Steve Jobs unveiled the iPhone to the public on January 9, 2007. Not long after, an entire product category was redefined. Gadgets are now software-enabled hardware, and the smartphone is the remote to the Internet of Things.
Nest reinvented the thermostat. Where people saw a commodity, Nest saw an opportunity. They charged a premium and reached mainstream. Nest, and companies like Nest, are going to reinvent our everyday surroundings. While the magnitude of this opportunity cannot yet be defined, Google’s $3.2 billion Nest acquisition has given the potential rewards a frame of reference.
An acquisition of such magnitude was the first of its kind in an arena of software-enabled things. It was also a much needed win for clean-tech (Kleiner Perkins) and will carry a catalytic impact on hardware. Entrepreneurs will think of ways to reinvent the next all but forgotten commodity, VCs will drop the sign at the door that says “We don’t fund hardware” and one can only imagine the next Bed Bath & Beyond ($BBBY) board meeting... Corporate executives anxiously looking at their notepads, gripping their pens, frantically coming up with a name for the committee that will be responsible for innovating what once seemed ordinary.
While it’s still very much the early days of software-enabled hardware, some companies are better positioned than others to ride the next wave that is upon us. The following is a list of nonpublic companies that we feel are in that position, based on two simple criteria: (1) they are sold at the Apple Store and (2) they have taken outside funding (except for Koubachi - which is supported by the Swiss government).
Hardware is difficult to scale without the public markets, and the public markets are unforgiving without scale. This is why it made sense for Google to buy Nest. Or was it Nest that sold to Google? Either way, the acquisition made sense. Which one of these M&A targets will be next?