From The Garage To 200 Employees In 3-Years; How Nest Thermostats Were Born.

Posted: May 11, 2013 in Gadgets, GT, Technology
Tags: , , , , , , , , ,

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Editor’s note: Derek Andersen is the founder of Startup Grind, a 40-city community bringing the global startup world together while educating,
inspiring, and connecting entrepreneurs. I remember when the press first hit about Nest Labs,
the guys behind the iPod/iPhone were taking on
thermostats everywhere! A collective “huh?” went
through the tech industry. It felt like the tech version
of the Avengers got together to build an office park,
not save the world. After sitting down with Nest co- founder Matt Rogers at Google For Entrepreneurs‘
office a few weeks ago, I learned the backstory and
vision of a company on a mission to build one of the
world’s only great hardware/software companies in the
world. There are hard workers, there are really hard workers,
and then there are the Matt Rogers of the world. If
you think you work hard, please read/watch our entire
interview then reevaluate. He had a quick start with
his first Mac product interactions being at age three.
As a child growing up in Gainesville Florida, when asked what he wanted to be someday, Matt would
respond “I want to work at Apple.” At 16 he was
building robots and entering them into competitions
with his classmates. As a sophomore at Carnegie
Mellon, he agreed to basically do anything
(anything was help draw bones in CAD for a robotics hand project) to get a chance to work with with the
robotics lab. His Junior year he applied via
Monster.com, and pestered employees until he got
accepted for an internship at Apple. That summer he
took on the worst grunt work project imaginable (he
rewrote all the software for manufacturing for iPod), and had three months for what he described as a “one
year project.” 7-days a week, 20-hour days, and
“basically not sleeping.” How did it pay off? As an
intern Apple awarded him a cash bonus, what VP of
iPod at the time and eventual Nest co-founder Tony
Fadell said was something, “He had never done before.” Apple After school he returned to Apple and spent the next
few years working on the firmware for iPod nano and
iPod classic. After his first weekend back at Apple,
and spending Saturday and Sunday getting moved in
and buying furniture, his manager approached him
saying, “Where have you been?” Matt responded, “I went to buy furniture.” He replied, “You should have
been here.” He responded, “Oh. I didn’t even know!”
Matt said that this, ”Set the pace for how iPod would
be for the next five years.” In December 2005, Matt and a small team started
working on the first iPhone concepts in a project
called “Purple.” At the time no one in the company
knew what was going on, not even some of their own
managers. They built the initial prototype in four
months. It wasn’t good enough so they started again. That second version was the one Steve Jobs
would unveil on stage at MacWorld in January 2007.
Four weeks previous to that, 25-members of the team
went to China hand-building from scratch each of the
first 200-devices to be shown at MacWorld. The team
was divided into day shift and night shift to hit the deadlines, working through Christmas and returning
after New Year’s Day. The Founding of Nest After shipping the iPhone, Matt led work on Nano,
Shuffle, and parts of the iPhone, iPad, and Apple TV
projects. By late 2009 he had hired 40-people and
managed teams building these products, all in his
mid-late twenties. That fall he had a two hour lunch
with Tony Fadell, his former boss at Apple who had left in 2008. Matt told Tony he wanted to start a
company. “What do you want to do?” Tony replied. “I
want to build a smart home company.” Tony’s
response? “You’re an idiot. No one wants to buy a
smart home, they’re for geeks.” But it turned out Tony
was already building a smart home in Tahoe, with solar panels, geothermal heat pumps, and more. Tony
honed in and focused on a single idea. “Why don’t
you just build me a thermostat?” Matt replied, “Why
not? We could build an iPod?” Tony responded, “We’ll
do it in six months.” Tony and Matt have what appears to be the ideal co-
founder relationship, stemming back from his early
internship days at Apple. “We think very much alike,
to the point where we complete each
other’s sentences. I don’t know if I would be able to
do it without him.” But was this the idea to risk a promising future at
Apple on? Matt had elevated from intern to Senior
Manager in just a few short years. “The more we dug,
the more we realized, this is a company we must go
start. We could save 10% of energy, solve an epic
problem, no innovation, multibillion dollar market. Why would we not do this?” Matt quit his job in Spring 2010, rented a garage in
Palo Alto, and started cranking in secret. Matt would
visit with old colleagues and say “Hey will you quit
your job? Will you come work (for free) with us on a
new project I can’t tell you about?” The first ten hires
worked for free for six months before finally raising money in October 2010. They bootstrapped with
money from Tony and some from Matt. “We were all
working basically severn days a week, twelve hours a
day, it was crazy. Not everyone was living in the
office – people have families, so they’d go home for
dinner and then come back. It was craziness.” Everyone worked on Thanksgiving only taking a few
hours off. Matt claims no one got divorced over the
extreme conditions adding that “all the wives are
happy now.” Still no one knew that Tony was even involved. “In
the early days when we were fully stealth. “We had no
website, no LinkedIn, we had nothing. Zero outbound
communication. I wouldn’t even tell people that (Tony
was involved). For all they knew, I was the only
founder. To get people in the door the first time meant I did a lot of lunches, a lot of coffees to get people
excited. I wouldn’t tell people on the first date – I’d
show a little leg, but I wouldn’t go all the way.” So here is Nest, in stealth, building an incredibly
difficult hardware/software product, with limited
funding, but still managing to assemble a killer
engineering team, in the midst of a talent war with
Facebook, LinkedIn, Groupon, and Twitter exploding
all around. “It was a mixture of my old team at Apple, my old professor from CMU and a few folks from
Tony’s early days at General Magic twenty years
earlier. One guy was a VP at Twitter, one was running
Microsoft User Experience. Unlike most startup
teams the average age of our team was about 40. I
think I was the youngest.” A year after raising a Series A from Kleiner Perkins,
Google Ventures, Lightspeed, Shasta, and others,
they shipped their first product. This spring Nest was
widely rumored to have raised $80MM at an $800MM
valuation and shipping 50,000 thermostats each
month. This company that was in a garage in 2010 is now +200 employees, and selling products in Lowe’s,
Apple Stores, Best Buy, and about half their inventory
is sold online. The company is not without
controversy, having been sued by Honeywell for
patient infringement, and as one friend in the home
automation industry recently told me, “Everyone is watching Nest.” They also recently acquired venture
backed energy dashboard MyEnergy. Building HARD-ware Nest launched their first product a year after raising
Series A, 18-months after their inception, with 75-
employees and having spent $10MM. “That’s with a
team of extremely senior guys who have all done this
a dozen times before. The difference between doing it
a dozen times before at Apple, Samsung or Google and doing it on your own, is that there’s no backup. At
Apple we worked on the project for a year, got it ready
and hand it over to the operations team to go scale
and shoot to the moon with. We all had roles we
played at previous companies and that all went out
the window at Startup Land. You have an HR hat, facilities hat, janitor hat, doesn’t matter, you have do
it.” Is it any surprise that there are so few hardware
startups the Valley? Or that most entrepreneurs
choose an app or a website over a hardware device?
Entrepreneurship is hard enough not to have to layer
in these complications. Matt adds, “I don’t believe I
could build Nest if Tony and I didn’t have all that experience at Apple. It’s really hard to pull off fully
integrated consumer electronic devices. It’s also
really expensive to build a consumer electronic
product. You have to build prototypes but you have to
build tools. You have to get a manufacturing line set
up. You have to front inventory costs. It’s crazy expensive.” When our interview finished a few weeks ago, I
walked Matt out to his car. It was 9pm, and he was
cheerfully headed back to work for yet another late
night at Nest. After hearing about the culture and work
ethic at Nest, his attitude simply reminded me of how
he described working a holiday a few years previously. ”That’s what it takes,” he casually said.
And if you really want to change the world I couldn’t
agree more.

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