Fadell cofounded the smart thermostat startup in 2010, after leaving an executive role at Apple. His new company experienced early success. By 2013, it had landed $80 million in funding and was reportedly shipping 40,000-50,000 thermostats a month, according to Gigaom. It put a connected smoke detector on the market in 2013. In 2014, Google acquired Nest for a handsome $3.2 billion. Shortly thereafter, Nest bought up Dropcam, adding a new product to its lineup.
In the last two years, however, it hasn't been all smooth sailing at Nest. In 2015, security experts discovered a vulnerability in the system (the company hired Jim Alkove from Microsoft later that year to head up its security efforts). Earlier this year, Recode** reported that Nest wasn’t meeting Google’s revenue targets. A month later, The Information published a lengthy story about Nest’s reportedly difficult company culture. To add insult to injury, after the article came out, Dropcam founder Greg Duffy aired his grievances about Fadell in a Medium post, saying "it was my mistake to sell — but that’s a story for another day." This spring Recode published some uncharitable memes that Googlers had apparently made about the Nest founder.
Nest is not the only connected home company to struggle in recent years. Last fall, Quirky, a company that owned a connected smart home business called Wink, filed for bankruptcy. Wink had a partnership with General Electric as well as a spate of connected products, and a hub for a variety of home devices (including Google’s Nest) to connect to. And, like Nest, rumors about its company culture swirled around Quirky, too.
While there’s been lots of excitement around the idea of connecting all our home appliances to Wi-Fi, very few products have caught consumer attention. And because the market is relatively new, consumers are constantly adjusting their desires for and expectations of such products. Take for instance, the Amazon Echo. When the talking tower emerged, some were skeptical it'd be more than a weird shopping device (like the Fire Phone). But this strange digital assistant and connected home hub, capable of not only ordering groceries, but playing music and answering trivia questions, has so far experienced mostly good reviews, rapid evolution, and helped jump-start Amazon's custom electronics business.
Much of Nest's recent effort has been focused on Works with Nest, its platform to connect Nest products with non-Nest products. But the platform itself may not be sticky enough to draw in more consumers—that certainly was the case for Wink.
For his part, Fadell said that he’s leaving because he’s looking forward to disrupting "other" industries. He is being replaced at Nest by Marwan Fawaz, who served as CEO of Motorola Home when it was part of Google.
**A Nest spokesperson emailed us to point out "Nest revenue has grown in excess of 50% year over year since it began shipping products 4.5 years ago and the Nest Learning Thermostat 3rd Gen (released in 2015) reached 1M units sold in half the time as the previous generation."
Nest also sent us the following statements:
Statement from Larry Page/Alphabet
"Under Tony’s leadership, Nest has catapulted the connected home into the mainstream, secured leadership positions for each of its products, and grown its revenue in excess of 50% year over year since they began shipping products. He’s a true visionary and I look forward to continuing to work with him in his new role as advisor to Alphabet. I’m delighted that Marwan will be the new Nest CEO and am confident in his ability to deepen Nest’s partnerships, expand within enterprise channels, and bring Nest products to even more homes."
Statement from Tony Fadell
"Last year, I began discussions with members of my team about my next endeavor. After six years of working on Nest, leading it through 4.5 years of double-digit growth and consistently high marks from customers, I leave Nest in the hands of a strong and experienced leadership team, with Marwan at the helm and a well-defined, two-year product roadmap in place. I’m looking forward to my new role as an advisor to Alphabet and Larry, which will give me more time and flexibility to pursue new opportunities to create and disrupt other industries—and to support others who want to do the same—just as we’ve done at Nest."