OnePlus co-founder talks OnePlus 2, business model, third new phone

Eli Blumenthal, Special for USA TODAY | USA TODAY

Chinese startup OnePlus made news on Tuesday when it announced the OnePlus 2 smartphone. Within three days more than 1 million people requested an invite to purchase the phone. The company has already sold more than 1.5 million of its inaugural OnePlus One phone, raking in more than $300 million in sales.

USA TODAY sat down with OnePlus' 25-year-old co-founder Carl Pei to chat about the company's first year and the future.

Comments edited for space and clarity.

USA TODAY: How did OnePlus start?

Pei: In August 2013 some of the early OnePlus people and some of our friends sat in a restaurant and noticed everyone using (the) iPhone. We started asking ourselves 'why?' The conclusion was no one else cared about the product as much as Apple does.

Then we asked, 'who is the second most product focused company making smartphones?' and no one could agree on anything. Some said Samsung, some HTC, some Sony.

That's where we saw the opportunity because we saw that people within Android (the manufacturers), they don't really care. They care about market share, consumer studies and filling gaps in the market as opposed to making the best products.

We just wanted to make the best Android phone, and put as much care into the product as Apple puts into their products.

USA TODAY: Why use the direct low cost sales model?

Pei: The entire landscape was changing. eCommerce is making everything more efficient and ultimately it benefits the consumer. It cuts out the middle man and cuts out a lot of the margins. You can read media and user reviews online. Advertising is diminishing in value and the value of good products is rising because it can be discovered without a huge marketing budget.

I'm sure that if Samsung cut all their stores and cut all the distribution and went direct to consumer they would be able to sell their phone at a lower price than we do. So it's not about making a cheap phone at all.

USA TODAY: Has there been any pushback from investors?

Pei: Once you have a lot of investors there is a lot of pressure on how you are running your business. Everyone will have a say especially if you give away a lot of board seats. We are lucky enough that we have a pretty lean and pretty low risk business model because we don't keep a lot of inventory. This model has actually slowed our growth a little bit to be honest because some people were pissed off that they couldn't get an invite fast enough.

But in the end our finances are much more healthy than a lot of these Silicon Valley companies that are burning a bunch of other people's money and burning venture capital for growth.

We broke even last year. We hope to break even this year but it's a stretch goal because we added so many more people to our team. If you have a great product, if your users love you then it is very difficult not to grow and make money.

We said 'let's sell 50,000 phones for the OnePlus One' but we were lucky and sold way more than that. We have some internal targets of 3-5 million (sales) for this year, but it's not really important if we reach it or not. The most important metric for us is what people say about our phone, are our users happy, can we survive this year or not?

USA Today: Who inspires you personally?

Pei: Steve Jobs was inspirational to me, but in recent years I began thinking a little bit differently. You should just learn the good things from people but then charge your own direction. I think Elon Musk is doing great things, Jeff Bezos is doing great things. There's a lot of cool people doing great things but I don't think there should be an idol.

USA TODAY: OnePlus fans are upset about not including NFC in the OnePlus 2, Why didn't you add it?

Pei: I think the entire issue of NFC is overblown. Very few people are using NFC, so we cut it. It's as simple as that.

I know that Android Pay is coming but all that is in the future. It (NFC) is going to gain widespread adoption in stores 12-18 months from now. By that time people will have moved on to the next device.

USA TODAY: Where do you see OnePlus in the future?

Pei: In 5 years I think it will be Apple, OnePlus and Samsung because there's no more room in the market. Everyone else would've died because they couldn't reach the scale they wanted fast enough or they couldn't have a margin to sustain their business. Look at the soft drink space: there are only two players, Pepsi and Coke.

USA TODAY: Does OnePlus intend to branch out beyond phones?

Pei: We have a vision where we work with everyone as partners. We can make our software, OxygenOS, compatible with everyone's stuff.

We almost made fitness trackers but we scrapped it because that is exactly against our open culture. We want to work with other people. By making our own we are already competing with our potential partners before even approaching them and giving them a chance.

We don't believe your home will be decked out with a OnePlus TV or a OnePlus smart scale. We believe that different brands should focus on different things and only by focusing can you make the best products in your category.

USA TODAY: Any plans for another phone this year?

There's going to be a second phone this year, before the end of the year. Hopefully for Christmas.

It may or may not be (higher spec'd than the OnePlus 2). When I saw the prototype for that phone I was like 'holy s--- that's going to be my daily driver' but then when the OnePlus 2 production version came out it's also super nice, so its really hard to decide now what to use.

It's going to be amazing, but today I'm not going to talk about it.

Follow Eli Blumenthal on Twitter @eliblumenthal