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Ex-Apple Leaders Push the Humble Thermostat Into the Digital Age

Tony Fadell, a former Apple executive who led iPod and iPhone development from 2001 to 2009, helped transform consumer products used by millions of people. Next up: the humble household thermostat.

Nest Labs Thermostat
Source: nest.com
Nest Labs Thermostat

A boring wall fixture and an unlikely target for innovation? Not to Mr. Fadell, his team of 100 computer hardware and software experts and the venture capitalists backing his Silicon Valley start-up, Nest Labs.

They see the conventional thermostat as a dumb switch that can be changed into a clever digital assistant that saves homeowners money and reduces energy consumption and pollution.

“We’ve built the world’s first learning thermostat — a thermostat for the iPhone generation,” Mr. Fadell said.

Nest Labs, based in Palo Alto, Calif., and founded last year, is announcing its offering on Tuesday, and plans to begin shipping the $249 thermostat by the middle of November.

Outsiders who have tried out the product are impressed by its stylish design, ease of use and advanced features, like motion-tracking sensors that detect whether people are present and adjust room temperatures accordingly. But it remains to be seen whether consumers and contractors will pay more for a high-tech thermostat, when good enough has been good enough for decades.

There are other digital thermostats on the market, like the Honeywell Vision Pro and the Filtrete by 3M. Yet they have been slow to catch on, and their features often go unused because they are ungainly and people find them difficult to program, said Russ Donnici, president of Mechanical Air Service, a heating and cooling contractor based in San Jose, Calif. By contrast, the Nest product is small, and temperatures are set by turning its outer ring and pushing in the ring until it clicks.

The project “kind of brings the thermostat into the 21st century,” said Mr. Donnici, who has advised Nest Labs without pay.

But the Nest device costs twice as much as the most comparable programmable thermostats on the market.

Homes account for more than 10 percent of the total energy consumption in America, including transportation. About half of the residential energy consumed is for heating and cooling, with the rest going for lighting, heating water, appliances, televisions and computers.

Each degree cooler a house is kept in a heating season (winter), or warmer in a cooling season (summer), translates to a 5 percent energy saving. So shifting consumption patterns, say, four degrees on average can mean energy savings of 20 percent, experts say.

Since the average home spends $1,000 to $1,500 a year on heating and cooling, that would translate to $200 to $300 in lower energy bills. It would also mean fewer power plants built and lower carbon emissions.

“There is a huge amount that can be gained in homes, and an intelligent thermostat could be a great opportunity,” said John E. Bowers, director of the Institute for Energy Efficiency at the University of California, Santa Barbara, who has not seen the Nest device.

After leaving Apple , Mr. Fadell traveled with his family for most of a year and began building an energy-thrifty “green” home in Lake Tahoe, Calif. As part of that project, he looked at thermostats and found them lacking in design and utility. “They’re ugly, they waste energy and there’s been no real innovation in decades,” he said.

Mr. Fadell studied the technology and the industry and decided there was an opening. His first recruit was Matt Rogers, who at the time led a staff of 30 engineers in the iPod division at Apple. They met to discuss the idea in October 2009, Mr. Rogers was intrigued, and in May 2010, he became a co-founder of Nest Labs.

“I loved my job at Apple, and had a great team,” Mr. Rogers said. “But in essence, we were building toys. At Nest, you can build a product that could have a huge impact on a big problem.”

The Nest Labs recruits hail from Apple, Google, Microsoft, Twitter, Logitech and other high-tech companies. Unlike other thermostat manufacturers, Nest Labs has a sizable team of specialists in the branch of artificial intelligence called machine learning, including Yoky Matsuoka, who came from Google and whose work won a MacArthur Foundation award.

Nest Labs has also attracted a crowd of venture investors. The start-up will not say how much it has raised, but the backers include Kleiner Perkins Caufield & Byers, Google Ventures, Lightspeed Venture Partners, Intertrust, Shasta Ventures and Generation Investment Management, an investment firm co-founded by Al Gore.

Despite the high cost of the Nest device, Mr. Fadell contends it will pay for itself in a year in energy-savings, with scant effort from the user.

At first, a person may set the thermostat four times in one day — upon getting up, going to work, getting back from work and going to bed. The thermostat uses those settings daily, then adapts to further changes. If a person is out of town each Monday on business, the Nest sensors detect that and switch to an “auto away” setting for lower energy use.

“You can, but you don’t have to program it, because it learns,” Mr. Fadell said.

The Nest thermostat will initially be available on the company’s Web site and through Best Buy’s site. Consumers can install it themselves or hire a professional. The company is also working with contractors, which distribute 70 percent of thermostats sold.

An estimated 10 million thermostats a year are sold as replacements and in remodeling. A few percent of that market, Mr. Fadell says, would make Nest Labs a winner. Yet to break through, analysts say, the company must alter the buying habits of consumers, retailers and contractors in an industry unaccustomed to Silicon Valley-style disruption.

“Complacency is the biggest challenge,” Mr. Fadell said.

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