Dropcam

Is Tony Fadell in Nest’s Way?

Last week, we witnessed something fairly remarkable. A major Alphabet executive — Nest Labs CEO Tony Fadell — publicly shamed the cofounder and employees of Dropcam, the connected camera company that Nest had acquired in 2014 for $555 million.

In an article in The Information, Fadell said that he didn’t think Dropcam cofounder and CEO Greg Duffy had “earned” the right to report to him directly. Fadell also explained away an exodus of Dropcam staffers by suggesting they were subpar. “A lot of the employees were not as good as we hoped,” he told The Information. It was “a very small team and unfortunately it wasn’t a very experienced team.”

Fadell may have been reacting to comments by Duffy, who painted a highly unflattering portrait of Fadell in the same article. However, Fadell’s comments and his poor performance underscore what an ill fit Fadell is for Alphabet and why Alphabet needs new leadership at Nest.

It wasn’t supposed to be like this, of course. Nest was acquired by Google for $3.2 billion in January 2014, a feat that earned Fadell plenty of accolades. Worried about competition and in awe of Fadell, who’d created the iPod as an Apple SVP, Duffy concluded that selling was his smartest play when Nest came knocking that spring.

Despite what seemed like a handsome payday for everyone involved with Dropcam, the bet soon looked like a poor one.

As we’d reported here in November 2014, not only did Duffy’s beloved VP of marketing almost immediately leave Nest over an apparent culture clash, but numerous employees we interviewed, along with scathing write-ups by former employees on Glassdoor, pointed surprisingly to trouble.

“Everything revolves around the CEO,” wrote one Glassdoor reviewer at the time. “It’s a dangerous mix of cult of personality and Stockholm syndrome. Comments like ‘[Fadell is] the next Steve Jobs are not uncommon, while people proudly say things like ‘I’m used to Tony screaming at me.’”

It wasn’t just the different management styles of Fadell and Duffy, whose organization was one-eighth the size of Nest and who was well-liked by his employees. There was suddenly an inability to get anything meaningful done. One Nest employee described to me a “huge meeting culture, to the point where anyone at the director level or up spends their entire day in meetings, many of them duplicative meetings about the same subject, over and over to the point where a lot of people have complained.”

Things remain much the same 16 months later, suggests The Information, whose report says Nest’s culture of micromanagement has more recently led the firm to plaster its offices with the phrase “Step Up” to ostensibly encourage lower-level employees to take more initiative.

More here.

StrictlyVC: November 13, 2014

Good day, dear readers! We have a longer-than-usual column today, so we scrapped some other sections, but much like the Terminator, they will be back. (Psst, web visitors, here’s an easier-to-read version of today’s email.)

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Top News in the A.M.

Senate Majority Leader Harry Reid yesterday moved to advance a bill that would usher in sweeping reforms to the NSA’s mass-surveillance practices, “a surprising move” intended to address the program before Republicans take over the Senate next year, writes the National Journal.

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Unrest at Nest

Sitting on stage last week at a San Francisco conference, Greg Duffy, the 28-year-old co-founder and CEO of Dropcam, which makes Internet-connected video cameras, fielded questions from an audience of startup founders. It should have been a time to celebrate. After all, last June, Duffy sold Dropcam to Nest Labs for $555 million. As the panel discussion came to a close, however, Duffy sounded an ominous note. Referring to a longtime colleague who was sharing the stage with him, he told the crowd that Liz Hamren is “the best VP of marketing in the business.” He then added, laughing, “She’s also my former VP of marketing. You can read from that what you want into my current situation.”

Duffy insists that everything is “great” at Nest, but a cursory look at employee reviews at the jobs site Glassdoor tells a different story. Despite the fact that longtime Apple executive and Nest co-founder and CEO Tony Fadell has received rock star treatment from many journalists (Fast Company dubbed him the “$3.2 Billion Man” for the amount Google paid for Nest this past January; others have wondered if he is the next Steve Jobs), he has received only a 46 percent approval rating across 26 reviews. By contrast, Duffy, who was Dropcam’s CEO until the merger, shows a 100 percent approval rating across six reviews.

Some of these Glassdoor reviews claim that Nest is “killing everything that was special about working at Dropcam” and that “everything we built is being carelessly dismantled after [the] acquisition.” One review states, “Everything revolves around the CEO. It’s a dangerous mix of cult of personality and Stockholm syndrome. Comments like ‘He’s the next Steve Jobs’ are not uncommon, while people proudly say things like ‘I’m used to Tony screaming at me.’ Everyone dreads meetings with Tony because he will flip if he doesn’t like what he sees. Somehow that’s perceived as good leadership.”

Sources who spoke to StrictlyVC and asked to remain anonymous say Fadell has fashioned a hierarchical structure reminiscent of TV’s “Game of Thrones.”

According to one employee, “Almost every decision, no matter how small,” goes through either Fadell or Matt Rogers, who cofounded Nest with Fadell and was previously a senior manager at Apple. (Through a spokesperson, Fadell and Rogers declined to answer questions for this story.)

“It’s always, ‘Tony and Matt want us to do this. We have to hit this deadline because Tony and Matt want us to.’ You definitely see people taking the path of least resistance because they don’t want to upset Tony.”

Another employee calls it a “huge meeting culture, to the point where anyone at the director level or up spends their entire day in meetings, many of them duplicative meetings about the same subject, over and over to the point where a lot of people have complained.”

Coming from Dropcam, which boasted a much more egalitarian culture, a clash seems all but inevitable.

Yet these employees also suggest that the differences between Dropcam and Nest are not just stylistic. One Nest employee says that Nest, which employs between 700 and 800 people, will see roughly double the revenue of Dropcam this year but that Dropcam, which employs 100 people, is growing its revenue eight times as fast, thanks largely to its subscription business.

Many employees were reportedly disappointed to sell to Google because “we were firing on all cylinders, with a sensor product about to be released and an outdoor camera about to come out in 2015 and great sales. It just felt like we’d been chopped off at the knees.”

Says one insider, now at Nest, “There had been rumors earlier in the summer that Google was going to acquire Dropcam, so we had an inkling that something was happening. But when the founders finally called the staff together to announce that we’d been acquired by Nest, there was dead silence in the room. You could have heard a pin drop.”

No wonder Dropcam investor and former board member Mark Siegel sounds less than elated when asked about the company’s sale to Nest. “I think there was a great independent company to be built, and I wasn’t shy about telling that to these guys,” he says of Duffy and his cofounder, Aamir Virani.

Siegel, a longtime managing director at Menlo Ventures, says Dropcam was on a “terrific ramp” when it was acquired. Its Wi-Fi cameras were finally being sold via both Amazon and Apple, and the company was in early negotiations with Best Buy. Morever, “We were about to launch in a bunch more retail locations,” he says.

“There was plenty that had to be built,” he notes. “But it’s very rare that you get the kind of consumer love for a product that you see with Dropcam. Even when we had some bumps in the road – like problems with the contract manufacturer early on—it didn’t affect consumer ratings, because the product was so good.”

“There were some concerns about what it meant to be an independent, small company going up against a Google/Nest,” observes Siegel. “That’s true of any [situation like this]. The real question is, ‘Was [competing directly with Dropcam] Nest’s priority?’ Now, maybe from the inside looking out, you can ask Greg if that was an overblown fear.”

To some of the employees we talked to, Nest’s priority seems to be separating itself from Google, not rolling out new products. At a Dublin conference, Fadell was asked about the cultural differences between Apple and Google. Painting a picture that sounds like Nest today, he said that from its earliest days, Apple had a “much more hierarchical structure, and the communications structure was very understood,” while at Google, “everyone could just talk to everyone and learn about everything, and there was much more transparency.”

“I’m not saying one is better than the other,” Fadell continued, “but it’s very different. The very first day, when the [Nest] deal was announced, I got all these various individuals from inside Google saying, ‘Oh, congratulations,’ and ‘I want to work with you,’ and ‘Is there something we can help you with?’ And at Apple, it was very structured. It wasn’t like you were going to send a message to Steve [Jobs] for any reason and say congratulations and flood his email box.”

Asked about Dropcam’s merger with Nest after his stage presentation last week, Duffy was quick to describe Dropcam’s integration with Nest as “very positive. Aamir and I spend a lot of time with Tony and Matt” and “there’s a lot of mutual respect.”

Unfortunately, Duffy politely declined to answer any further questions. “Google policy,” he explained.

Then he made his way toward a clutch of founders who hoped they might catch a few more minutes of his time.

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New Fundings

Body Labs, a 2.5-year-old, New York-based company that deploys body-modeling software for applications in the apparel, CAD and video gaming industries, has raised $2.2 million in seed funding from unnamed investors. Venture Capital Dispatch has more here.

Blueprint Medicines, three-year-old, Cambridge, Ma.-based company that’s developing highly selective kinase inhibitors for genomically defined cancers, has raised $50 million in Series C financing led by Partner Fund Management, with other new investors — Wellington Management Company, RA Capital, Tavistock Life Sciences, Perceptive Advisors, Sabby Capital, Cowen Investments and Redmile Group — participating along with a long list of previous investors.

CareLuLu, a 1.5-year-old, San Francisco-based online marketplace that connects parents with child care and preschool programs, has raised $1.7 million in seed funding led by Khosla Ventures, with participation from CrunchFund, the Startup Factory, and 500 Startups.

Denim LA, the two-year-old, L.A.-based parent company of direct-to-consumer denim seller DSTLD, has raised $4.4 million in seed funding from Amplify.LA, Baroda Ventures, CAA Ventures, CrunchFund, Plus Capital, TenOneTen, WaveMaker Partners, Zillion, and individual investors.

Full Spectrum Laser, a six-year-old, Las Vegas, Nv.-based company that makes laser and 3-D printer equipment, has raised $10 million in growth financing from Summer Street Capital.

Gogobot, a four-year-old, Menlo Park, Ca.-based site and mobile app focused on helping users discover things to do based on their friends, interests and travel style, has raised $20 million in Series C funding fromHomeAway, with participation from earlier backers Battery Ventures and Redpoint Ventures. The company has raised $39 million to date.

Gr8code, a six-month-old, Tampa, Fl.-based outfit that will soon start running a nine-week developer camp, says the venture firm OmniElite Financial Group will invest $5.4 million in the camp over four years. The Tampa Bay Times has more here.

Lawn Love, a months-old, San Diego-based online lawn service that helps users find, book, and pay for landscaping or lawn care, has raised $1.9 million in seed funding from Allegro Venture Partners, Binary Capital, Launch Capital, Next Level Capital and individual investors.

League, a six-month-old, Toronto-based digital health and wellness platform that will let users create “leagues” of health professionals that work together to deliver personalized programs, has raised $4 million in seed funding led by OMERS Ventures with Foundation Capital, Real Ventures and Infinite Potential Group participating.

Lover.ly, a two-year-old, New York-based startup behind a wedding planning site, is closing on a $3.5 million Series A, the company tells VentureWire. It had previously raised $4 million, largely from individual backers, including angel investor Joanne Wilson.

Quandl, a three-year-old, Toronto-based data management platform and marketplace where people can buy, sell, and download financial and economic data, has raised $5.4 million from August Capital. Venture Capital Dispatch has much more here.

Razberi, a three-year-old, Carrollton, Tx.-based company that makes network video services for professional video surveillance and security applications, has raised $3.5 million in Series A funding led by LiveOak Venture Partners.

Scopely, a nearly four-year-old, mobile entertainment network that’s amassing a suite of games built by internal and external developers, has raised $35.8 million led by Evolution Media Partners and Highland Capital Partners, with Knoll Ventures, Greycroft Partners, The Chernin Group, and Sands Capital Ventures also participating. The company had earlier raised $8.5 million. TechCrunch has more here.

Speakaboos, a six-year-old, New York-based multilingual interactive storybook service for reading books online and offline, has raised $6.5 million in Series B financing led by Rick Segal, managing partner of ReThink Education, and Al Sayegh Group. A group of unnamed individual investors also participated.

The Fashion, a 1.5-year-old, London-based fashion site that aggregates the products of numerous fashion sites into a single online destination, has raised $1.7 million in seed funding from the Copenhagen-based firm North East Venture Capital and The Danish Growth Fund.

VersionOne, a 12-year-old, Alpharetta, Ga.-based company that helps manage life cycles of software development projects, has raised $20 million in new funding from LLR Partners. The company has raised roughly $27 million to date, including from OpenView Venture Partners.

Xiaomi, the 4.5-year-old, Beijing-based smartphone maker (reportedly in talks to raise up to $1.5 billion in new capital), is acquiring a stake in China’s largest video streaming company, Youku Tudou. It marks the first step for the company to provide its own content, as the WSJ reports here.

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Exits

Big Fish Games, a 12-year-old, Seattle-based game development studio, has been acquired by the racetrack operator Churchill Downs for $885 million, including $485 million in up-front payments and another $350 million based on performance milestones. Big Fish had raised at least $92.5 million from investors over the years, including an $83.8 million venture round in 2008 from Balderton Capital, General Catalyst Partners, and Salmon River Capital.

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Essential Reads

Twitter is planning to fix its growth problem. Here’s the game plan.

Facebook is updating its privacy policies to clear the way for its payments push and location-based ads.

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Detours

A 40-year hunt for a bully.

Why you shouldn’t lie to your kids, even for good reasons.

The inside track on how to swing a hotel room upgrade, spa treatment or an impossible-to-get table at the new, cool resto.

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Retail Therapy

Now that we’ve discovered them, we’re going to be needing these foosball erasers.

Unrest at Nest

Sitting on stage last week at a San Francisco conference, Greg Duffy, the 28-year-old co-founder and CEO of Dropcam, which makes Internet-connected video cameras, fielded questions from an audience of startup founders. It should have been a time to celebrate. After all, last June, Duffy sold Dropcam to Nest Labs for $555 million. As the panel discussion came to a close, however, Duffy sounded an ominous note. Referring to a longtime colleague who was sharing the stage with him, he told the invite-only crowd that Liz Hamren is “the best VP of marketing in the business.” He then added, laughing, “She’s also my former VP of marketing. You can read from that what you want into my current situation.”

Sources who spoke to StrictlyVC and asked to remain anonymous say Fadell has fashioned a hierarchical structure reminiscent of TV’s “Game of Thrones.”

Coming from Dropcam, which boasted a much more egalitarian culture, a clash seems all but inevitable.

To some of the employees we talked to, Nest’s priority seems to be separating itself from Google, not rolling out new products. At a conference in Dublin, Fadell was asked about the cultural differences between Apple and Google. Painting a picture that sounds like Nest today, he said that from its earliest days, Apple had a “much more hierarchical structure, and the communications structure was very understood,” while at Google, “everyone could just talk to everyone and learn about everything, and there was much more transparency.”

Unfortunately, Duffy politely declined to answer any further questions. “Google policy,” he explained.

Then he made his way toward a clutch of founders who hoped they might catch a few more minutes of his time.

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My Best Friend, Google

In yesterday’s New York Times, columnist Farhad Manjoo wrote, “One way to think of Google is as an extremely helpful, all-knowing, hyper-intelligent executive assistant.”

And it’s only getting smarter. As Sundar Pichai, top banana at Google’s Android division, tells Manjoo of the near future: “If I go and pick up my kids, it will be good for my car to be aware that my kids have entered the car and change the music to something that’s appropriate for them.”

It’s an exciting prospect, though I must admit that so much connectedness raises some questions for my own young family, such as which song from “Frozen” Android will choose: “Let it Go” or “For the First Time in Forever”? What if just one kid wants to hear “In Summer”?

If a fight breaks out in the back seat, I hope Android will turn up the volume so I don’t have to listen to my children screaming and punching each other.

Here’s another thing: I am generally a good, straightforward person, but occasionally, when my husband thinks that I’m working tirelessly in our home office, I’m really downtown shopping at Neiman Marcus. If our Dropcam or Nest thermostat alerts Google to the fact that I’m away, and the GPS in my phone provides the rest of the clues as to my whereabouts, I wonder about some of the implications. For instance, could Google send me a discount code while I’m at the store? That would be terrific.

Google cofounder and CEO Larry Page tells Manjoo that people get “so worried about these things” like Google’s tracking us and profiting from our every move online and off, that we could miss out on the benefits of this new context aware world over which Google suddenly looks to have iron-clad control.

But with Page and Google cofounder Sergey Brin at the helm of this “single, hyperaware computing system,” what’s to worry about? (They will live forever, correct?)

The fact is I am done wasting time, changing the music in my car to suit my kids. I have more important things to do, and Google knows it, because it has already scanned this content of this post.

Photo: Peter Foley/EPA

StrictlyVC: September 19, 2013

Top News in the A.M.

Apple CEO Tim Cook: Sorry for any confusion, people, but “we never had an objective to sell a low-cost phone.”

Dropcam, the $50M Startup That Should Keep ADT Awake at Night

Dropcam is watching you.

To date, the four-year-old startup has raised $47.8 million for its HD wireless home-monitoring cameras that allow consumers to watch the kids from the office, glimpse which neighbor isn’t picking up after his dog, or catch break-ins.

Greg Duffy, Dropcam’s 26-year-old cofounder and CEO, won’t disclose how many of the company’s $150 cameras the company has sold, but he will say that the company is enjoying “5x” year-over-year revenue growth from a “significant sample of users” that “cut across nearly every demographic.”

That’s a lot of video. The company claims that it uploads more video each day than YouTube.

What Dropcam plans to do with all that video is where things get interesting. At Dropcam’s San Francisco offices, where 45 people are now employed, Duffy hints that Dropcam will soon dip its toe into the lucrative realm of home security.

It makes perfect sense. It also puts the company’s funding into perspective.

Right now, 40 percent of Dropcam’s customers pay $9.99 or $99 per year to save up to seven days of footage costs, partly for home security purposes.

Duffy believes Dropcam can capture a much larger piece of the home security pie because, in his view, it’s a market that’s just waiting to be disrupted Not only are the “ADTs of the world” “generally stuck in past eras of technology,” but “they charge you insanely high prices for a very simple service,” he notes.

ADT’s most basic plan — which includes a motion detector, two wireless door or window sensors, and a wireless key fob that enables users to control the system – costs $42.99 per month, a $300 installation fee and requires a three-year commitment. More “advanced” services — including stored video footage and email alerts — cost $57.99 a month, with a $500 installation fee and a three-year contract.

That’s big business: ADT has a market cap of $8.7 billion dollars.

Companies like ADT “make you think that to keep your family safe, you need to pay for something that’s essentially as expensive as a cell phone and requires [an even longer] contract,” Duffy says. “But it costs them nothing to deliver the service, and using today’s technology, you could deliver [the same service] for a fraction of the price.”

Dropcam’s investors — Institutional Venture Partners, Accel Partners, and Kleiner Perkins, among others — evidently think so, too.

New Fundings

Illumio, a Santa Clara, Calif.-based cloud security startup that remains largely in stealth mode, has closed a $34 million Series B round led by General Catalyst Partners, which was joined by Formation 8. Andreessen Horowitz, which led the companies $8 million Series A funding earlier this year, also participated, as did individual investors Marc Benioff, the founder of Salesforce.com, and Box CEO Aaron Levie.

StrongLoop, a San Mateo, Calif.-base company, has raised $8 million in Series A funding led by Shasa Ventures and Ignition Partners, a round that brings its total funding to $9 million SrongLoop develops a backend-as-a-service (MBaaS) that uses Node.js as a platform for developing mobile apps in the cloud or in the data center. The company has named Issac Roth as CEO. Meanwhile, Jason Pressman of Shasta and Nick Sturiale of Ignition have joined the company’s board.

Stackdriver, a Boston-based company, has raised $10 million in Series B funding led by Flybridge Capital Partners. Bain Capital Ventures, which provided the company with $5 million in Series A funding last year, also participated. Stackdriver enables its customers to better manage their cloud-powered applications, including by mapping relationships between the customers’ system, application, and infrastructure resources.

Remind101, a San Francisco-based startup that aims to provide teachers with a safe way to text message students and stay in touch with their parents has raised $3.5 million. The Series A round was led by the Social + Capital Partnership, with famed Internet investor Yuri Milner participating. The money follows a $1 million seed round that came from First Round Capital and numerous individual investors last year.

Syntertainment, a Berkeley, Calif.-based new gaming startup that reportedly focuses on “individual lives,” has raised a $5 million Series A round from investors that include Andreessen Horowitz and former Electronic Arts CEO John Riccitiello.

Cargomatic, an L.A-based startup that appears to be the Uber of the trucking business — it promises to “provide on-demand, pre-screened trucks where and when” shippers need them — has raised $900,000 as part of an expected $1.75 million financing. Investors include the company’s founder and CEO, Jonathan Kessler, and Brett Parker, the chief operating officer of the transportation company Savon Freight.

Crave, a San Francisco-based company that produces “discreet and elegant” sex toys, has raised $2.4 million in Series A funding, including the venture firm Chaotic Ventures and individual investors.

Deliv, a Palo Alto, Calif.-based company focused on providing same-day delivery services, has raised $6.85 million in Series A funding from new investors Upfront Ventures and RPM Ventures. Previous investors in the company’s $1 million seed round, including Redpoint Ventures, Trinity Ventures, PivotNorth Capital, General Catalyst Partners and the Operator’s Fund, also participated.

Exits

At least some limited partners are making big bucks on Groupon. According to AllthingsD, NEA, Groupon’s first institutional investor (it backed Groupon with $4.8 million in 2008) distributed 20 million shares of the company to investors on Friday. The shares are worth roughly $225 at their current trading price of $11.35.

New Fund News

Benu BioVentures, based in Natick, Mass., launched this week, after being spun out of Benu BioPharma, a management and consulting company that focuses on biotechs and medical device startups. The outfit’s cofounders, Dennis Goldberg and Fred Meyer, tell the Boston Business Journal that they intend to invest in human biopharmaceuticals, and their initial investments will be in the “mid-single-digit million” range.

Job Listings

Silicon Valley Bank is on the search for an associate to add to its corporate venture group to source and qualify potential new opportunities for the firm. Among the job’s requirements: knowledge of the VC ecosystem and at last one or two years of experience in finance or banking.

Essential Reads

Kleiner Perkins gets some bad news, as California’s highest court rejects its efforts to take former partner Ellen Pao’s case against it to arbitration.

Time asks whether it’s time for Arthur Levinson to step down as the chairman of Apple’s board, given that Levinson — the chairman and former CEO of Genentech — is becoming CEO of a new, Google-backed health-focused venture called Calico. “There is something about this that feels uncomfortable,” says board expert Lucy Marcus of Levinson’s continuing ties to both companies.

The Economist takes a quick look at why the ambitions of Western firms in emerging markets far exceed their efforts.

New research suggests that established — versus temporary — teams can become too comfortable.

Detour

The snark monsters of Silicon Valley.

Retail Therapy

Witness the world’s first, truly elegant water filter, when you’ve already spent a fortune on your home/office anyway.

And hey, a sensor that attaches to your golf club and breaks down your speed, angle and acceleration. Maybe now, you can Nate Silver your way to a better back nine!

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Dropcam, the $50M Startup That Should Keep ADT Awake at Night

Dropcam is watching you.

That’s a lot of video. The company claims that it uploads more video each day than YouTube.

It makes perfect sense. It also puts the company’s funding into perspective.

Right now, 40 percent of Dropcam’s customers pay $9.99 or $99 per year to save up to seven days of video footage, partly for home security purposes.

That’s big business: ADT has a market cap of $8.7 billion dollars.

Dropcam’s investors — Institutional Venture Partners, Accel Partners, and Kleiner Perkins, among others — evidently think so, too.

Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.