Nest Labs, the innovative smart home startup, is close to completing a deal to raise upward of $150 million in a new round of financing that values it at more than $2 billion, according to sources close to the situation.

That valuation could be even higher — with more than $200 million raised on a $3 billion valuation — for the Palo Alto, Calif.-based Nest, said some sources, with several investors vying for the deal. But, according to several people with knowledge of the situation, the transaction appears to have been clinched by Yuri Milner’s DST Global investment firm.

DST has the bulk of the new investment, said sources, but current investors — including Google Ventures, Shasta Ventures, Kleiner Perkins, Generation Investment Management, Lightspeed Venture Partners, Venrock and others — will also participate.

Nest’s last reported funding round was about a year ago, raising $80 million on a post-money valuation of over $800 million.

That was a big number then; apparently investors have been  attracted to the pedigree of its founder and CEO, Tony Fadell, a former Apple exec who has been dubbed the “father of the iPod.”

When Fadell launched the company, he said in an interview that his “primary focus will be helping the environment by working with consumer green-tech companies.” He delivered first with the Nest, a super-smart thermostat.

The souped-up household device, which is designed within an inch of its life, is digitally aware, with a wheel user interface, a Wi-Fi connection, sensors aplenty and an ability to learn your behavioral patterns. On its launch, I called the simple brushed stainless-steel object a “temperature-taking version of an iPod.”

Nest followed the thermostat with a smoke- and carbon monoxide detector called Protect, which it launched late last year.

As I noted then: “Among its other attributes, the smoke alarm will be connected to the thermostat, part of an effort by Nest to create a series of home products that are aware in the home and adapt to the environment and its users, and are controlled by smartphones or tablets.”

The radical redesigns of home products that have not changed much in decades is the beginning of what many are betting will be a bigger market to quantify the world in an arena that has been dubbed the “Internet of Things.” The goal is essentially to “quantify” everything possible in the physical world and translate it into the digital one — essentially a sensor-filled future.

But there are higher risks, of course, with hardware-focused products like Nest, compared to software-only investments, due to the more costly ramp up for such products. But said one investor, “This is a company that could change how we live our everyday lives,” noting that the tight integration with mobile phones was a key step in the evolution of such devices.

A Nest spokesperson declined to comment, and Milner has not replied to an email request for comment.



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