KaiOS, the characteristic cellphone platform startup, raises a modest $3.4M to coach its sights on progress in Africa

Smartphone shipments have been declining in what has been a tough yr for cellular handsets, and that’s meant much more stress on an already-precarious sliver of the cellular market: characteristic telephones. Today, one of many gamers in that house, the characteristic cellphone working system startup KaiOS, is getting a small monetary injection that each speaks to that stress, but additionally an opportunity to develop in what stays a gap available in the market: promoting cheaper and low-end, however finally nonetheless useful and usable units, to the poorest customers in creating economies in sub-Saharan Africa.

The Hong Kong-based characteristic cellphone startup, which has beforehand been backed by strategic traders like Google and TCL, has picked up $3.4 million from Finnfund, an impression investor out of Finland.

Finnfund’s financing is coming within the type of a convertible be aware — which means it may convert into fairness in a possible future funding spherical.

We’ve reached out to Sebastien Codeville, the founder and CEO of KaiOS, to ask whether or not extra monetary exercise is within the pipeline and can replace this submit as we be taught extra. It’s been some time since KaiOS raised (or extra particularly disclosed) exterior funding: its final funding was in 2019, when it raised $50 million from traders together with Cathay Innovation, Google and TCL.

Finnfund and KaiOS mentioned that as we speak’s cash will go in direction of KaiOS constructing out its enterprise in sub-Saharan Africa — a significant marketplace for lower-end, low-cost units. Africa is a selected focus for the investor, and it’s immediately backed a lot of startups within the area, too, together with meals supply-chain startup Twiga and fintech Jumo.

“With this investment, KaiOS can expand into new markets in Sub-Saharan Africa,” mentioned Codeville in a press release. “We are happy to partner with an investor like Finnfund who share our vision of how important it is to boost digitalisation in Africa.”

Finnfund estimates that there are some 3.4 billion individuals on the earth as we speak with out web entry, principally in creating economies, and principally as a result of they can not afford smartphones. Even the most affordable smartphone fashions, powered for instance Google’s Android OS, can work out to be as excessive as 20% of customers’ month-to-month incomes, Finnfund estimates. (Running just a little math on its numbers, Finnfund’s funding works out to $0.001 or 1/10 of a cent funding per potential person.)

KaiOS’s pitch is that it’s a low-cost various for handset makers that need to construct characteristic telephones that may compete with low-end smartphones. Equipped with apps and different hallmarks of in internet-enabled handsets, KaiOS currently lists 41 handset models working its OS, with the most affordable units retailing for about $10.

But the startup has a tall order forward of it.

KaiOS spent its early years on the wings of a number of promise. It started life in 2017 as a fork of Firefox OS, which was an ill-fated try by Mozilla and companions to construct a viable smartphone platform competitor to Google-backed Android and Apple’s iOS. Optimistically, the KaiOS crew noticed a gap to focus on the bottom finish of the patron market, in creating economies, and to consolidate R&D aimed toward these customers on a single platform for superior characteristic telephones.

Others agreed, and KaiOS rapidly picked up OEMs like Nokia, in addition to software program companions to construct out its ecosystem. Even Google, hedging its bets, wished to ensure it performed a robust position within the characteristic cellphone phase whilst Android grew its market share, and so it grew to become a strategic accomplice to KaiOS, investing tens of hundreds of thousands of {dollars} within the startup. 

But issues haven’t performed out as anticipated.

When KaiOS introduced funding in 2019, it mentioned that some 100 million units utilizing its OS had been shipped. At the time, IDC predicted that 500 million characteristic telephones can be shipped yearly for the following 5. Today, the corporate says simply that “over 170 million” KaiOS-powered units have been shipped — with active users available in the market a far decrease variety of round 100 million. It’s estimated that KaiOS as we speak has a 0.07% share of the whole cellular market. In distinction, Android, which itself has been powering an ever-cheaper vary of smartphones, has simply over 71% and iOS has a 28.3% share.

In addition to the small market share for characteristic telephones, its overall sales volume can be in decline. India, adopted by China, Pakistan and Bangladesh, are the nations that dominate the characteristic cellphone market as we speak. But alternatively, provided that Nigeria is the one nation in Africa to make it into the top-five markets for characteristic telephones (it’s quantity 5), that does suggest that there’s nonetheless potential throughout the remainder of the continent, one thing that Finnfund is hoping to construct on.

“The investment in KaiOS is yet another important step in connecting the unconnected,” mentioned Finnfund funding supervisor Kuutti Kilpeläinen, in a press release. “KaiOS has proved that it can solve the affordability problem and we are proud to join the group of investors who all share the same ambitious goal of closing the digital gap.”