A secretive startup has raised $14 million to build a smartphone that may work like a Nintendo Switch

Wonder CEO Andy KleinmanWonderWonder CEO Andy Kleinman.

Andy Kleinman thinks the well has run dry for smartphones.

He’s not necessarily wrong. The phone market today is led by Apple, Samsung, a handful of Chinese companies with little Western presence — and that’s about it.

Few companies make big profits. And the devices themselves have become commodified to the point where fans’ most passionate disputes now concern display bezels.

Kleinman’s solution, then, is to go niche. He’s spent the past two years building a new startup called Wonder, which is aiming to build a number of devices, new phone included, aimed specifically at video game enthusiasts.

The Los Angeles-based company has largely been working out of the public eye, but on Tuesday announced that it has raised $US14 million to date. That includes a recently-closed Series A round of funding led by Grishin Robotics, a Russian VC firm focused on the Internet of Things, and TCL, a Chinese manufacturer behind select Roku TVs and various smartphones. Kleinman says the latter will help Wonder with manufacturing and distribution.

In a press release, Wonder says its first product will be “a new type of portable hardware device that might be considered a hybrid between a powerful smartphone and a gaming console.”

Kleinman declined to share more specifics in an interview with Business Insider, but a source familiar with the company’s plans described the product as a large, high-end mobile device that will work with a number of accessories aimed at making it more useful for gaming. That will include a dock for use TVs, the source said, which helps the device function somewhat like Nintendo’s Switch console. All of this is based on Android.

Kleinman has previously said the company is interested in virtual reality tech as well.

There is plenty of reason to be sceptical of a project like this. But Kleinman and Wonder do have some relevant experience: Kleinman has previously had stints at mobile game makers Scopely and Zynga, while a LinkedIn search shows veterans from HTC, Activision, Sony, and former Android modder Cyanogen holding prominent positions at the company.

Kleinman says there’s at least 50 people working directly on the project today, but that the company is actively growing. Investors in Wonder are similarly diverse, ranging from Silicon Valley types like Joe Lonsdale’s 8VC firm to entertainers like Kevin Spacey and Shakira.

Reasons to doubt

In any case, starting from scratch in a saturated smartphone market is extremely difficult. Making a mobile device aimed at gamers may be even harder.

Wonder startupWonderWonder has big ambitions, but serious challenges ahead of it.

Kleinman speaks frequently about how Wonder will focus heavily on the community of enthusiasts it wants to build, but it’s not obvious that the game-playing public wants gaming devices not made by Sony, Microsoft, or Nintendo in the first place. Multifunction gaming devices like the Nokia N-Gage and Sony Xperia Play have bombed spectacularly, as have alternative consoles like the Ouya. (Former Ouya CEO Julie Uhrman says she is currently an advisor to Wonder.) These are not names you want your stuff to evoke.

If Wonder does manage to find demand, then the challenge, as always with video games, becomes software. Android-based gaming devices like the Nvidia Shield have carved out some niche, but offer a significantly smaller selection of games than a console like the PlayStation 4. They also live in a market far away from the iPhone.

Wonder, for its part, is promising “exclusive software, services, and content,” and Kleinman says the company is meeting with “big, small, and medium” gaming companies to make that happen.

The results of that will have to be more involved than Scopely’s brand of casual games, however, for Wonder to have any chance with the hardcore crowd Kleinman is targeting.

Not for everybody

For now, it’s not clear what Wonder’s device even looks like — or where it will be sold — so there’s still plenty of room for speculation. But Kleinman’s belief that future smartphones have to be significantly differentiated to survive is sensible.

“If you think about cars, for example, it started as a basic method of transportation, and over the years it started becoming more about — there are different sizes, there are different colours, there are different levels of luxury, different speeds,” Kleinman said. “People started to get whatever they identified with the best.

“And so I think we’re here. If there’s going to be 4 billion people with a smartphone in the next couple of years, it doesn’t make sense that everyone has something that looks exactly the same. It makes sense that people have experiences more unique to who they are.”

Andy Rubin Essential PhoneBrian Ach/GettyAndroid co-creator Andy Rubin launched the first phone from his new startup, Essential, last month.

Wonder’s plan to cater to its niche exclusively is what Kleinman thinks will separate it from other new hardware startups like Andy Rubin’s Essential, which unveiled a new Android phone last month.

“I’ve never said, ‘OK, Wonder is going to go straight up and compete with Apple, or Samsung, or Google in the same place.’ It’s not the same thing. We’re focused on something specific,” Kleinman said.

Kleinman says the company has started production, and that it will slowly reveal details about the device to those who sign up for an “Alpha program” on its website. A full reveal will then come before the end of the year.

Whether the result will be something appealing enough to attract the enthusiasts Kleinman wants — and whether enough people even want to trade their iPhones for a different device at all — is an open question.

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