only truly international Chinese unicorn, since most of its sales and growth are outside China.
With just a tiny amount of capital, mainly contributed by its two founders, Pete Lau and Carl Pei, the company began selling its phones little more than a year ago in late April 2014. Its 2014 full-year revenues were $300mn, well behind Xiaomi’s $12 billion. But, unlike Xiaomi, OnePlus chose to focus its efforts on the US, Western Europe and India. In these places, OnePlus is doing far better than Xiaomi, and is now considered a legitimate competitor to major international Android phone brands like Korea’s Samsung (SSNLF), Taiwan’s HTC (HTCXF), Japan’s Sony (SNE) and America’s Google Nexus (GOOG). OnePlus is cheaper than these others, but that doesn’t seem to be the main reason its winning customers as well as enthusiastic reviews from experts. It’s mainly because of the quality of both OnePlus’s hardware and Android software.
According to the Wall Street Journal, the One Plus phone is “exceptional” and it “beats Apple iPhone 6 and Samsung Galaxy S5 in many ways.” The New York Times has called the OnePlus phone “fantastic, about the fastest Android phone you can buy, and its screen is stunning “. Time Magazine chimed in with OnePlus is “exactly how a smartphone should be.” Engadget, the widely-read US technology blog, recently rated the best phones to buy in the US. Oneplus came out on top. That’s certainly a first for a Chinese brand.
In my seven years as an investment banker in China and before that as CEO of a California venture capital firm, I’ve never met quite such a mold-breaking company. OnePlus set out to achieve what no other Chinese company has ever done, to excel not just at making low-cost fast-to-market products but making ones of the highest quality, in engineering and design, hardware and software.
They next did something else no Chinese, and few American companies have done successfully: use social media sites Twitter (TWTR), Facebook (FB) and Youtube (GOOG) to market its products at almost zero cost, and build a brand with a high reputation and a growing band of loyal customers and followers in the US and European markets.
Both Xiaomi and OnePlus say they plan to make most of their money from selling services and software, not from selling phones. Xiaomi has the advantage of much larger scale, with far more users. But, OnePlus may actually do better with this strategy and make more money for the simple reason that in the US and Europe, compared to China, a lot of people are accustomed to paying for mobile software and services.
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