Why did NOTHING buy a CLOSED company?

00:06:57
https://www.youtube.com/watch?v=4whvHxPwRGE

Summary

TLDRIn a candid discussion, Carl Pay explains the rationale behind acquiring the Essential brand, focusing on the value of its name and trademarks rather than its past products. He reflects on the challenges of launching a new smartphone company, the pressures from investors, and the lessons learned from previous ventures. The conversation also touches on the potential of the Gem Phone, the costs associated with product development, and the importance of delivering quality products over brand names. Carl shares insights into the stress of startup life and the significance of building a legacy in the tech industry.

Takeaways

  • 💼 Carl Pay acquired Essential mainly for its name and trademarks.
  • 📱 The Gem Phone was a unique concept but may not have sold well.
  • 💰 Development costs for unique devices can be very high.
  • 🔍 Brand names are important, but product quality is crucial.
  • 😓 Startup pressures can lead to significant stress for founders.
  • 🛠️ Essential's patents were not part of the acquisition.
  • 📈 Investors' expectations can create immense pressure.
  • 🧠 Learning from past experiences is vital for new ventures.
  • 🔄 The name 'Stone' was considered but not chosen.
  • 🌐 The domain essential.com is seen as valuable for the future.

Timeline

  • 00:00:00 - 00:06:57

    Carl Pay acquired the defunct company Essential in 2020, which had produced the PH1 and was working on Project Gem. The acquisition raised questions about the rationale behind buying a brand that no longer existed. Carl's focus on the brand name 'Essential' was revealed, emphasizing its simplicity and elegance, which they believed would hold value in the future. Despite considering other names, they ultimately decided to create their own legacy rather than reviving the Essential brand. The discussion also touched on the importance of product quality over brand name, with Carl noting that even a unique product like the Gem Phone might not sell well without essential features like a good screen and battery. He acknowledged the challenges faced by startups in the industry, particularly in securing investment and supplier relationships, and reflected on the stress and pressure of building a new company. Ultimately, the acquisition was driven by the value of the brand name and associated trademarks, rather than any technological assets.

Mind Map

Video Q&A

  • Why did Carl Pay buy the Essential brand?

    He primarily bought it for the name and associated trademarks.

  • What was the main product associated with Essential?

    The PH1 smartphone and the Project Gem concept.

  • Did they acquire any patents from Essential?

    No, they only acquired trademarks, not patents.

  • What was the estimated cost to produce a unique device like the Gem Phone?

    It could cost around $5 to $10 million just for development work.

  • What was the biggest source of stress for Carl when starting Nothing?

    The pressure of delivering returns to investors and the fear of failure.

  • How did Carl feel about the name of the company?

    He believed the name is important but not as crucial as the products delivered.

  • What did Carl think about the market potential for the Gem Phone?

    It would have generated buzz but likely wouldn't have sold well due to consumer preferences.

  • How did Carl handle investor expectations?

    He felt a lot of pressure to deliver higher returns and worried about letting investors down.

  • What did Carl say about the importance of brand names?

    He stated that while brand names matter, delivering great products is more important.

  • Was there any other name considered for the company?

    Yes, the name 'Stone' was considered.

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  • 00:00:00
    Records show that Carl Pay bought a
  • 00:00:01
    closed company back in 2020. That
  • 00:00:03
    company was called Essential. They
  • 00:00:04
    produced the PH1 and almost released
  • 00:00:06
    these Super Tool smartphones, codenamed
  • 00:00:08
    Project Gem. But Essential had ceased
  • 00:00:10
    operating by then. So why spend money on
  • 00:00:12
    a brand that doesn't exist anymore?
  • 00:00:13
    Let's chat to Carl. So how come we
  • 00:00:15
    bought a brand that had basically closed
  • 00:00:18
    down? Oh, you you have this? Can I have
  • 00:00:19
    a look? All right. It seems like Carl
  • 00:00:21
    just ignored my question. Whatever. He's
  • 00:00:23
    the boss. We'll get to the bottom of why
  • 00:00:24
    he bought Essential right after this. Go
  • 00:00:27
    for it. It's different. I don't know how
  • 00:00:29
    practical it is. It's just like a
  • 00:00:31
    postage stamp. It's like 10% of the
  • 00:00:33
    screen. Yeah. Aspect ratio is like 4:1
  • 00:00:35
    or something crazy. How does text
  • 00:00:37
    messaging work or emails work? I can't
  • 00:00:38
    wait for you to see the keyboard.
  • 00:00:39
    Actually, let's compose a new message.
  • 00:00:42
    Really?
  • 00:00:47
    Now that we've entertained Carl with the
  • 00:00:49
    Gem Phone, let's get back to the point
  • 00:00:50
    of the video. When I look at the brand
  • 00:00:53
    book, some of the early ones, and when
  • 00:00:54
    I'm looking through the Google Drive as
  • 00:00:55
    well, there's a whole bunch of early
  • 00:00:57
    product renders that have the word
  • 00:00:59
    essential written on them. Were we going
  • 00:01:00
    to be called essential at one point?
  • 00:01:02
    Yeah, we were. Yeah, for a few weeks.
  • 00:01:04
    So, then we changed our mind. How did
  • 00:01:05
    that happen? We just had like endless
  • 00:01:06
    loops of discussions and uh then I just
  • 00:01:09
    made the call. Wait, so did we buy
  • 00:01:10
    essential just for the name? Please tell
  • 00:01:12
    me there was something more to this. Oh,
  • 00:01:14
    it's mainly the name. We really like
  • 00:01:15
    this word. It's so simple. It's so
  • 00:01:17
    elegant. It means so much. So that was
  • 00:01:19
    the only thing that we actually bought.
  • 00:01:21
    The trademarks, social media handles,
  • 00:01:23
    the web domain, essential.com, and even
  • 00:01:25
    the web domain is going to be pretty
  • 00:01:26
    valuable in the future, right? It's such
  • 00:01:28
    a good word and com domains are running
  • 00:01:30
    out. I think when we started the
  • 00:01:31
    company, we just had a step-by-step
  • 00:01:32
    process of all the things we needed to
  • 00:01:33
    do and figuring out the brand name was
  • 00:01:35
    one of them. So when we got to that
  • 00:01:37
    point, we acquired Essential, but then
  • 00:01:38
    after doing it, we were like, this is
  • 00:01:40
    somebody else's name in the same
  • 00:01:42
    category of product. So, we don't want
  • 00:01:44
    to confuse the market that this is a
  • 00:01:46
    revival cuz we're about to do something
  • 00:01:48
    very different. A brand name is a
  • 00:01:50
    decision that's very hard to change and
  • 00:01:52
    also like we're building our own legacy.
  • 00:01:54
    So, let's rethink and we we then thought
  • 00:01:56
    about it and we couldn't come up with
  • 00:01:57
    anything. So, then it became nothing.
  • 00:01:58
    Were there any other names that were
  • 00:02:00
    kind of thrown around? Yeah, I really
  • 00:02:01
    like the the name Stone. Okay. What
  • 00:02:05
    about it?
  • 00:02:07
    Short. Mhm.
  • 00:02:09
    Looks cool.
  • 00:02:12
    The brand name, it's important, but it's
  • 00:02:14
    also not that important. It's all about
  • 00:02:16
    the products you deliver and the brand
  • 00:02:17
    you create. Apple is a super strange
  • 00:02:19
    name if you think about it. It's like a
  • 00:02:21
    fruit. It's like, hey, I'm going to
  • 00:02:22
    start banana. Now, it sounds weird, but
  • 00:02:24
    if it one day becomes a really
  • 00:02:26
    successful company, then everybody's
  • 00:02:27
    going to be like, "Yeah, banana. That's
  • 00:02:28
    such a genius name. How did you come up
  • 00:02:29
    with it?" But I think it doesn't
  • 00:02:31
    actually matter that much. So, the name
  • 00:02:32
    doesn't matter as long as you deliver
  • 00:02:33
    great products. I'm not in the product
  • 00:02:35
    team, but I feel like Gem could have
  • 00:02:37
    been a great product. Let's dig a little
  • 00:02:38
    bit deeper and see if there's any chance
  • 00:02:40
    of nothing making a device like this.
  • 00:02:41
    Some people speculated that through this
  • 00:02:43
    acquisition you got access to things
  • 00:02:45
    like patents from Essential. Is that not
  • 00:02:47
    true? We got access to trademarks. It's
  • 00:02:49
    not patents. But actually, as a young
  • 00:02:51
    startup making phones, there's not a lot
  • 00:02:53
    of valuable patent creation like in in
  • 00:02:57
    terms of like real technology,
  • 00:02:58
    especially if the company hasn't been
  • 00:02:59
    around for a long time. So, there was
  • 00:03:01
    never anything that we looked at. We're
  • 00:03:03
    not going to be making this. We don't
  • 00:03:04
    need any patents to make this. We can
  • 00:03:06
    make it tomorrow if we want to. Well,
  • 00:03:07
    that's good to hear cuz I thought you
  • 00:03:08
    were crushing my dreams that we were
  • 00:03:10
    never going to Just because we can
  • 00:03:11
    doesn't mean we will. Okay, so now my
  • 00:03:14
    dreams are crushed. Thanks, Carl. But at
  • 00:03:16
    what cost? No, seriously. How much would
  • 00:03:18
    a device as unique as this cost to
  • 00:03:19
    produce? Every screw, every chip, every
  • 00:03:21
    hour spent on development is money you
  • 00:03:23
    can never get back. In your head, a
  • 00:03:24
    product might look like a masterpiece,
  • 00:03:26
    but on the market, it could be a total
  • 00:03:27
    flopper. What's really custom is the
  • 00:03:29
    screen, right? So, if you want to do
  • 00:03:30
    this, you have to get the screen factory
  • 00:03:32
    to create a custom cut for you. So, we
  • 00:03:35
    probably have to pay $5 to $10 million
  • 00:03:36
    just for the work, not the screen
  • 00:03:38
    itself. It'll be like $250, $300 bump
  • 00:03:41
    price. So, on the topic of uh people
  • 00:03:43
    always asking us to make smaller phones,
  • 00:03:44
    do you think something like this, had it
  • 00:03:46
    gone to market, would have sold well?
  • 00:03:48
    Uh, it would have gotten a lot of buzz
  • 00:03:49
    in the beginning, but it probably
  • 00:03:51
    wouldn't have sold well because people
  • 00:03:52
    want a good screen, good battery, good
  • 00:03:54
    camera. Those are non-negotiables and
  • 00:03:57
    then you can do like cool stuff on top
  • 00:03:58
    of that. But if you don't have that
  • 00:03:59
    correct, I think it's very hard to get
  • 00:04:01
    to any volume. So, how can you guarantee
  • 00:04:03
    your products will sell at volume? And
  • 00:04:04
    how can you convince your investors that
  • 00:04:06
    your company will be successful? You're
  • 00:04:08
    an Get the out of here. Oh,
  • 00:04:12
    maybe Carl knows something we don't.
  • 00:04:13
    Let's reflect back a little bit then
  • 00:04:14
    because at one point Essential was
  • 00:04:16
    valued over a billion dollars. It was a
  • 00:04:18
    unicorn. They had investment from people
  • 00:04:20
    like Amazon and it's written online that
  • 00:04:22
    they spent over 100 million USD on
  • 00:04:24
    product development. So, for you when
  • 00:04:26
    you were starting your new venture, was
  • 00:04:28
    that not a little bit scary? like this
  • 00:04:30
    company didn't make it past its first
  • 00:04:32
    smartphone. We had to endure a lot of
  • 00:04:34
    hardships because of past startups in
  • 00:04:36
    the same industry. We got rejected by
  • 00:04:38
    all the suppliers because they're like,
  • 00:04:40
    "Hey, we've seen this story before. Go
  • 00:04:42
    somewhere else." But it's not just
  • 00:04:43
    suppliers though. It's also when you
  • 00:04:44
    were looking for investment. How did you
  • 00:04:46
    convince investors that the story with
  • 00:04:49
    nothing was going to be different? I
  • 00:04:50
    have no idea. I wouldn't invest in
  • 00:04:51
    myself in in the in the beginning.
  • 00:04:53
    Having done it once before makes the
  • 00:04:56
    pill a lot easier to swallow. like,
  • 00:04:57
    okay, you've probably made a lot of
  • 00:04:58
    mistakes and learned from those mistakes
  • 00:05:00
    in the past. So therefore, the risk is
  • 00:05:02
    not as high this time around. We were
  • 00:05:04
    all from this industry and we knew kind
  • 00:05:06
    of under the hood how a business like
  • 00:05:08
    this runs. It's not only about having a
  • 00:05:10
    good design, being able to ship a
  • 00:05:11
    product, but it's also about the
  • 00:05:13
    engineering behind the product. It's
  • 00:05:14
    about the manufacturing, it's about the
  • 00:05:16
    quality control, the supply chain, the
  • 00:05:18
    customer service, the sales and
  • 00:05:19
    marketing. 10 to 20 things you have to
  • 00:05:21
    master to have a business like this. and
  • 00:05:23
    we felt like we were relatively good
  • 00:05:25
    here. Uh based on the past experience,
  • 00:05:27
    we can clearly see that starting a new
  • 00:05:29
    company is hard. When building nothing,
  • 00:05:31
    Carl was carrying the weight of
  • 00:05:32
    expectation from investors, team
  • 00:05:33
    members, and the public too. And that
  • 00:05:35
    led to a lot of pressure, not just
  • 00:05:36
    mental pressure, physically too. I had
  • 00:05:38
    an issue with my heart in the beginning
  • 00:05:40
    because I was so stressed about doing a
  • 00:05:42
    startup. Every like 10 or 15 seconds, my
  • 00:05:45
    heart will beat like super hard
  • 00:05:49
    like for for weeks. And then they
  • 00:05:52
    couldn't find a problem. They just said,
  • 00:05:53
    "You're probably stressed." What would
  • 00:05:54
    you say was the kind of biggest source
  • 00:05:55
    of stress when starting a company? I
  • 00:05:57
    think I took it a bit too seriously. Oh,
  • 00:05:59
    somebody invested money. Oh my god, you
  • 00:06:01
    know, this person could have invested
  • 00:06:02
    this money in Apple stocks or somewhere
  • 00:06:04
    else. And if we're not able to deliver
  • 00:06:06
    higher return, then we really let this
  • 00:06:08
    person down. That just stressed me out a
  • 00:06:10
    lot, but it was just imagined stress. It
  • 00:06:12
    sounds like failure was never really an
  • 00:06:14
    option. Yeah, the first stage is uh
  • 00:06:16
    surviving. That was really top of mind,
  • 00:06:18
    but there's been a lot of worry about
  • 00:06:20
    not being able to survive as well, but I
  • 00:06:22
    think for each year it gets a bit
  • 00:06:24
    better. With Carl now deep in reflection
  • 00:06:26
    on the early days of nothing, let's see
  • 00:06:27
    if we can squeeze one more detail out of
  • 00:06:29
    him about the essential acquisition.
  • 00:06:31
    Would you mind if I asked how much we uh
  • 00:06:33
    paid? Yeah, I would mind. You would
  • 00:06:35
    mind? Oh, we signed an NDA, so we would
  • 00:06:38
    be in breach of the NDA. I mean, it's a
  • 00:06:40
    safe space car. This is going to go on
  • 00:06:41
    YouTube. We can blow it. We've got
  • 00:06:43
    editors.
  • 00:06:46
    He doesn't trust that we'd censor the
  • 00:06:47
    price and he's right to do so because we
  • 00:06:49
    definitely tell you. So to answer the
  • 00:06:51
    question, why did nothing spend? Simple.
  • 00:06:53
    It's for a nine letter word. You're
  • 00:06:55
    welcome.
Tags
  • Carl Pay
  • Essential
  • Gem Phone
  • smartphone
  • acquisition
  • branding
  • startup
  • investors
  • product development
  • technology