Unicorn Leaders
The Unicorn Leaders podcast takes a deep dive into the world of building a billion-dollar company (a unicorn) in every episode. Join us while we explore the leadership and environments that create unicorn startups straight from those with first-hand experience (startup founders, VPs of talent, and more). The podcast is hosted by Fahd Alhattab, the CEO of Unicorn Labs and a millennial workplace expert who specializes in providing transformative leadership and team dynamics training for high-growth startups. Fahd has been researching what creates high-performing teams over the last five years. Join him as he asks his guests the hard questions to uncover what it means to be a leader in our fast-paced, information-based world.
Unicorn Leaders
Ep. 27 - More Than a Thermostat: How Ecobee Took on Google—and Won with Stuart Lombard
In this episode, Fahd sits down with Stuart Lombard, founder of Ecobee, to unpack one of the most iconic David vs. Goliath stories in Canadian tech. What started as a personal mission to reduce his carbon footprint led Stuart to invent one of the world’s first smart thermostats—and take on giants like Honeywell and Google Nest in the process.
Stuart shares how Ecobee turned clunky hardware into a customer-obsessed experience, why innovation often starts with frustration, and how staying true to their mission helped them win customer trust while competitors chased channel partnerships and flashy ads.
From getting 172 VC rejections to building sensors that rewrote the rules, this is a story of what happens when a team chooses learning over ego—and how a thermostat became the first step in rethinking home energy systems.
You, you know, took calls, customer service calls early on, right?
SPEAKER_02:I still answered customer customer calls. So if you think about like what Google, there's no way you're gonna get a letter from either Sergei or letter uh you know, or or Larry, but but you know, an email from the CEO. Wow, that's pretty cool. And you know, those go on Reddit and blah blah blah.
SPEAKER_00:And I think that's that's brilliant because that's what you you you used your size to advantage. It's sort of what we can we kind of constantly say in these David vs. Goliath stories is that Goliath is too big to get to get a letter. Totally. But when they hear from the CEO and they get on a call, there's just so much weight to it. Hello, Unicorn Leaders, and welcome back to this season of the Unicorn Leadership Podcast, where we're diving into the David versus Goliath stories. How small, scrappy teams with big visions find a way to outthink, outlast, and win against the giants. My name is Fat Atab, and I am the founder of Unicorn Labs and your host here on this Unicorn Leadership Podcast. And today's story is one of my favorites. It's a homegrown Canadian story about this small little David that ends up competing with Google and Honeywell. It proves that innovation doesn't just come from Silicon Valley, but it can come from these Canadian winters with a founder who simply wanted to make things better. My guest Stuart Lombard was on that personal mission. And I get to sit down with him and have this conversation where he wanted to reduce his environmental footprint. He was a multi-time entrepreneur, had done some pretty amazing things. And as he was in between journeys, he realized that heating and cooling made up more than half of a home's energy use. And he wanted to find a way to reduce his own personal energy footprint. And so he starts to go about doing it himself for himself and realizes whoa, there's a there's a huge problem here and an opportunity. And he comes up with this idea that maybe we can make thermostats smart, but no one really likes the idea at first. See, see thermostats are clunky and confusing and they're wasteful. And there's a moment where he comes home and it's freezing, and he goes, Like, if I could just program this thing better to be able to change with the weather and to be able to change based on different heat pockets and and coal pockets in my house, we could do a lot better. And that's the spark for EcoBee, a Canadian startup that went head to head with Nest, which ends up being bought by Google and getting a ton of funding, and the established Goliath of Honeywell, who was worked with every contractor and was in every home. Investors told him he was crazy, like 172 times as he kept track, but he kept going, betting on customers instead of contractors, betting on building a product that actually saved people money and was easier to use, building open systems instead of closed systems where everyone could integrate into it. And years later, that bet paid off. EcoBee became one of the top smart thermostat brands in the world and eventually was acquired for$770 million. This is a story of how one founder turned purpose into product and frustration into fuel and built a company that forced the giants to change in their way. Um, Stuart, I'm excited. I'm excited for this conversation because it's someone you've read about, a biography you've read about, and then you get to meet them. That's sort of how I feel. Yeah, I've been reading your story, I've been digging through the internet, finding different things to try and piece together the E. Kobe story. And I've got questions because I think when you read it and you read in between the lines, you're trying to figure out what did Stuart think in that moment? How did he feel in that moment? What was the decision? What were the trade-offs? We're we're talking about this David versus Goliath story and this theme of how small but mighty teams overcome the odds. And your David versus Goliath is interesting because you you actually show up on the scene with some really legacy Goliaths. And then as you build your technology, a big juggernaut Goliath sort of walks in and says, I'm interested in this space too. Well, let's let's go back and let's tell the story from the beginning, try to get a sense of it. Um uh I I overly wrote the narrative here of this like moment where you come home to a frozen house and and and maybe there's this aha moment there, but you've you've also told me that the aha moment sort of builds, and that's sort of actually the where it cascades too. So, what where's the origins of the idea of EcoBee?
SPEAKER_02:I think, you know, the origin story was really um I was working as a partner at a venture capital firm. Um, you know, woke up one day and decided not what I want to do with the rest of my life. Uh, and so I quit and I um, you know, had some time on my hands, so I said, like, okay, I'm gonna try and, you know, figure out how to reduce my environmental impact. And uh so went out and I bought$26,000 of solar panels. I was on my way to buy a Toyota Prius. My wife was like, honey, this going green thing is gonna break us. Um you know, and so from there came the insight that heating and cooling is 40 to 60 percent of your home's energy. So actually better managing your heating and cooling is the best thing that you can do.
SPEAKER_00:Um where does where does that where does that interest for you around environmental consciousness come from? Because that so you go, you know, you're at the you're at the VC, you're you're working there, you decide to to to take some time away and and dive into this. But that means that passion has built for that curiosity, that that interest. Where does that come for you?
SPEAKER_02:Yeah, my dad grew up in a small town of probably like, you know, uh, I don't know, maybe a hundred people in uh upstate Michigan, middle of the woods. His father ran a lumber mill there. Uh and so, you know, we were always outdoors. Outdoors. Right. And uh, you know, he was a big fisherman, and so he would take me fishing with him, um, which, you know, at the time I don't know if I enjoyed it that much, but now I do. But we did some interesting things. Well, one of the things we did was um my dad was very uh self-sufficient and he felt like he could build anything. And and so he did. And so one of the things we built together was a collapsible canoe because he wanted to be able to take his canoe with him wherever he wanted to go. And so he had this idea that I could build a canoe, I can fit it into a briefcase. It was a very large briefcase. We built like tents, we built like, you know, whatever it was, like, you know, he's like, you don't have to go to a store and buy that. I can make that. Well anyway, but that also like you know had an impact on me in terms of you know, that idea that you can, you know, that you can make things, that you can do things that, you know, um anything sort of possible kind of thing. Yeah.
SPEAKER_00:Yeah, that you can envision it and build it. Just just being being a builder, right? Like I I I like that. I like that. So you've got this like inherent with your family, this outdoorsy environmental love for nature, love for uh uh for this beautiful planet that we're in.
SPEAKER_02:And you can see it, you know, slowly kind of dissipating, right? I think this part of it, right? And so what's what's my role? How do I, you know, how do I help improve things? I'm hugely optimistic about the future because things are uh, you know, you know what?
SPEAKER_00:Tell me, tell me about that because I don't want I I actually want let's let's go there because that's an interesting place for us to start because I would say there's a lot of people who are not. There'll be a lot of people who look at the situation we are in environmentally and the politics around it, and especially how the politics has shifted around it and are actually quite dystopian about it. Right. Um, I'd like to be optimistic about it. So tell me what that view.
SPEAKER_02:So I think the the, you know, the politics, first of all, are transitory, right? So that's my my point of view. Like, and I think, you know, they'll come and go. And but I think in the end, you know, one of the things we talked a lot about at Ecobee was that, you know, historically with green what I will call green products or environmentally favorable products, there is sort of this, you know, it costs more and it doesn't work as well, right? But I think actually that sustainable products cost less and work better. Um, and so if you take, for example, electric vehicles, in China, an electric vehicle now costs two-thirds of the cost of an internal combustion car. Just insane. And so they will be cheaper. Yeah. And they're better. They're faster, you know, they got a lower center of gravity, they handle better. They, you know, less moving parts, less moving parts, less maintenance, less cost. Um, and so, you know, I think it's only a matter of time before, you know, electric vehicles take over. It's 52% of car sales in uh in China. It's 27% of car sales in Europe right now. And so yeah, so there's EVs, you know, the next one on a consumer basis is really heat pumps. Heat pumps are already better than uh than uh, you know, gas furnaces, for example. Um, you know, they're four times more efficient than uh than even the most efficient gas furnace. Um, you know, and so as you sort of electrify things, um, good things happen. And then on the other side, on the generation side, um, solar power is already the cheapest power anywhere.
SPEAKER_00:Okay. So you sort of have this general sense of consciousness around the environment because of your upbringing, because of being a fisherman with your father, these trips, these canoes. You have this general sense of being a builder. Um, what what were you doing before the venture capital firm? Where did you take a few stabs at entrepreneurship? Did you build some of your own stuff?
SPEAKER_02:Sure. So um, you know, I'm engineered by training, studied math, uh, went to work at a company called Capital.
SPEAKER_00:Well, you understand the thermodynamics of it all.
SPEAKER_02:Went to study, uh, sorry, went to work at a company called CA Electronics. So one of the CA Electronics is an amazing Canadian company. Um, you know, and they built flight simulators. Used to have 80% of the commercial flight simulation business. And um, you know, you go into their factory and they had these massive boxes that were the size of like, you know, a two-car garage, but it's up on stilts and it goes up and down. And what was very cool when I started there in the late 80s was that you could get your pilot certification for a 747 without actually ever flying in a 747. And they were really the first ones to be able to do that. It was a super cool company. Um, and the problem with civil aviation is that it's a boom bust market. Like, you know, it's sometimes it's great. And then, you know, for years, like, you know, they would sell like, you know, 120 simulators and then they would sell like four, right? Because the market was just boom bust. So they were trying to uh extend into other areas. One of them was um energy distribution, and they built control systems for electric dams and cities who wanted to distribute, you know, electricity through the cities. And that section of the business was so messed up, right? And so nobody, nobody wanted to be in that section, right? And, you know, one day they're like, hey, we need someone to go to China to go run this project in literally right in the middle of China. If you took a map of China and you put a pin in the very middle, that's where I went. And I was like 24 at the time, and they were like, anybody want to go? And I was like, that sounds really cool. I'll put my hand up and do that. And um anyway, and so I went and I I worked on that system and I learned quite a bit. Went whenever wherever there was like disaster, that's where I went because disaster was opportunity. And it gave me responsibility that I, you know, at 24 I had 150 engineers working for me, not because I was qualified, it was completely unqualified, but because nobody else wanted the job. Because I've read because I put my hand up.
SPEAKER_00:And I was like, I'll go to this rural China.
SPEAKER_02:Like I, you know, like I was super cool. Like, why would you know? And and it's amazing because China is so different now. I remember thinking like, you know, China will never catch up. Like there were probably like a handful of cars, like seven cars, like because people just didn't have cars. Everyone was on bikes, right? It was like it was a totally different world. And then I went back in 2000, you know, call it 10 years later, and it totally transformed, right? Like just, you know, modern skyscrapers, cars everywhere. Like it did just like it what China accomplished is truly incredible. Growth there, yeah. Um anyway, so that's where I started. But one of the problems with C Electronics was that I had this horrendous boss, and he was so horrible that I had to quit, right? And um, you know, usually people who say, like, if you had a horrible boss, that's a horrible thing. But for me, it was uh, you know, it was good because it forced me to quit. So I was walking out the door serendipity. This guy that I'm that I used to work with says, like, hey, you should really check out this internet thing. So this is 1994. Mark Andreessen was still a student at the University of Illinois. Um, you know, there were no web browsers. And I'm like, okay. And anyway, I go off to a whistler and uh go skiing for six weeks. And uh while I'm out there, I'm like, geez, if I watch another episode of The Simpsons, I'm gonna shoot myself. And so, you know, go back home and started one of Canada's first internet service providers, which we built into Canada's largest internet service provider, uh, took it public in 1995.
SPEAKER_00:What was the name?
SPEAKER_02:Uh so the company that went public was called iStar Internet. My company was InforM. So we merged three companies together to form a company called iStar Internet. Cool. And because I was, I think, 28, 29 at the time, and that was co-CEO with my business partner, and uh, you know, that was a complete disaster. And if you have another podcast about like how bad things can get, that was like the Keystone cops and the the stories I could tell you, I don't think you would even believe, but uh it was true. Anyway, so we left.
SPEAKER_00:And but this is good, you this is where your story is forged, right? Like this is sort of what I, you know, kind of uncovering what in these David vs. Glide stories is who are these founders and and how are they forged in the fire of it all? And so you've got this builder mindset that's environmentalist in your upbringing. You have this engineering mathematical mind that you study and you spend again at 24, you're in, you know, you're in China with 124 engineers working for you. So you you you develop skills just because you have to and you have no choice. And then you go off and build your first company and and a bunch of mergers and acquisitions, a bunch of roll up, and you learn manage more management and business by fire, and and and you have some early successes, but also some really difficult moments on on management and what it looks like to actually align people on a single vision of where things are going.
SPEAKER_02:Yeah, yeah, yeah, yeah. I did it was not good at that at that time, that's for sure.
SPEAKER_00:Yeah, no, I mean at 27, 28, you know, and I'm wasn't expecting you to. So that's that's that's that's pretty cool.
SPEAKER_02:And so my head exploded and I was like, okay, I quit. And uh at the time, John Albright, who was the uh venture capitalist who put that role up together and and and helped us go public and funded it, you know, he asked us to help him and he was looking at deals. And the idea was he would do an investment and and we might become the co-CEOs of the next company. And so we and he invested and we became the co-CEOs of a company called Isolation Systems, which built virtual private networking equipment, which allowed you to encrypt your data, send it across the internet, which at the time was a lot cheaper than using private lease lines, which is what most people were doing. Um and so we built that business um and successfully sold it to uh a company out of Boston called Shiba, who was in the modem business. They were trying to get into the networking business. Um, and that was great. Uh, you know, that was fun, I think, because it it gave me the opportunity to see how uh, you know, 500 people build companies versus you know the world. And then, you know, fast forward to 2007, after years, I was like, I don't want to do this anymore. And uh and so I quit and then started eco being.
SPEAKER_00:That's really cool. That's a really cool background. I think that's that's interesting. It's fascinating to see all the different pieces, the you know, time spent as an engineer building, the time spent as a first-time entrepreneur kind of merging, getting that uh, you know, to an IPO, then time spent as a you know, co-CEO in terms of management, and then just the breadth of companies that you get to see. So you leave, you've got this hunch for being environmentally conscious, you start investing in that in your own home, in your own personal life, and you realize that the biggest opportunity to reduce your footprint is your elect your electricity at home.
SPEAKER_02:Yeah, then you're you specifically manage you better manage your heating and cooling.
SPEAKER_00:Yeah, better managing your heating and cooling. And um what's what the where does where does that rabbit hole take you? But the moment between deciding I'm doing this for myself to the moment you realizing there's a product here and and and there's a there's a gap in the market.
SPEAKER_02:Yeah. Yeah, I mean people say, like, you know, what do you do? Wake up one morning and decide you're gonna start a thermostat company. And I was like, yeah, pretty much. Yeah, yeah. Um uh, you know, obviously we did some market research and stuff like that. And, you know, I think the you know, you could clearly see that the products in the in the market weren't internet connected, they weren't smart, they were difficult to use, like all that was well known. Um, and so you know, could we do better? What if we could use math and science? What if we could use data like energy prices and weather and you know, how much better could we do? Uh and so I think we had a good view as how we how we could solve a better mousetrap. You know, we just work on the market sizing and, you know, determine the market was big enough and uh, you know, and that the impact that we could have would would be good. And then, you know, beyond that, it was uh, I mean, it was funny actually, because when we we had four original uh co-founders, uh so myself, Mark Malchiondo, John Metzelar, and Brian Parkinson. And uh John was our our hardware guy because we knew nothing about hardware. And uh so we go out to visit John, and John's like, okay, which one of you guys is the HVAC guy? And we all look at each other and we're like, there isn't one. Which one of you guys understands consumer electronics? And we're like, nope, you know. And uh not that I'd recommend that's the way to start the business, but you know, we had no we had no expertise, right? But we did have the belief that I think that, you know, if you can, you know, if you can pick up a book, you can read, if you can learn, you can do a lot. And uh and I think that sort of um ethos really, you know, helped us. One of the things we thought about a lot when we were building EcoBee is how do we build a learning company, right? And uh, you know, if you think about it, when we started, you know, my friend, Stuart, Mike, what the fuck are you doing? You're an idiot, right? You got this cushy job, you know, you got a you have an executive assistant, you're on like the 44th floor of you know, fancy office building, and you got your own parking spot, you know, when you're giving all that up. Getting all getting all the money you need at the time, like, you know, like uh, you know, to start a thermostat company, no one gives a shit about thermostats.
SPEAKER_00:And they're not sexy. Like you're not, you're not like I'm starting like today, I'm starting an AI company or whatever, right? It's not the sexy thing.
SPEAKER_02:Totally not sexy. And then what are you gonna do six months from now? The implication really being that like thermostats are already as good as they're ever gonna be. You can't do any better than this. And, you know, as you sort of fast forward, you know, you know, we were talking about, you know, AI and sensor fusion and far field voice and you know, all kinds of technologies that are in that product that uh, you know, that make it that make it very different than just a thing. And so I think, you know, the you know, that idea of like how do you create a learning company, how do you really think about, you know, building innovation um and continuing to kind of you know move the ball forward, I think is is is is really, really important. And that kind of came from I think from that ethos of probably a little bit arrogant, but you know, we can learn things, we can do things, we can change. Yeah.
SPEAKER_00:Yeah, it's not, it's not, I don't want to say it's arrogance because it's not arrogance that you know the answer. It's it's confidence that I can figure out the answer. Yeah like that I have the tools to build my way through it. So you get together with your forefronters, like the you know, you kind of put together your little founding team, trying to find people who'll be interested. Um, you know, I'm sure you you go through a few. And what's the first steps? What's the first steps that you guys uh put together? You do you do your market research, you realize there's an opportunity here, you get these co-founders together. Is it building the prototype? Is it what's what's the first uh kind of months look like?
SPEAKER_02:Yeah, first thing we did was, you know, wrote a business plan first of all. So that was important. And then I think, you know, we we literally called up heating and cooling contractors and said, Hey, I'm Stuart, I'm working on this new product. I'm really excited about it, I'd like your help. You know, do you mind if we ride around with your uh with your technicians? Right. And so we spent like the first three months riding around with HVAC technicians, you know, picking their brains. Um, and there were a few that were, you know, super, super helpful and you know, foundational and helping us think about the market and you know what makes for a good product and all that kind of stuff. And uh anyway, so so that's that's really how we started. And uh then we built our first product.
SPEAKER_00:And uh I love that ingenuity. Like, I don't know how many people genuinely think Jenna call up HVAC companies and say, I want to ride around and like like I I think you say it so casually, but I've personally worked with enough founders that that is just like that is so that's brilliantly simple, yet so powerful.
SPEAKER_02:Yeah, I mean I think you have to you have to accept a lot of rejection, right? So there was like the first couple calls, I was like, okay, people are gonna be like click.
SPEAKER_00:They're like, no thanks. You're not you're not riding around.
SPEAKER_02:Yeah. But I think um, you know, generally speak speaking, people want to help. Yeah, right. And so I think, you know, it depends on the way that you phrase it, right? If you're trying to sell somebody something, then I think they're naturally reticent and their guard is up. If you're like, hey, I'm just looking for some help. Do you think you could help me out? Uh, people generally want to help. And not everyone, you sort of have to psych yourself up that I'm gonna, you know, it's gonna take me 50 calls to get, you know, to get three or something like that, right? Like it's uh your success ratio is not gonna be that. And there were lots of people who were like, you're doing what? You're a loser, right? But but you know, that's just part of it.
SPEAKER_00:So you do some customer discovery by riding around, you get some insights. What do you do with those insights?
SPEAKER_02:You know, they already went into the first product, and you know, it's interesting actually because you know, one of our um, you know, opportunities or challenges or whatever it was was that we had this, you know, this twin. And so Nest was our twin. And well, you know, it was you know, people used to say, like, you know, uh, why can't you be like Nest? Like, why aren't you just like Nest? Right. And that was like a dagger to the heart, right? You know, and and and I think, you know, the real insight there was it wasn't that we were not trying to be good, but we didn't know what good was, right? And that difference between, you know, wanting to be good and actually being good are two different things, you know. And so when people said like, why isn't your product better? It wasn't that we didn't try. We did try. But two things happened. One was we we didn't really know how. And then the second part was that, you know, we we set the bar too low. I tell people we were like, you know, we were the champions of the you know, North Toronto Minor Bantam Hockey League, but we thought we were playing in the NHL. We didn't realize we were not playing in the NHL. And then Nest came out and Nest uh showed us that you know we were not in the NHL, right?
SPEAKER_00:This is what this is what professional looks like. Is what this is what innovation at the top tech companies look like. Yeah.
SPEAKER_02:What we learned was like you can't you can't make compromises, can't make compromises on certain things, right? That was an existential moment for us, and that really forced us to kind of like double down, think about what it takes to be really good and then to become really good at those things. And I think you know, one of the most rewarding things was that, you know, the team was constantly improving, and that you know, there were times where you're like, it's amazing. Like you can just see that we're getting better and better and better.
SPEAKER_00:In those early moments of building Ecobee, when do you go for when when do you find yourself going for investment? Like how how early in that journey did you seek some venture capital investment? Was it some of it self-funded in the beginning? What was that what was that like for you?
SPEAKER_02:Yeah, I funded like the very early parts of the business. Um, but because I had the relationship with John, John was very interested in investing in the business. And then Tim Jackson was at French Capital Company out of Waterloo. Anyway, they both wanted to invest in the business, and so we did a three million seed round sort of six months in, and that really started the ball. And then we went from there.
SPEAKER_00:Now that worked out for you because you had the relationships, but I read online that the sort of subsequent VC was really tough. You know, I I had a quote here 172 VC rejections. I'm often told thermostats are boring. That's tough because you you worth inventor capital. You think if I'm if I'm you, I would have thought, like, oh, I'll definitely get the capital. Like I I have the network, I have the context, I have some proven experience, and look at my business plan, like I know this works. How does I guess this is this is where I sort of pair your mission-driven drive with this willingness to take 172 rejections. Like I think that that, you know, how was that for you?
SPEAKER_02:Well, I think what you know, one of my favorite quotes about venture capital is from Scott, Scott Adams, and I think it's like venture capital is the only profession where you get paid an outrageous amount of money to be wrong 90% of the time, right? And if you keep that in the back of your head while you're getting rejections, I mean, for an industry, one of the reasons I left actually is because like for an industry that is wrong so often, they are the most certain of themselves of anyone that I've ever met, right? And so I'm like, okay, you know, whatever. Like, you know, we're gonna we're gonna keep going.
SPEAKER_00:You don't see you don't see what I see. You don't see the opportunity, the environmental opportunity.
SPEAKER_02:And part of it, I think, too, is like having tat in the shoes. I know how hard it is, right? Like it's a it's a hard job. You see 500 business plans a year, everyone's convinced their business is going to infinity, and you know, like one of the 500 you see is probably going to infinity. So when we started, people were like, you know, Stuart, nobody wants a$250 thermostat. Like, you know, just not gonna happen, right? And then Nest came out, and then Nest was all the rate, right? And they had tons of publicity and you know, they did incredibly well and all that kind of stuff. And then it was like, of course, everybody wants a$250 thermostat, but Nest has already won. And so, you know, it's a winner take all, you know, you might as well go home now, right? And uh and it was interesting because before, in the beginning, they looked at me like I was a moron, right? And then like after Nest came out, they looked at me with pity. They were like dead man walking, like you're dead, she just don't know it yet, right?
SPEAKER_00:Moments of this is I'm way in over my head. This isn't working. I thought this was fun. Do you have those moments? Did you have moments there, low moments and and ready to quit moments, ready to throw it in?
SPEAKER_02:Yeah, we had low. Yeah, I mean, we had lots of those. I mean, I think you know, there were like plenty of you know existential moments. I mean, one of the things when, you know, when Nest got acquired, we had spent a year working with Google on an integration, right? And we were going to be their thermostatic choice in this, you know, connected home vision that they had. And then literally like the week before it launched, they called me up and they're like, tomorrow we're gonna announce that we're uh acquiring uh Nest. And uh all the work we've done is off and thank you very much. Click. Like we just spent like, you know, a good portion of our uh that's a double ouch.
SPEAKER_00:Yeah, there's like a the partnership ouch, and then uh I we now have a new big competitor. Yeah. And were you you you were aware of Ness before Google purchased them?
SPEAKER_02:Yeah, yeah, yeah. No, definitely before because they they launched maybe two years beforehand. And so um, you know, and Tony Fidel is an incredible individual, and um, you know, he was the father of the iPod and significant contribute contributions to the iPhone. And so, you know, I say he's like the Sergei Buka of consumer electronics, like he's like a real, he's the real deal. Yeah.
SPEAKER_00:Um, and uh so we definitely So they've yeah, they've got this power powerhouse founder, and now Google and it's unlimited money. How did you and the team feel in that announcement in those moments of you've seen how good Nest is, you've seen the buzz it got from a consumer, you know, and it's quality, and now you know they have an unlimited war chest.
SPEAKER_02:Early when Nest came out, like even our own employees were like, wow, that is so cool. Like that is so good. Okay, people, people, people, right? Right. Um Yeah, you know what?
SPEAKER_00:Yeah, maybe for I'm I'm sort of honing in on the moment when Google buys Nest, but yeah, like let's go back to the moment that Nest launches.
SPEAKER_02:So the moment Nest launches, I think like that was, you know, that was probably the you know, the lowest low. There were plenty of lows, but that one, that one was, you know, was one of them. Uh we're probably like 30 people at the time or something like that. So the move was pretty low. There was a little bit of panic, and you know, some people left, but the core of the team soldiered on, right? And I think there were definitely some people who were like, I I don't see this working anymore. But the core group, I think, stayed together, which was amazing. And then we figured out a way. We figured out a way to, you know, to continue to survive and thrive. And then, you know, from continuing to survive, it became like, okay, how do we get better? And that really became like a learning thing, which was incredibly powerful because, you know, then everyone could see it. Everyone could see, like, wow, we're actually like good. Like this is, you know, and they could see what they'd done, right? And that sort of pride of ownership. And like, you know, I was here and I thought it was good, but but maybe it wasn't quite world-class. And then it was like, wow, like that is that's good. Yeah. Uh, you know, I'm proud of that, right? Uh and so uh, you know, that created, I think, a huge kind of slingshot, if you will, or much momentum behind the company because we kind of went through this downside. And then once you went through the downside, then you're like, we can get through anything. Like, you know what I mean? Like we've, you know, this is bad as it gets, like, and we survived and we like whatever. Again, not that you're arrogant, but but you know what I mean? It gives you sort of confidence that, yeah, yeah, no, actually, like, I think this can go.
SPEAKER_00:Isn't that interesting, right? The the like surviving the lowest lows is actually often the moment in our in our history of like, oh, if I can get through that. What was what was your in in in the moments of Nest's release and the team feeling down about it, some people leaving? I'm sure you and your founders feeling a level of anxiety. What was your strategy? What was your thinking? I don't take you as someone who gets up there and does a big motivational speech for everyone. Like, but what was like, okay, I need to, I maybe do need to control the narrative for my own team a little bit. Maybe I do need to talk to them about what our strategy is or what we're gonna learn from this. Like how did you and your founding team react in what you needed to build with the team during those moments?
SPEAKER_02:So I think we were in a bit of a tough position because we were about to release a new product. Uh, we were maybe like six months away from releasing a new product. And the question was like, okay, do we release a new product, which we kind of knew was not gonna be wasn't gonna be dead on arrival, but it wasn't gonna be a winner? Or do we, you know, cut and switch gears? And we decided to keep going because we felt like we couldn't last two years without something. And so we launched the product, just called the Smart SI, which was at a lower price point, which allowed us to get into a couple of new channels. And those new channels became important for us. Uh, and uh, and then that allowed us to continue, which allowed us to build EQB3, which is really sort of like the next generation that um, you know, that took the company to a totally different level. We had this partnership with Just Energy, but to make that work, we needed this low cost thermostat or lower cost thermostat. And so um we completed it, they did an equity investment. investment into the business, which was which was fantastic. So, you know, one of the things that was fortunate is as we were going through all these VC rejections, is some of our largest customers invested in the business.
SPEAKER_00:So during that difficult period partnerships really help carry you through during that stage. In in in in some ways from a strategic perspective, you know, Honeywell sort of has strong channel partners through their contractors. Nest sort of and you know positions itself as this the iPhone of home, the glamour. Where do you take your positioning when you when you sort of see these come out? Where did you go, okay, if that's happening, where does EcoB fit into this?
SPEAKER_02:Yeah, I think maybe separate uh channel strategy from product strategy. So product strategy was really about how do we win with customers, right? So when we thought about Google, um, you know, they were spending, you know, the whisper numbers we were losing$600 million a year on the business. And you know, they were doing Super Bowl ads and NFL ads and um you know they bought every bus shelter and every subway in North America, right, whatever it was. Like they had like they had stuff everywhere, right? And so we were like, we can compete with that. Like that's not yeah, yeah, yeah. We can't, you know, there's no way we're gonna be able to spend don't try and you know out Google Google with something we said quite a quite a bit. Our strategy was really around like how do we draft behind that advertising. We felt it was still a research category. So people were going to like do their research. And so we really focused on winning with customers and getting great customer reviews. And so that was all about um you know one having great customer support, which we knew was something that Google was not going to do. You know, we had, you know, sort of internal measurements around net promoter score, which was really our key tracking and keeping our net promoter score above 70 as a way to think about like are we delivering for customers or not. And then if we you know if we didn't weren't maintaining 70, then you know we're gonna go back and rather than building new features, we're gonna try and improve on whatever customers you know seem to have, you know, what their biggest pain points are. And um you know and so that worked out really well for us. And one of the insights we had which you know helps when you're actually spending time with contractors and riding around trucks is, you know, we had this great product we're like we've built this internet thermostat it's gonna be amazing. Control through your phone, blah, blah, blah, blah, blah. Look how amazing your customers are going to love it. They're like, we don't want to sell that. Right. And what we misunderstood was that you can have the best mousetrap, but their business model is totally different and they're worried about customer callbacks. So there's a problem with your thermostat and a customer calls me and I have to go out there and fix it for them. I don't get paid for that. So what we did was we turned that around to it would be a huge strength for us. And so realizing that these people were uncomfortable, they also want to stand in front of a customer and look stupid. Right. So if it doesn't work and it's you know it's on the customer's phone and something's broken, they're like, oh my God, you know, I hate it. What we did was create a training program where we uh created mock-ups of actual like furnaces and air conditioners and we would go out to a customer site and have many of them and everyone would get a thermostat and they could practice installing it on the system so they could get good at it. Right. And then they got to take the thermostat home with them and install it in their own home. And then they had it in their own home in their own phone. Right. And then when they went into a customer site and customers said like which one of these internet thermostats should I get contractor was like I've got one on the phone. This one's the best one by far. And that uh you know that created huge, huge dividends for us. And again that was something that no one else did for whatever reason.
SPEAKER_00:No. You've you've got this you know real obsession over customer support that I kind of notice in the work like you know some some stories but you you know took calls customer service calls early on right that I still answered customer customer calls.
SPEAKER_02:So then if you think about like what Google, there's no way you're gonna letter from either Sergey letter uh you know or or Larry, but but you know an email from the CEO. Wow that's pretty cool.
SPEAKER_00:And you know those go on Reddit and blah blah blah blah blah blah blah and you and I think that's that's brilliant because that's what you you you use your size to advantage. Just sort of what we can we kind of constantly say in these David Rissa Goliath stories is that Goliath is too big to get to get a letter. Totally. But when they hear from the CEO and they get on a call there's just so much weight to it. Yeah there's so much what's better and you're like I'm not really doing I I would say the same thing my customer service report saying we just we'll get to this and we'll fix it right but there's an element of oh they care.
SPEAKER_02:Yeah yeah totally well that's the best is like you know when somebody picks up the phone and they call and they're like you're like hello EQB support and they're like who am I talking to? How are you talking to Stuart? I'm the CEO they're like what that's like the best and uh you know same with same with customer emails but the other benefit too is that you know I think a lot of companies customer support is considered like you know the backwater and you know kind of like you know the just the you know the the bottom of the barrel kind of thing. Nobody cares about it and and it's like kind of a dead end job.
SPEAKER_00:And all staff want to get out of it. Yeah.
SPEAKER_02:And so and it's a hard job, right? But I think if the if the business values customer service, you know, we had some great customer service leaders and they show that you know this is important and and you know we invested in people's learning and and and stuff like that. Like Andre who runs customer service now is she's she's unbelievable. She's the best manager I think I've ever met in my life. But it created you know tremendous loyalty in that group certainly improved our scores. And then when we thought about our brand it was one of our core pillars because again we know that like installing a thermostat can be daunting depending on who you are. It's the beginning of your connected home journey we want it to be a good one. And you know certainly we saw it as a place where we could differentiate ourselves and again thinking about competitors they were not they were definitely not focused there.
SPEAKER_00:Yeah that's really cool. And and it comes to product innovation really in your case you've got this customer service stuff you've got these little not these little but you've got these brand wins and you've got these service wins but really the shift for EcoB becomes this sort of product innovation which is the sensors, right? The additional before we get to that how did the insight for that come? Where did where did the insight for this product innovation, these sensors come from or how did that come to be? Because you've you're building this learning organization. And so I'm sure these ideas are flowing, they're bubbling. Walk me through that.
SPEAKER_02:Yeah I mean I think again like goes back to I think you know being customer focused and I think a lot of other founders have talked about you know being customer focused and you know I used to send the the customer emails to everybody on the team like everybody, right? So everybody could see what our customers were saying because you know I think it's easy to be kind of like detached from your customers but not when you're actually like listening to them on the phone or or reading their emails. And anyway people said like love your product it's amazing but you know I have these hot and cold spots in my house and if you could solve that for me I would love you forever. And uh and so that kicked off a the campaign to figure out how could we solve hot and cold spots in your home.
SPEAKER_00:Because essential thermostat, you know, you've got one room that's exactly one room that's hot or comfortable in your hallway but it's not comfortable yeah wherever it is. And that's when people fight over the thermostat like I feel like that's a good ad like you know like you know my wife always wants to turn it up and I want to turn it down.
SPEAKER_02:Totally and so that was that you know that was totally transformational for us. And you know that's another good lesson is that like it takes people a long time to follow right it took Google five years, I think five or six years to follow and honeywell similarly so we had a long time where we had like that clear isn't that interesting we're often so worried about that as founders. Yeah.
SPEAKER_00:We're worried that like oh if we innovate the next yeah like the big the big guys the Gawyits are just going to turn around and and take our idea. What we're seeing here is that there's a you're saying a five year period where where you own that innovation. So so you you realize this you know they tell you there's cold spots, hot spots, so you start to do some discovery around this what what does that look like? What does discovery look like? What is the product innovation kind of process look like there?
SPEAKER_02:Yeah I think you know we sort of just ideated what could be right like what could be what would be great what would be I think so that's one thing is like you know ask yourself with what would be great and try and stick to that as opposed to like working your way down and we kind of ideated around what would be great that came out with a bunch of answers. Then we did a bunch of prototyping to see if we could make it work. Right. So let's try putting it all together and you know and seeing how it can work. And then from those prototypes, you know, we said like okay I think we can make this work we'll put it into a product there was a bit of a uh a time where we were like not a hundred percent sure we were pretty sure it was going to work and we launched you know and I don't think we would do that again. Because the challenge with high volume manufacturing is is that once you get something out there, if it doesn't work, you know, the cost of bringing it back.
SPEAKER_00:So we were lucky because we got it cost of reversibility is too high on that is way too high experiment with high volume uh as well.
SPEAKER_02:Yeah yeah and you have a million pieces out before you can even like you know whatever you do anything right like there were times where you know people had you know tried to do the right thing but you know had unintended consequences.
SPEAKER_00:This is really interesting I want to I want to open this up because um in the world of organizational psychology I sort of borrow from Alex Osterwald here you know we talk about the explore phase and the exploit phase of a business. And so you're sort of saying that we've got things that work we've got our manufacturing belt. Yeah and you know as Toyota is not going to build this concept car on the belt. Yeah and I need to build the concept car over here, take what works from it, add it to the belt slowly and innovate that so that your exploit parts the parts that are capitally efficient have a return kind of come back and do a return. And then you've got these labs, these explore new ideas. Now what's interesting is that you typically see that in the Goliaths we find that if startups try and do that too early, what ends up happening is that they're actually chasing too many different products. There was a moment that that became right for you and what was that moment was it that the central product was returning enough profits that a lab could you know kind of innovating on the side here allowed for that.
SPEAKER_02:Yeah I think the you know again the challenge with hardware is you know is it's not fungible, right? So you know you can't really you know put things in and take them out or it you know it's it's hard to do right you're not releasing software updates and patches as quickly. And there's a cost, right? So if you say like for example like you know I'm gonna put in an air quality sensor that air quality sensor costs$3, like$3 is important to you in your bill of material and you know how you make your margins and all that kind of stuff. And so you can't say okay we're gonna put one in and then we'll take it out if it doesn't work or whatever it is like I mean you can but it it it's not super efficient and you know we do a few things but very few things right and so I think for us, you know, once we got into retail and we got into high volume where you knew that like coming out the other side like you know you're gonna be manufacturing hundreds of thousands of these, let's call it, then there's too much pressure in that cycle in terms of making the timelines because you got to have retail lined up and a bunch of other things lined up to make it all work, that you can't experiment. Right. It's just it's uh it'll you know cost of experimentation is too high. Yeah on the on the end of it. Yeah I mean if you have like a three month delay which is totally possible in experimentation phase or a six month delay, you know, you blow the timeline for the whole product which blows a lot of other things. And so having 90% certainty that whatever it is that you're doing is going to work before you even like you know do anything um was pretty important for us. And it does slow you down. But on the other hand, it just creates much better quality out the other side.
SPEAKER_00:That's a good uh so you've got you got Ecoby labs and all these ideas and experiments are running through that all these additional features are running through that you're using this filtering lens of is it going to be on the box like to try and and slowly but surely this this idea of the sensors kind of c comes to be what does that product journey look like in terms of what was the was there a technological innovation there that allowed for those sensors or was it simply hey this just hasn't been tried that the pieces are it's kind of Lego pieces are there. We just kind of put them together?
SPEAKER_02:Yeah I think um you know the sensors themselves, I guess you know high level they were Lego pieces, right? Like there were innovations clearly around them about how the sensors worked um you know how tracking worked for example so we had this idea that wasn't just temperature sensors or motion sensors. So we knew if you were in the room we had to do like a hysteresis like did you just walk into the room or did you just like are you actually sitting in the room and spending time there as an example and so and then how you know the sensors kind of worked because you might have sensors that were off by let's say two or three degrees you don't want things jumping by two or three degrees in terms of your control algorithms and that kind of stuff. There was quite a bit of nuance and smarts around how that all worked but I would say the base hardware there were Lego blocks. Now, you know again a thing that we learned was wireless connectivity is a challenging thing, right? And it's black magic and there's there science but it's not a clear science. And so really becoming good at uh at wireless, you know, is again you start thinking about like what are the the capabilities that our organization needs to acquire in order to be really good. You know, spending time thinking about what those are wireless was one of them.
SPEAKER_00:And what when when when you noticed a gap in the capabilities in the team, what was your strategy there? Was that to to send you know someone with adjacent knowledge to kind of try and explore that? Was it to hire some talent who has uh key expertise in that what was sort of the people side of that the team team perspective yeah both.
SPEAKER_02:I mean so we one of the things we did was we spent time with Amazon like really understanding like their process for wireless development. And so that helped us a lot um and benchmarking ourselves against you know their products um because we'd been working with um you know wireless contractor uh and like engineering contractor who did the design and they were like this is awesome this is great this is amazing right yeah it doesn't feel like it's great right but you know it's hard to know right it's hard again like that question of what good is right um and so then we started benchmarking our products against other products and we realized that actually we weren't all that great right and so then it was like okay how do we solve this and you know what does Amazon do? And so that was a good start and so they helped us a lot and uh because they came in as a they were part of an equity round a very short basically but um but again like that was that gave you access to them as a partners or that because um because they were launching Alexa we were big on the Alexa platform. So again like how do you compete with Google? One of the ways is you know you partner with you know Amazon or Apple or you know the the enemy of my enemy is my friend kind of thing. Right. We partnered heavily with Amazon. They were launching Alexa. We saw Alexa as being like a huge benefit to consumers and so you know as being a key feature that we wanted to to support they supported us quite a bit is interesting. I think the investment was actually like the beginning of the end kind of thing because you know they wanted to do a much bigger investment but they wanted control or certain kinds of control, let's call it right. And we didn't want to give that up and so you know the original investment was slated to be much bigger. It ended up being a very small investment. Because they couldn't um get the control. Yeah so that we didn't have to give up control. And I think that you know in retrospect uh you know started a bit of a souring relationship. Anyway, so that was kind of the beginning of the end of that. I think our Amazon relationship is still good. So it's maybe not the beginning of the end is too strong a word, but but it was definitely not as good as it was uh sort of 20 years.
SPEAKER_00:And what you thought it could be. Yeah. Yeah. So so in in the opening up this the sensors kind of this product innovation this becomes a really big swing for you for you. And I think you positioned it as the thermostat for homes with more than one room, which is funny and like cheeky and you know like I think a very clear distinction. Right. Like you call out the problem in that nice little marketing you know tagline which you know marketing taglines don't always work that way but that was such a like a nice clear product innovation and messaging that that really aligns. In addition to that product innovation there's a a slight other kind of software decision which is also to just be open platform. I think that's that's it like in reading a bit of your product strategy that seems to also be one of the the reasons you get this influx of customers while Nest sort of says well we're you know kind of closed we're working only with Google homes. Yeah. Right. So there's there's interesting how how does how did how did that product decision come to be sort of you know where was the thinking around that and how did you take advantage of of that?
SPEAKER_02:I think we thought about it you know pragmatically like how how can we win? And I think you know one of the things we thought was that the phone that you have in your pocket was going to be a big influencer on your smart home ecosystem. And so you know while Google obviously has a very strong platform with Android there was a whole Apple ecosystem uh that you know was 60% of the market in North America and probably higher penetration in our core demographics. And so um you know winning with Apple you know was a big deal. And so supporting uh home kit was important and and these companies were getting into the connected home ecosystem. So they didn't know a lot about thermostats, right? So we helped both Apple and Amazon write the connected home spec for their thermostat portions, you know, which helped them and and definitely helped us. And so you know the Amazon relationship was super important for us as was the Apple relationship and and and we became kind of like the you know if you're in the Google ecosystem, you know, buy nest if you're in the Apple ecosystem buy EcoB, which was you know which was phenomenal for us.
SPEAKER_00:I mean that that brand positioning with Apple's brand also really helps, right? That's like it's like your Apple's choice.
SPEAKER_02:And they put us in Apple stores and you know a whole bunch of other stuff which had you know huge halo effect on uh on on us and the product.
SPEAKER_00:Yeah yeah that's uh so the tide starts to turn what's the indicators for you that that you get it you get that momentum but how's that feel? How's that momentum feel? How's the team doing what are some of the team decisions?
SPEAKER_02:Yeah you know that was like a phenomenal period for the company because we're you know we're growing and we're getting better. When you know if you look at sort of the the way the market went right when we started Honeywell had like I don't know 60% market share something like that. You know and then there were a bunch of other people then we came in and you know 1% share 2% share 3% share we're sort of slowly building right um and then Nest comes and Nest takes 80% share overnight. And uh and so then Nest has 80% share right uh and we're now like at five or six percent or something like that. Right. And then um you know E2B3 comes out and uh centers and you know we have much better differentiated positioning and you know and then we start to grow. And so you know by the end of it I think Ness is about a 50% share. We were about 30% share Honeywell was probably like 10 or 15% share and that was like the market basically we were ascending and and so that was really good and our competitors were generally descending. And so um while we were still the number two brand so it felt really good and and you could feel the momentum.
SPEAKER_00:Yeah. And let's talk about I mean the team the team dynamics the culture you've got an evolving team dynamics and an evolving culture. Right the culture of the early days where Nest comes out and you're sort of surviving. Your goal is survival to last long enough to figure out your next step, right? And then the culture during this this sort of upswing we talk a lot about team dynamics at Unicorn Labs and we talk a lot about how managers and founders affect those team dynamics. How much intention did you do did you have around team dynamics and maybe differently at different stages you shared with me a bit earlier, you know, at one point when you go from 200 employees to you know 400 you sort of saw it and sensed it more because you've doubled the the team so the culture now is so much more but maybe let's look at those stages and would love just a reflection on some of the core elements.
SPEAKER_02:Yeah I mean I think um you know probably most what we did was formalize it. Right. So I think like for a lot of entrepreneurs when you're you know up to a certain size, you know you're you're interviewing every person. And so you kind of interview for culture um kind of you know just intrinsically right it's just something you do and you got a feel for it and like you know whether this person's going to fit or not. You know, then you stop interviewing everyone and then then you're kind of relying on other people to uh to do it. And Tony say used like you know I hire people based on whether I'd like to go uh out for a beer with them. And I think that is the worst way to hire someone because you know when you look across your organization like who somebody would like to go out for a beer with is like completely vastly different. And so that feels to me like is not a good way. And and um you know it comes in in a bunch of other ways. And so what we really tried to do was like first of all say like here's what's important in our culture, which is what you know what we value what we reward. Right. And then that went into our employee review process. So you know there was obviously like a you know job skill portion but a sort of a value uh portion was important you know and and so it gave you the chance to talk to your manager about those different things and how you fit into it. And then also in the hiring process right and so in the hiring process, you know it was part of our scorecard and again you had job competencies but then you had sort of like the the value competencies and you know the assumption is is that like you know we're all good hiring people, right? But but I think that the data shows that people are actually horrible at hiring people. Anyway and so and so how do you you know shift the odds in your favor um you know and I think at least like one of the realizations to me was it came out of an interview and I realized that people were interviewing for like completely different things were important to them versus to me. And I didn't I didn't I I just thought you know we all think the same thing like you know we're hiring a uh you know a controller or something like that, right? Like that's a controller like are we all asking for the same things? No they we were like way off base. And there's that book Top Grading which there's lots of parts I don't like about it. Top grading top grading by GH Smart anyway. And I don't love everything about it but but one of the things they talk about is is this idea that you know past success is the best predictor of future success. And so this idea of understanding like what people have done that's been you know truly extraordinary or great or good or you know whatever your level of bar is and understanding what that is is really really valuable to understanding and and and and again when we talked about you know interviews and hiring people were always like oh I like you know I like Mary. Yeah she seems pretty good you know and you're like okay you know what do you like about her? Well you know she's been an accountant before and you're like okay but you know and so kind of getting to like you know so you know one of the things that we that that was part of our values was initiative as an example. So like give me an example of when Mary took initiative you know and you know and then let's talk about what that thing was and decide whether we think it's a good thing or a bad thing or you know let's turn the top 10 or you know whatever it is, right? But at least you can talk about something other than like my gut feeling was that you know this person was reasonable at that kind of thing. Right. And so how do you tease those things apart?
SPEAKER_00:Yeah. I like that. So so one of the core focuses for you in building the culture was really a focus from a CEO level as to who we're hiring.
SPEAKER_02:A lot of it's who we're hiring I think you know and then again it gets to this you know where are we going to invest right and so it gets into your strategy. Where are you going to invest? And so you know and those took small and and large things. So for example we had a Let's be great program everyone in the company had$1500 that they could use for books, education, whatever they wanted as an example we had a library, right? And so you know the idea of having a physical library with books in it, you could put books in it, you know, all these things that you know kind of said we're learning and experimenting. One of the things we did in our office design, we really tried to focus our office design on collaboration. So if you walked into our office, first of all everything was whiteboard paint. So you could just like jot down an idea wherever you are all the high hallways were super wide so you could walk like three or four abreast and have a conversation. We put a our lunch area right in the middle and it sort of centered on this idea that people have been meeting in town squares for forever. And that's where you went to get the news and to see people and all that kind of stuff. And so we created like a town square and then the idea of town square with like shop windows on the town square where you had these like interesting stores and things like that. So we put our hardware lab like right in the middle of the town square. And so you could look through a glass window and you could see all the 3D printers and like all the prototypes we were building and all the stuff. People were like, no we're gonna give away all the secret sauce and all this like no no no it's like this is like you know showing people that we're like innovation business, get excited about things, ask questions like what do you think that is like you know and so how do you create an excitement engagement? And I think you know again that's where sort of like that idea of like you know value, culture and strategies, you know, the more of these things that you can say these are important to us. This is where we're investing and vice versa we're not doing some other things. And there were definitely some other things that we didn't do. So for example like RSP contribution we did not do right and people were like you need RSP matching contribution or whenever we get good people I'm like you know which you know which$500 on education or$1500 on RSP contribution. And other people can decide like you know what's right for them. Yeah but for me it said like hey these are the things that are important and we're trying to send a signal and a message that you know these things are important.
SPEAKER_00:Yeah I like that. I think that's that I think the the learning culture piece you've doubled down on that with the learning fund with the books with the just having it out in front of people. Yeah right I think to to to to use the different tools or the 3D printers or so on and so forth. Right.
SPEAKER_02:Like and then to take some risks on some new technologies and some new things and you know not just in um you know in the uh in the product side but also for example like training contractors like that was a new thing like hey let's try this out let's see if it works and you know different ways to really experimentation culture.
SPEAKER_00:Yeah and that's what I mean that comes back to the labs here. That really allows you to operate here and and have this experimentation culture in addition. Yeah. So so let's bring this sort of to its to its climax you know you've got five years before Nest really starts to follow innovation. And that's a real moment of pride like okay the the the the big guys have followed us in terms of the innovation um I'm sure that restabilizes some parts you know maybe they they they like in terms of market share but you continue to do really well what happens post them following your lead how's your team feel when they sort of follow your lead what does that next phase look like yeah I mean I think you know that's probably another way that you know startups are different from big organizations, right?
SPEAKER_02:And so, you know, I don't know what the feeling was inside Ness but from outside my perspective was like people get bored and they move on right if you're in Google, you know you're trying to become you know and you're the VP of this you're trying to become the executive or senior VP of that or something else. And so you know there's there's a new shiny object inside Google where you're trying to go. And so you know I think their challenge is like how do we keep people excited and about this thing. Right. And they have people who are moving through that organization right who are now like my guess is I don't want to call them tourists but you know what I mean like they're they're they're here for a bit and then they're two years.
SPEAKER_00:It's uh like a lot of tenures a lot of VP tenures two years, 2.5 years and then they jump the next and what real impact are you having?
SPEAKER_02:Yeah and I think in a perfect world you've got the mission and the vision right and so within Google the mission and vision is you know is much probably different and bigger and you know they're they're they're tackling other challenges, right? And so um but within the Eco Beat this is it. Like this is the only thing there is right. And so I would hope it feels much more important and people are much more committed and therefore you know the competition in some ways felt like it got a bit easier. Like I'm not happy that they added sensors like I wish they hadn't of course but but you know what I mean? Like I it also felt like on some things they started like, yeah, I kind of give up. I mean and I think you know again one of the challenges for a big company like Google or Amazon or Apple or you know pure$200 billion business, you know, a$300 million dollar business doesn't do much for you. Right. Like or a you know$500 million or even a billion dollar business doesn't do much for you. You know, AWS is now whatever it is, I don't even know what it is, but it's like you know, it's tens of billions of dollars a quarter probably right. And so you know the thermostat business isn't right. It's just not the same strategic importance. Right. But if you have your mission and your goal and your core and your vision and you know that is you know 100% of what you do that's another good reason why you should be able to outcompete.
SPEAKER_00:So that takes you to this final stage where there's an interested buyer. Yeah acquired by generic yeah and so what are the what are the few years before that? And what makes you go with this partnership to get it to get acquired, to go with it and and you stay on as CEO for a few years. So tell me about that.
SPEAKER_02:Yeah so I think you know a few things like you know people always talk about exits and and exits is a is a thing that really uh bothers me because exit is a very VC centric way of thinking of the world and and um you know sure the VC exits they get their money back or whatever and they make their money and everybody's happy but um but for you the founder the the business doesn't exit that like the business keeps going right that's in isn't that that is interesting.
SPEAKER_00:Right we use the word exit.
SPEAKER_02:Yeah but no I don't know how they manage to co-op the world to like thinking of like Simon Sinek has this great book called the Infinity game where he talks about like you know you know chasing your mission and your mission really you know going on right and it it's not about you know individual things it's about how how to you know make sure the mission survives and thrives. And so you know that's really the way that we thought about you know the acquisition and not so much as an exit. And actually in retrospect I should have been much stronger in communicating that this is not an exit because there were a bunch of people in the company who were like okay my job's done see you later goodbye right which was uh which was unfortunate but I think you know and and one of the things that happened when we when we did informp was um you know we sold the business or we merged the business and and you know went public and and it was like okay that's an exit and you know wonderful isn't it great and you know you put some money in your pocket and then you watch them like take what you had built and you know put your heart and soul into and you know run into the ground two years later and you're like oh that was really disappointing actually right think you know here a lot of founders who are like oh I'm gonna build a business I'm gonna sell it and then I'm gonna start again and it's like maybe you know the the money is you know is nice it's short lived I think the the sort of the thrill of the of the sale and then and then watching you know what you built go into the ground is is is quite disappointing. And anyway, so all to say this was as part of sort of like the general acquisition and I think why it worked out so well was because you know we had a very similar vision for the future. There were lots of areas where you know we needed them and there were lots of areas where they needed us. And so that sort of you know mutual need I guess uh also made for a very good partnership if you will and a good transaction. And I think you know what was most important for me was that the business was going to thrive and survive. And then a lot of the Eco B people have taken more senior positions within Generac. And so I think it's gone very well at least I hope from for for both Side. Certainly for me, I you know, I love uh Aaron Jagfeld. I think he's a super smart guy and uh you know, nothing but great things to say about Generac. But a big part of that thought process was, you know, how do we make sure the business does incredibly well in the future? When we were looking at doing an IPO or doing another private fundraise, and the acquisition just seemed like you know, the best way forward given the other choices that we had to actually move the roadmap forward. To move the roadmap forward because we were going to need to raise some additional capital. There were some new markets that we wanted to go into. Um, you know, we talked a little bit about, you know, the energy markets, right? So energy, I think, is super exciting. It's like a, I don't know, multi-trillion dollar market that is going through rapid change. But as people know, the the thing about renewables is that they're not constant, right? And so that creates these tremendous volatility in electricity prices. So, for example, in Texas, if you can avoid the 50, 50 most expensive hours of the year, so 50 hours in a year, one week in a year, if you can avoid that, you can save$1,000 on a$1,500 utility bill. So two-thirds of your utility bill cost. And so if you think about that and you're an intelligent appliance like a smart thermostat, and you know that you shouldn't run during these hours, and they're not 50 continuous hours, no. 50 hours like, you know, plays through mostly the summer, but plays through different periods, you can save your customers a lot of money. And so thinking about, you know, renewables, what's happening on your roof, let's say, but then also what's happening in your home, are you home, or you're away, then you know, being a smart appliance and knowing, like, okay, odd, you're you're home now. So I'm gonna make a different decision than if I know you're not home, but energy's expensive, or maybe energy is free right now, right? And so there's all kinds of things that you can do to gain the system to create significantly better outcomes for customers.
SPEAKER_00:That's the theme that I kind of picked up on is so much more than a thermos. Like that that was the that's the mistake that people initially judging it was, right? Which is again takes me back to that I mentioned the Steve Bauman moment, so much more than a phone, right? You know, no one would pay$450 for a phone, no, but they'd pay for a computer in their pocket. Yeah. Yeah. And and what they're doing here is, you know, you're you're transforming the entire energy system in a home. Yeah. Yeah. Um, which is uh which is which is really cool to see. Bring this home and and end it off. Often when I do these David versus Goliath sort of story comparisons, you're looking at this battle and it's competitive and so on and so forth. I think what's beautiful about yours as I was researching it is when it's mission-based, both David and Goliath can live and fulfill the mission. It's not them against each other. Where's Nest today? Where the where are they in in that world? Like are they are they continuing to push innovation? Is there anyone else that's pushing the smart home innovation the way EcoB continues to?
SPEAKER_02:Yeah, I think they are. I think you know that that idea of like a worthy competitor. I think they're a very worthy competitor and you know, they're definitely pushing hard. Amazon is pushing hard, Amazon's in the thermostat business now. You know, they're they're pushing hard, you know, and the dynamics are are different. And so there's, you know, their new connected home standards uh called matter. So that creates new challenges and opportunities, you know, for eco-be in the connected home space as an example. And so anyway, it's exciting. And I think all of that's what what makes it an exciting place to be because it is not stagnant. And it may look, you know, kind of like again, like this idea of like, oh, just thermostat, who cares? Right. But um, you know, actually the market is, you know, there's just a lot going on. And, you know, maybe it's like the duck with, you know, above the water looks calm and not much happening, but under the water, there's like all kinds of stuff happening. You know, it's like that. And and you know, and and that's what makes it super exciting and dynamic.
SPEAKER_00:Well, Stuart, thank you. Thank you. This was this was really good. Lots of insight and tons of stuff that I think is extremely valuable for our audience. So thank you for being here, sharing your time, sharing your insights and your brilliance. Thank you. Super fun. That's fun.