Smartphone shipments are declining in what has been a tough year for handsets, and that means more pressure on an already vulnerable mobile market: feature phones. Today, one of the players in that space, feature phone operating system startup Kaios, is getting a small financial injection that speaks to both that pressure, but also an opportunity to grow in what remains open in the market: selling cheap and low. – Last, but not least, practical and usable tools for the poorest users in the developing economies of sub-Saharan Africa.
The Hong Kong feature phone startup, previously backed by strategic investors such as Google and TCL, has secured $3.4 million from Finnish influencer Finfund.
FinFund’s financing comes in the form of a convertible note – meaning it can be converted into equity in a future funding round.
We’ve reached out to KaiOS founder and CEO Sebastien Codeville to ask if more financial activity is in the works, and we’ll update this post when we learn more. It’s been a while since KaiOS raised (or specifically went public) from outside investment: the last funding round was in 2015. 2019, when He collected 50 million dollars from investors including Cathay Innovation, Google and TCL.
Finfund and Kaios said today’s funding will go to KaiOS to build its business in sub-Saharan Africa — a huge market for low-end, low-cost devices. Africa is particularly focused on the investor, and has directly backed several startups in the region, including food supply chain startup Twiga and fintech Jumo.
“With this investment, KAOS can expand into new markets in sub-Saharan Africa,” Codeville said in a statement. “We are delighted to partner with investors like FinFund who share our vision of how important it is to advance digitalisation in Africa.”
FinFind estimates that 3.4 billion people in the world currently lack internet access, mostly in developing economies and largely unable to afford smartphones. Even the cheapest smartphone models, such as those powered by Google’s Android OS, can add up to 20% of consumers’ monthly income, Finfund estimates. (Running a little math on the numbers, finfund investment (It works up to $0.001 or 1/10 percent of the investment per user.)
The KAOS capability is a low-cost option for handset makers looking to build handsets that can compete with low-end smartphones. Equipped with apps and other features for Internet-enabled handsets, KaiOS currently lists 41 handset models running the operating system, with the cheapest devices selling for around $10.
But the startup has a tall order ahead.
KaiOS spent its early years on many wings of hope. In the year It began life in 2017 as a fork of Firefox OS, an attempt by Mozilla and its partners to build a smartphone platform-friendly competitor to the Google-backed Android and Apple iOS. Optimistically, the KAOS team saw an opening to target the lower end of the consumer market, developing economies of scale and combining R&D aimed at these users into a single platform for advanced phones.
Others agreed, and KaiOS quickly picked up OEMs like Nokia as well as software partners to build the ecosystem. Even Google hedged its bets and wanted to make sure it played a strong role in the feature phone segment as Android grew its market share, and thus invested tens of millions of dollars in the startup as a strategic partner of KAOS.
But it didn’t turn out as expected.
When KaiOS announced its funding in 2019, it said 100 million devices using the OS had been shipped. At the time, IDC predicted that 500 million feature phones would be shipped annually for the next five years. Today, the company says “more than 170 million” Chaos-powered devices have been shipped — far fewer than the roughly 100 million active users in the market. Today, KaiOS is estimated to have a share of 0.07% of the total mobile market. In contrast, Android itself has been making the cheapest smartphones ever with more than 71 percent, while iOS has a 28.3 percent share.
In addition to the small market share for feature phones, the overall sales volume is also declining. India, China, Pakistan and Bangladesh are the countries that dominate the feature phone market today. On the other hand, the fact that Nigeria is the only country in the top five mobile phone markets (number five) means that there is still potential in the rest of the continent. She is hoping to build a fin.
“The investment in Kaios is another important step in connecting the unconnected,” said Finfund investment manager Kuti Kilpellainen in a statement. “KaiOS has proven that it can solve the problem of affordability and we are proud to join a group of investors who share the same goal of closing the digital divide.”
