Fairphone to make bigger impact in 2016 – but how are we going to pay for it?
It’s already February, but hopefully it’s not too late to wish everyone all the best for 2016! I’m not really one for making resolutions, but this time of year always reminds me to reflect on what’s happened in the past 12 months, and think about my priorities for the year ahead.
At Fairphone, 2015 was packed with highlights: we finished developing our very own, modular phone from the ground up. The first one on the market! We funded the start of production with pre-orders and started shipping the first phones in the last weeks of the year. Not to mention moving to a new office, a growing team, community events in Berlin, London, Paris and Amsterdam, positive product reviews, some major awards and significant progress on our impact projects.
Transitioning from pre-orders to continuous availability
The negatives certainly didn’t outweigh the positives, but they were always nagging at the back of my mind, even in our best moments. Many of the issues we came up against in 2015 are common throughout the consumer electronics industry. But others were related to a new phase we’re entering as an organization: investing in our ambition to grow.
When we decided to develop the first Fairphone, we took a hard line in our views on financing: no external funding! It was crucial to us to maintain our independence and do things our own way. We didn’t want interference from third parties who didn’t understand our vision or shareholders bent on churning out the highest possible profits. So we firmly focused on pre-orders. We wanted to be a community-funded organization and finance the production of our phones by asking people to pay in advance.
We wanted to be a community-funded organization and finance the production of our phones by asking people to pay in advance.
And it worked! The success of our crowdfunding (pre-order) model for the two production runs of the Fairphone 1 in 2013 and 2014 made it an obvious approach for funding the production of the Fairphone 2. We’ve come this far entirely thanks to our community of supporters. Using the power of a pre-sales model, we’ve built up a solid company, created a product and entered a competitive market.
In the coming year, our goal is to focus on growth in order to create even more impact in our supply chain with the aim to sell 150,000 phones per year.
Finding investors that fit with Fairphone’s business model
To achieve these goals, we want to build our inventory, speed up delivery, develop new accessories, expand our social impact and approach other channels. All of this requires a bigger financial buffer — sustainable growth isn’t possible with pre-sales alone.
Therefore, it’s time to take the logical next step in our business model: looking for ways to incorporate external investments. However, we’re not willing to compromise our independence. So we’re taking a very careful approach to what types of investment we are willing to accept. We want to continue to maintain control over how we run our business, while at the same time growing our organization, improving flexibility and better serving our customers.
The most important prerequisites for potential investors are to have the right mindset and be aligned with our mission.
We are considering two different types of investment. The first I inelegantly call “cash only”. This means that the investor understands, feels connected to and want to support our mission, but is not involved in the practical side of running our business. The second type we are looking at is a strategic investor. In this case, alignment with our mission is even more essential, as a strategic investment partner would have the right knowledge and network to actively collaborate with Fairphone and help us grow. At the moment, we are in the process of finalizing an investment of the first type.
External investment helps to achieve our overall impact
Going forward, we plan to pursue new investments that are the right match for our objectives – specifically those that measure success both in terms of impact as well as profits. While we felt that we were more vulnerable to external influences when we first started Fairphone, we have now reached the stage where our mission and vision are firmly embedded in the company. We will stay vigilant in keeping this balance of social impact and business as we grow, though we’re confident we can involve external parties without compromising our values.
Depending on the structure of individual investments, our shareholders will have a say in major company (financial) decisions. However, you can rest assured that they will not influence Fairphone’s daily operations. What this working capital will do is support Fairphone’s growth to ensure continuity while minimizing our financial risk. It will provide us with the room to keep doing what we’re doing at a larger scale with less pressure on the team. Most importantly, it will allow us to better serve our customers and community.
Note from the editor:
As Bas mentioned, even with potential new investors, pre-orders are still essential to our business model. Need a new phone and want to show your support? If you pre-order a Fairphone 2 now, you can expect your phone in 4-6 weeks on a first-come, first-served basis. Or follow our regular updates on Facebook or Twitter.