KaiOS, a Hong Kong-based feature Phone firm, has received $3.4 million from Finnfund, a Finnish impact investor. The funds will be used to help Kaios expand its business in Sub-Saharan Africa, a significant market for low-end, low-cost devices.

Smartphone sales have been dropping in what has been a difficult year for mobile devices, putting further strain on an already unstable segment of the mobile market: feature phones. One of the players in that space, the feature phone operating system startup KaiOS, has received a small financial injection that speaks to that pressure while also providing a chance to grow in what remains a market opportunity: selling cheaper and lower-end, but ultimately functional and usable devices, to the poorest consumers in developing economies in Sub-Saharan Africa.

The Hong Kong-based feature phone firm, which has previously received funding from strategic investors like as Google and TCL, has received $3.4 million from Finnfund, a Finnish impact investor.

Finnfund’s money is in the form of a convertible note, which might be converted into stock in a future funding round. KaiOS hasn’t raised (or, more particularly, announced) outside money in a long time: its most recent round was in 2019, when it raised $50 million from investors including Cathay Innovation, Google, and TCL.

Finnfund and KaiOS stated that the funds raised today would be used to help KaiOS expand its company in Sub-Saharan Africa, a significant market for low-end, low-cost devices.

The investor has a special interest in Africa, and it has personally sponsored a number of firms in the area, including food supply-chain company Twiga and fintech Jumo.

 Codeville stated, “With this financing, KaiOS will be able to grow into new areas in Sub-Saharan Africa. We are delighted to collaborate with an investor like Finnfund, who shares our belief in the need of accelerating digitalization in Africa.”

“According to Finnfund, there are around 3.4 billion people in the world today who do not have access to the internet, the majority of whom live in developing nations and cannot buy cellphones.”

The argument for KaiOS is that it provides a low-cost option for handset makers looking to produce feature phones that compete with low-end smartphones.

KaiOS now advertises 41 handset variants running its OS, with the lowest ones retailing for around $10 and equipped with applications and other trademarks of internet-enabled handsets.

However, the startup has a difficult task.

KaiOS spent its early years on a wave of promise. It originated as a fork of Firefox OS, an ill-fated attempt by Mozilla and partners to create a competitive smartphone platform competitor to Google-backed Android and Apple’s iOS.

The KaiOS team identified an opportunity to target the low end of the consumer market in emerging nations, and to centralize R&D directed at these customers on a single platform for sophisticated feature phones.

Others agreed, and KaiOS swiftly attracted OEMs like as Nokia, as well as software partners, to expand its ecosystem. To hedge its chances, Google became a strategic partner to KaiOS, spending tens of millions of dollars in the firm.

When KaiOS announced funding in 2019, it stated that 100 million devices running its operating system had been shipped.

IDC anticipated at the time that 500 million feature phones will be shipped yearly for the following five years.

Today, the business claims that “over 170 million” KaiOS-powered devices have been sold, with a far smaller number of active users in the market of roughly 100 million.

KaiOS is predicted to have a 0.07% proportion of the global mobile market today. In comparison, Android, which has been powering an ever-cheaper range of handsets, has little more than 71%, while iOS has 28.3%.

In addition to its limited market share, feature phones’ overall sales volume is declining.

India now dominates the feature phone market, followed by China, Pakistan, and Bangladesh.

On the other hand, the fact that Nigeria is the only country in Africa to make it into the top-five markets for feature phones (it ranks fifth) suggests that there is still potential across the rest of the continent, which Finnfund hopes to capitalize on.

Finnfund investment manager Kuutti Kilpeläinen, stated, “The investment towards KaiOS is yet another critical step in connecting the disconnected. KaiOS has demonstrated its capacity to tackle the affordability challenge, and we are happy to join the group of investors who all share the same ambitious aim of reducing the digital divide.”

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