Ad agency buys thermostat company

The acquisition of Nest by Google for $3.2 billion only three years after being founded made the specialist cleantech press and even the mainstream press last week.  Nest, is the developer of the Nest thermostat, a product that changed the thermostat market by being the first thermostat to be “cool” and one of the products on my Energy Efficiency cool wall.

The Google Nest deal is interesting for several reasons.

Firstly it is a Trojan horse product for the smart home. Smart homes have been talked about as long as I can remember but to date three things have been missing, the technology hasn’t really been there, the infrastructure hasn’t been there and there hasn’t been a cool product that excites people enough to make them buy it.  Nest changed that with a thermostat that looked cool and does some clever things as well as being connected with the internet. The fact that a $249 thermostat sold out and created a public buzz in its early days is amazing, a cool thermostat. Take a look at your thermostat or heating control at home, it is almost certainly anything other than cool and probably isn’t even very effective.  How often do you touch it? Do you know how to programme it?  Is it attractive?  Nest changed all that and effectively created a new market.

Nest also enables demand response and in the US various utilities are using Nest at the centre of demand response programmes, see this for example. Google brings its massive IT infrastructure to Nest.  Its skill and resources in big data processing will certainly enable new ways of understanding energy demand in much more detail and the aggregation of demand side (both demand response and demand management) measures into significant scale – allowing new business models that will further threaten energy suppliers.

Another aspect of the Google Nest deal, which made a lot of money for the original VC investors, was its likely influence on the wider cleantech investing market.  The irony was that it happened in a week when the influential TV programme in the US, “60 Minutes”, ran a piece talking about the “death” of clean tech.  As always life is more complicated than the media portray.  Cleantech is alive and well, albeit in a different form to how it used to be seen, with a focus on resource efficiency and capital light innovations (including business model innovations) rather than capital heavy and very long-term energy generation technology innovations.  The theme of energy and resource efficiency has to be a great investment theme for the next couple of decades, whatever happens in energy supply.  The nature of innovation and venture investing of course is that there will be failures – think about how many failures there have been around the internet – particularly in the internet bubble of the 1990s.  And as for “60 minutes” comment on the arrogance of silicon valley VCs – what can you say, they do tend toward arrogance but they changed the world.

On as lighter note I did enjoy Greentechs “top twitter reactions to Google buying Nest”.  My particular favourites are shown below.  Inclusion of the tweets here does not constitute agreement with the opinions expressed.

Ryan Block (@ryan): Oh PS with Nest’s built-in sensors now Google knows when you’re home, what rooms you’re in, and when you’re out. Just FYI.

Michael Nagy (@thenagman): Nest also changing name to NSAest

Lawson Kight (@lawsonkight): Ad Agency Buys Thermostat Manufacturer

Chris Nelder (@nelderini): They know when you are sleeping. They know when you’re awake. They know if you’ve been bad or good, so be good for goodness’ sake!

Annie (@bloodlesscoup): #GlennBeck predicted that the Feds would control/know your thermostat 5 yrs ago. Not so stupid now huh?

Esquire Magazine (@esquiremagazine): Google’s Nest purchase means it probably wants to take over your home. But wait, wasn’t it already doing that?

Sam Faulkner Biddle (@samfbiddle): If your house is burning down you’ll now get gmail ads for fire extinguishers.

PS – My Nest, which I have had for two years thanks to John Picard, sits on my desk – the consequences of living in a 1900s apartment block where the heating is communal and the controls consist of radiator valves and windows.  It is cool though.