Update: Nest's Thermostat Gets Thinner and Smarter, Adds More VC

Update: Nest’s Thermostat Gets Thinner and Smarter, Adds More VC

More features for a thermostat people might actually enjoy using. More venture funding from Venrock.

Eric Wesoff October 04, 2012

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

Update: Nest has added new investor Venrock to the existing group of investors of Kleiner Perkins, Google Ventures, Shasta Ventures, Al Gore's Generation Investment Management, Lightspeed Venture Partners, and Intertrust. Nest has not disclosed the amount of this funding round although the initial rounds, prior to this Round C with Venrock, were reputed to be in the $50 million to $80 million range, according to VC sources who passed on the deal.

Venrock's Matthew Nordan writes about his Matt Trevithick-inspired Nest installation here.

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Nest just announced a second-generation version of its slick, smart and Apple-esque thermostat. (Nest is founded by Apple alum and iPhone designer Tony Fadell.)

Lowering the costs of home heating and AC usage is what programmable thermostats can do if they are used correctly. Heating and cooling is the low-hanging energy fruit in a home.

The Palo Alto, Calif.-based Nest thermostat detects outside and inside temperatures and occupancy patterns and can potentially save an average of $173 on an annual electric bill for roughly a two-year payback. Homes would save that same 20 percent if they used a conventional programmable thermostat -- but according to Nest, only 11 percent of owners use their thermostat correctly. Nest automates the process with some wireless data crunching and sensors.

One modification on the thermostat is cosmetic: the round is thinner. Changes in the backplate have improved compatibility. And functional changes allow the thermostat to distinguish between radiant heat systems, heat pumps, and forced air, with a thermostat profile optimized for each system type. Multiple-stage heating and cooling was addressed. Sensors were improved.

The new unit is priced at $249, while the older inventory has been priced to move at $229.

The New York Times quoted a spokesperson for the 136-employee Nest as having sold “in the mid-hundreds of thousands” of units.

In a briefing last week, Nest spokespeople would not provide details on unit sales or on the startup's Series C funding round.

The firm is currently in the "top ten in Amazon home improvement" and a "bestseller" at Lowe's. Others in the advanced thermostat business include Honeywell, Cooper Industries, and Radio Thermostat.

We reported on deregulated Texas utility AC Reliant giving away free Nest thermostats. The company claimed that with Texas AC on full blast, the Nest paid for itself over one season.

As a VC-funded startup, Nest's mission is to scale big and fast. Perhaps Nest can scale the energy hardware business like a consumer IT product. Selling the device at the Apple Store is a start.