General

Google’s Nest Buys Dropcam for $555 Million

June 20, 2014, 5:00 PM PDT

Dropcam, the popular home monitoring camera startup, will be acquired by Nest, maker of smart thermostats and smoke detectors. The deal is worth $555 million in cash.

Nest itself was just purchased by Google just four months ago for $3.2 billion. But the company says it is undertaking this acquisition on its own, outside of Google. Dropcam will be folded into Nest’s brand and company culture, and will also be subject to its privacy policy, Matt Rogers, Nest co-founder and VP of engineering, told Re/code in an interview Friday.

“The teams are very well-aligned and we love the product,” Rogers said. “We both think about the entire user experience from the unboxing on. We both care deeply about helping people stay connected with their homes when they’re not there.”

Rogers said the deal was signed Friday and has yet to close. The Dropcam team plans to move from San Francisco to Nest’s offices in Palo Alto, Calif.

Dropcam has never disclosed sales, but it is routinely the top-selling security camera on Amazon, and it recently branched into selling in retail stores like Apple and Best Buy. The company’s newest camera sells for $199, and a version with lower resolution and less field of view sells for $149.

But Dropcam is not solely a device company. As I wrote in a 2012 profile, it is a hardware startup with its head in the cloud. The company originally tried to use existing webcams to support a hosted personal video archive, but found the ones on the market were not up to snuff. So it began making its own.

Online storage is the other part of Dropcam’s business model. The company charges $99 per year to save a week’s worth of video at a time. Last we checked, Dropcam said 39 percent of of consumers who buy its cameras pay for its cloud storage service as well.

People concerned about the privacy implications of Google’s acquisition of Nest may be further unsettled by Nest’s purchase of a home surveillance company. Rogers anticipated that in a blog post announcing the deal, insisting there’s no reason to worry:

Like Nest customer data, Dropcam will come under Nest’s privacy policy, which explains that data won’t be shared with anyone (including Google) without a customer’s permission. Nest has a paid-for business model and ads are not part of our strategy. In acquiring Dropcam, we’ll apply that same policy to Dropcam too.

By the way, if Google owning Dropcam sounds a lot like Dave Eggers’ “The Circle” to you, I asked Dropcam CEO Greg Duffy about the parallels in an interview last year.

As for Eggers’s vision, Dropcam CEO Greg Duffy allowed that it was surprisingly close to home. But he said, “With Dropcam, it’s the individual who chooses to share. That helps keep it from being weird and dystopian.”

Prior to its acquisition, Dropcam had raised a total of $48 million from investors including Institutional Venture Partners, Accel Partners, Menlo Ventures and Kleiner Perkins Caufield & Byers. In recent months, it had made key hires, including long-time Apple product development leader Andy Hodge, who formerly worked with members of the Nest team on the original iPod.

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