IPhone Creator’s Nest Labs Turns Up the Heat With Latest Thermostat

As one of the creators of the iPod and iPhone, Tony Fadell raised eyebrows when he announced last year what he’d be doing for a second act. “A thermostat?” was the collective response from Silicon Valley.

Fadell, along with fellow Apple alumnus Matt Rogers, founded Nest Labs, the maker of a device that automatically adjusts a home’s temperature based on user behavior. A year after the company began taking orders for its product, Fadell said he’s not getting that bewildered response as much.

The thermostat is available at retailers including Lowe’s and Amazon.com. Even Matthew McConaughey is getting into the act. Texas utility Reliant Energy is using the movie star to market the product and lure new customers. While the company won’t disclose sales figures, Rogers said “we’ve exceeded our own expectations.”

Now the company is announcing the second version of its $249 “learning thermostat,” adding features to accommodate people with higher-end energy systems in their homes. The new model adds the capability for more advanced cooling systems, floor heating and other features that are common in more affluent neighborhoods. A new design makes the stainless-steel device 20 percent thinner.

“Our customers were saying I want to buy Nest but it doesn’t work in my home,” Fadell said during an interview at the company’s offices in Palo Alto, California. “The more complicated and more efficient systems, typically in the higher-end demographic homes, we couldn’t cover.”

Fadell unveiled the round-shaped Nest last year after spending nearly a decade at Apple, where he worked closely with co-founder Steve Jobs on building the original iPod and iPhone. He and Rogers, who also worked on the iPod and iPhone teams, saw the thermostat business as ripe for a technical upheaval that would give customers a better way to manage their power consumption and save money.

The device includes a motion sensor to determine when people are home so it can turn up the heat or air conditioner. Over time, the device learns a user’s patterns, such as what time the heat gets turned up each morning, and automatically sets a schedule for that. Likewise, after somebody leaves in the morning, the device may learn to lower the heat because a person isn’t likely to return for several hours.

Another feature turns off the air conditioner just before it reaches the appropriate temperature and then blasts the fan to push the last gust of cold air into the house, a subtle move that saves energy. The system can be managed remotely from an iPhone or Android mobile application.

“We have tons of interest,” said Fadell, whose company lists Google Ventures, Kleiner Perkins Caufield & Byers, Intertrust, Lightspeed Venture Partners, Shasta Ventures and Generation Investment Management as its investors.

All the interest in Nest hasn’t escaped the incumbents in the thermostat business. Honeywell International filed a patent-infringement lawsuit against the company earlier this year, an allegation Nest is fighting. Fadell, who hired former Apple patent attorney Chip Lutton to join him at Nest, said he’s confident the matter will be resolved soon.

Lutton is one of several former Apple employees who have joined Fadell at Nest, which now has 130 employees. That has many wondering what Nest may be up to besides just a home thermostat.

“This is a really deep team,” said Rogers. “You don’t assemble a team like that just to do one product.”

Fadell, who said he doesn’t have a non-compete agreement with Apple, is careful to add that he doesn’t want to battle his former colleagues.

“It would be hell on earth to compete with Apple,” he said. “I’m not that dumb.”

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