Google’s $3.2 billion acquisition of Nest Labs Inc. is it’s second biggest ever. This is what the Internet giant got for its money.
One of Silicon Valley’s rising stars
Nest Labs, which produces smart thermostats and smoke alarms for the home, has long been admired in the Valley. Former Apple executive Tony Fadell leads the company, which was founded four years ago. Nest has already made a sizeable dent in its market. Fadell said in an interview with the New York Times that his company’s thermostat device had made it’s way into almost 1 percent of U.S. homes. Google invested in Nest previously through its VC arm, Google Ventures, which led two rounds of financing for the Palo Alto-based startup. Other existing investors, which can expect an excellent return, include Kleiner Perkins Caufield & Byers and Lightspeed Venture Partners.
Entrance into your home
Google has a hold on consumers’ computers, mobile devices, cars and is even making robots that could shape the future of a number of industries. Now, through the Nest acquisition, the company has found a way into the infrastructure of the home. A report from ABI Research estimates 1.3 million smart thermostats were shipped worldwide last year, and the connected home industry is expected to grow in the future. Google has attempted to break into this market before when it released an energy-monitoring tool called the PowerMeter. The company designed the product to provide homeowners with information on their energy consumption, but retired it in 2011. Now Google has jumped to the forefront of the smart home devices market, through a major money acquisition.
A highly rated executive
Tony Fadell is a genuine superstar in the tech sector, having previously headed up the engineering of the iPod and iPhone at Apple. Some commentators have gone so far as to claim Apple missed out on a potential future CEO by not buying Nest before Google. The terms of the deal indicate Google’s confidence in Fadell, as Nest will continue to operate independently under its own brand, and will build out its portfolio of connected devices.
A major foothold in The Internet of Things space
The Internet of Things technology movement has been gathering steam for some time now, with the smart home space setting the pace for the entire industry. A study by CB Insights revealed that home automation companies raised $468 million between the start of 2012 and the end of last year. The research company also revealed three of the top four most active investors in the Internet of Things market are corporate investors, and Intel Capital pumped the most cash into the emerging sector. News of the healthy return made by the likes of Lightspeed and Kleiner Perkins Caulfield & Byers from the Google-Nest deal may draw more investors to the sector. Nest had already built up a reputation and following in the home automation space and larger Internet of Things arena. With Google behind it, the two look to dominate the market.
Google loves data; this has been clear for some time. And Nest’s products gather a huge amount of data from consumers who use them. The smart thermostat can report on a number of trends, from when people are out of their houses most, to when lights are turned off and on. Data plays a big part in the Internet of Things movement, and Google may be looking to leverage new information to provide even more targeted advertising. The Internet of Things creates a lot of byproducts — jobs, profits, innovation, but most of all, data. That’s what makes the segment so appealing to Google, and that’s why the company has made such a monumental acquisition move.