Google acquired Internet-savvy domestic device maker Nest Labs on Monday for a whopping $3.2 billion, catalyzing an outpouring of media in tech hubs across the country.
Boston, in particular, has a few reasons to be happy about the Nest news. Just last March, the Palo Alto company chose MyEnergy, a local personalized energy saving startup, as its first – and only – acquisition. As a result of the deal, MyEnergy investor Point Judith Capital, an early-stage investment firm in downtown Boston, was brought into the fold. Not to mention that Nest’s new parent company holds an office in Cambridge as well.
Though the returns for Nest, the MyEnergy team and Point Judith Capital are call for celebration as is, the union of Nest and Google marks a big win for cleantech.
We spoke with a number of Boston thought leaders to provide insights into Google’s acquisition of Nest, and its consequences for the city’s innovation scene.
Nest and MyEnergy: The “Perfect Marriage”
MyEnergy was founded initially under the name EarthAid by Ben Bixby and Greg O’Keeffe in 2009. The company aims to turn the dry into delightful, with the ultimate goal of reducing energy consumption across the country: It offers a sleek web app that allows users to compare hundreds of utility bills for electric, gas and water with those of Facebook friends.
In 2011, MyEnergy raised $4 million in Series A from Point Judith Capital, which holds offices in both downtown Boston and Providence, as well as Clean Energy Venture Group and Capital E.
Leading Point Judith Capital's investment in the up-and-coming startup was Zaid Ashai, chairman and CEO of Nexamp and General Partner of Point Judith Capital, who told BostInno what he initially saw in MyEnergy – a potentially powerful solution to a pressing problem:
Utility data streams for residential buildings were very hard to comprehend, and when people looked at their energy bill, it was very hard to decipher. The reality is that the bill is really hard to take action on…
If you look at the energy consumption, 60 to 70 percent of electricity is used for residential and commercial buildings. Even with standard, off-the-shelf technologies, you can actually drive that energy consumption down by 20 to 30 percent by comparing yourself against better baselines.
And Nest founders Tony Fadell and Matt Rogers seemed to agree with that prospect, finding it even more powerful when paired with their company’s connected thermostat and smoke alarm. The rest was history: Two years later, on May 8th, 2013, Nest acquired MyEnergy, with no financials disclosed.
At the time, the idea thought to be driving the acquisition was that MyEnergy could provide Nest users with even more data and analytics to go green. As Nest’s company blog post put it at the time:
Every day we get requests for more data: for spreadsheets, charts, detailed comparisons and, most importantly, energy savings translated into actual dollars. We’ve acquired MyEnergy to help us do both: the details and the dollars.
Bixby, O’Keeffe and a handful of others from MyEnergy joined the Nest team. Though the startup's Boston office was closed, MyEnergy retained its brand and became based out of Nest's offices in Palo Alto.
While none of the details around the deal were publicized, Ashai confirmed that Point Judith walked away with a stake in Nest after MyEnergy’s acquisition, noting that it seemed like a “perfect marriage.”
“That data service component was missing before you could drive adoption,” explained Ashai of MyEnergy’s value added. “Both companies have phenomenal leadership. They have a vision that’s very similar in that they’re driving home products that are bringing the domain into the 21st century, and adding the software component seemed like a great fit.”
Google’s Acquisition of Nest
Rumors flew that Nest was being courted with massive billion-dollar acquisition deals months before this Monday. But what made Google the standout buyer? (Besides, well, being Google.)
Google Ventures’ Bill Maris and David Krane participated in Nest’s Series B and Series C rounds in 2011 and 2013, respectively, meaning there was already an established rapport. Additionally, Nest remains under Fadell’s vise and retains its own brand identity, but will also gain the benefits that come with being acquired by Google.
Fadell told TechCrunch:
Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone. We’ve had great momentum, but this is a rocket ship. Google has the business resources, global scale and platform reach to accelerate Nest growth across hardware, software and services for the home globally.
Google was reportedly trying its hand at a smart thermostat service last December, as well. The search engine giant’s charitable arm, Google.org, was playing around with energy usage data over 10 years ago with Google PowerMeter – a project that, until it was sunsetted in September 2011, provided a similar service to MyEnergy. With the acquisition of Nest, Google gains access to the company’s 100 granted patents, as well as the 200 more on file with the USPTO and the 200 prepared to file in the pipeline.
While Nest’s devices are incredible in their own right, Rob Day, a partner at local energy cleantech venture firm Black Coral Capital, explained that Google’s interest in the company goes beyond the intellectual property.
“It’s not that Google wanted to buy a thermostat,” posited Day. “Google wanted to buy all the interaction with customer activity in that space and all the controls for home automation. It’s about all that rich data in the building.”
But Google’s potential access to that rich data is creating headlines of its own. Almost immediately after news of the acquisition hit the wire, people began posing questions concerning security and Google’s access to personal home information. To counter the inquisition, Nest’s Co-founder and VP of Engineering Rogers published a blog post with a Nest Q&A for skeptics, promising the home data would stay under the company's private policy.
Could Boston be housing the next Nest?
Black Coral Capital's Day thinks that there’s a chance, given the trend toward connected cleantech and the city’s specialties in hardware and the cloud.
“One of the things that has really marked Boston and cleantech in the past years is that a lot more of it involves energy intersecting other businesses. It’s about energy and services,” shared Day, touting the advances already made by LED lighting company Digital Lumens and home energy efficiency company NextStep Living. “People still think it’s all about biotech and solar panels in cleantech, but it’s not. MyEnergy was a great example of that. Boston has really become a cluster for that kind of entrepreneurial effort.”
Boston has long been considered a path-paver in cleantech. When the hype began in 2007, innovators thought it was going to be a quick boom cycle, explained Ashai. But it was far from. “Energy efficiency companies take longer, and it’s harder to sell to utilities and enterprises. It’s not that these companies can’t succeed, there will be failures and there will be great successes,” stated the Point Judith investor, citing SolarCity and Tesla as companies that fall into the latter category.
“Nest is a counter-balance against all the energy that seems to be invested in innovation around social-networking,” Digital Lumens Founder and CEO Tom Pincince told BostInno. “There’s this fervor around Snapchat and Instagram and social tech, and then you have Nest, a hardware company with a tremendous design sense, tackling hard problems.”
Yet, the powerful story of a four year-old company getting acquired by the tech behemoth for billions – within the notoriously slow-moving sector of cleantech, no less – does far more than attract the attention of the press and industry; it also trickles down and becomes absorbed by aspirational entrepreneurs in universities and startups.
“A lot of people want to think of a good example of success before starting entrepreneurial efforts. [Google’s acquisition of Nest] will take it from the realm of people nodding their heads, saying, 'that’s a smart idea,' to saying, 'clearly that's a good idea,'” said Day. “To be able to point to that right now will be great for the whole cleantech sector and region.”
