Nest reportedly snags funding at crazy $2 billion valuation

Kara Swisher is up to her old tricks at her new site, Re/Code, this time breaking news of a rumored funding round for Nest, the poster child for sexy smart home startups.

According to Swisher, the new round of $150 million would put Nest’s market value at around $2 billion, which is a heckuva valuation for a company barely 2 years old.

Why would investors put such a valuation on Nest? A couple thoughts:

  • Smart home is hot again.  There are numerous reasons, but I’d suggest interest by carriers as well as the early success of companies with new approaches (like Nest) in a category that had previously failed to ignite interest.
  • The company’s early sales clocked in at 50k or so thermostats a month a year ago, and now I’d suggest those numbers are probably closer to a few hundred thousand a month. They’ve also launched a new product (smoke alarm), which would be wholly additive to unit volume.
  • The Fadell Factor. Or, actually, make that the Apple factor. Tony Fadell, the CEO, was the driving force behind the iPod, one of the seminal products of the last decade. That type of pedigree at the most respected technology company in the world, combined with Nest’s early success, is a force-multiplier when it comes to valuation. 

So what will Nest do with all that money? My guess is continue to pour money into new product development, launch in a couple new more categories (lighting, locks and security are potential new areas I’d expect them to look at) on their way to what I would guess would be an IPO in the 2015-2016 time frame.