Nest’s CEO Tony Fadell explains why he teamed up with Google: it’s about infrastructure

January 14

Tony Fadell, the father of the iPod and the co-founder and CEO of startup Nest Labs, wants to get back to doing what he does best: being a designer. That’s one of the reasons why Fadell and his team have sold Nest — their young startup that makes smart thermostats and sleek smoke detectors — to Google for an eye-opening $3.2 billion, or roughly 5.8 percent of Google’s total cash.

In an interview with Gigaom following the announcement of the deal, Fadell told us how he wants to refocus on designing product experiences instead of spending his time on scaling and infrastructure — something that’s long been at the core of massive Google. It’s certainly “not about laptops and phones,” joked Fadell; it’s more about a marriage of hardware, software and services, he explained. And the deal has been under discussion for a long time, he noted, Sergey Brin was the one who originally told Google Ventures to start a discussion with Nest.

Here are edited excerpts from a conversation with Fadell.

Om Malik: Tony, it seemed like you were on a great trajectory and were looking to build a standalone company, so what changed and led to the decision to sell?

Tony Fadell: We had been hoping to build an independent company. There were plenty of people who offered money but Google offered a great middle ground — we focus on product and vision and they will help build out the company and help scale it.

OM: Can you elaborate?

TF: I was spending nearly ninety percent of my time on building the infrastructure of the company and I wasn’t able to spend enough time and cycles on what I love doing: products and creating differentiated experiences for our customers. That is where my love is and Google offered to let us focus on that, but with scale that will help bring our horizon closer to us, faster. Google offers to bring that scale to us. For me, ultimately building great products is key.

OM: Explain to me what Google brings to the table, in terms of scale and bringing the horizon closer?

TF: When as a company you want to change the world, you have to look at markets outside of the US. We are doing very well in the US and Canada but we need to get to Europe and around the globe. Just getting to UK has taken up a lot of time and energy and when you look at Europe, there are many countries and many opportunities. It is an atoms-based business and a lot goes into getting it to scale — legal, physical distribution and even localization are time consuming and need new kind of scale.

OM: Can you share how this deal went down?

TF: We have been talking to them for a long time. Google Ventures have been investors in Nest. Sergey told Google Ventures that they should be talking to Nest and we talked about technical collaboration but then Google offered a deeper relationship. Larry, basically said that Google could add another product group but since you (Nest) have the vision, the team and expertise, why not join up. Google, offered us scale and it made sense to us.

Will Google’s server infrastructure come in handy in a few years? Absolutely. Will their ability to work with algorithms help us? Absolutely. There are a lot of short and long term benefits, but in reality they are going to help us get to new markets at a much faster rate — especially, overseas. I see there are a lot of customers in countries were we are not there yet.

OM: What should we expect to see in the coming months?

TF: We are going to increase our marketing spending to get more people to use Nest products.

OM: What do you think will be the impact of this deal on the whole “internet of things” market?

TF: I think this will prime companies to kick off all the excitement around “internet of things” and shed light on all the products that were ignored. What we are doing changed the game and, with Google by our side, tells the world that this is a serious business. A lot of other companies are going to wake up and realize the importance of this market. In the end that is good for the customer. We are ready to compete in the market — we know we have the best products.

(c) 2014, GigaOM.com.

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