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.



12 comments
wim
wim

Wow - you deleted my comment because it was positive towards Nest and referenced an alternate home automation product - Ninja Sphere! Well done Recode on being showing your hand early as being draconian and product biased. Not impressed.

danielz
danielz

They need to expand beyond the US though.  There are other markets sitting on the edge of their seats waiting for the opportunity to use these products.


With any luck, that's what this new round of funding is for.


Jeff Judge
Jeff Judge

Congratulations on the big funding round, well deserved!


The Nest products are fantastic. I recently setup two thermostats and one smoke detector in our home and really appreciate (1) the insight to our home data (temperature, humidity, time to get to X temperature), and (2) the ability to control the temperature via phone.

Coal
Coal

 I have both products, and I do not see cross communication in any meaningful way. If the smoke detector is working with the thermostat, it's behind the scenes. I wish I could use the detector in a bedroom as the gauge for temperature, but alas, I cannot. Slightly disappointed so far.

ElizCrane
ElizCrane Re/code

@wim  Likely your comment was caught in our filter -- that often happens with posts that include a link.


Please refer to our Comments policy http://recode.net/comments-policy/ for the rules we use here. Or feel free to email me at elizabeth@recode.net if you have questions about how we handle comments.

hello
hello

@wim Doubt they deleted anything. You probably just forgot to click Post Comment.

SurviveAndThrive
SurviveAndThrive

@gaetanomarano Is that why all of the competitor's latest iterations that learned so much from NEST, and have had years to catch up, still fall so incredibly short?  

TW
TW

@gaetanomarano It depends on what you think the Nest products are. If you think they are the things you hang on the wall / ceiling, you're only half right.

Le_isms
Le_isms

Nest is great (I own one myself), but I'd hardly count competitors out. For instance here's a model that's been out for months that pulls TOU pricing info from utility companies, which Nest currently can't handle http://www.amazon.com/gp/aw/d/B00FLZEQH2

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