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.

Episode Transcript

SPEAKER_00 (00:00):
You, you know, took calls, customer service calls
early on, right?

SPEAKER_02 (00:03):
I still answered customer customer calls.
So if you think about like whatGoogle, there's no way you're
gonna get a letter from eitherSergei or letter uh you know, or
or Larry, but but you know, anemail from the CEO.
Wow, that's pretty cool.
And you know, those go on Redditand blah blah blah.

SPEAKER_00 (00:15):
And I think that's that's brilliant because that's
what you you you used your sizeto advantage.
It's sort of what we can we kindof constantly say in these David
vs.
Goliath stories is that Goliathis too big to get to get a
letter.
Totally.
But when they hear from the CEOand they get on a call, there's
just so much weight to it.

(00:36):
Hello, Unicorn Leaders, andwelcome back to this season of
the Unicorn Leadership Podcast,where we're diving into the
David versus Goliath stories.
How small, scrappy teams withbig visions find a way to
outthink, outlast, and winagainst the giants.
My name is Fat Atab, and I amthe founder of Unicorn Labs and

(00:58):
your host here on this UnicornLeadership Podcast.
And today's story is one of myfavorites.
It's a homegrown Canadian storyabout this small little David
that ends up competing withGoogle and Honeywell.
It proves that innovationdoesn't just come from Silicon
Valley, but it can come fromthese Canadian winters with a

(01:19):
founder who simply wanted tomake things better.
My guest Stuart Lombard was onthat personal mission.
And I get to sit down with himand have this conversation where
he wanted to reduce hisenvironmental footprint.
He was a multi-timeentrepreneur, had done some
pretty amazing things.
And as he was in betweenjourneys, he realized that
heating and cooling made up morethan half of a home's energy

(01:42):
use.
And he wanted to find a way toreduce his own personal energy
footprint.
And so he starts to go aboutdoing it himself for himself and
realizes whoa, there's a there'sa huge problem here and an
opportunity.
And he comes up with this ideathat maybe we can make
thermostats smart, but no onereally likes the idea at first.

(02:03):
See, see thermostats are clunkyand confusing and they're
wasteful.
And there's a moment where hecomes home and it's freezing,
and he goes, Like, if I couldjust program this thing better
to be able to change with theweather and to be able to change
based on different heat pocketsand and coal pockets in my
house, we could do a lot better.
And that's the spark for EcoBee,a Canadian startup that went

(02:24):
head to head with Nest, whichends up being bought by Google
and getting a ton of funding,and the established Goliath of
Honeywell, who was worked withevery contractor and was in
every home.
Investors told him he was crazy,like 172 times as he kept track,
but he kept going, betting oncustomers instead of

(02:45):
contractors, betting on buildinga product that actually saved
people money and was easier touse, building open systems
instead of closed systems whereeveryone could integrate into
it.
And years later, that bet paidoff.
EcoBee became one of the topsmart thermostat brands in the

(03:05):
world and eventually wasacquired for$770 million.
This is a story of how onefounder turned purpose into
product and frustration intofuel and built a company that
forced the giants to change intheir way.
Um, Stuart, I'm excited.
I'm excited for thisconversation because it's
someone you've read about, abiography you've read about, and

(03:27):
then you get to meet them.
That's sort of how I feel.
Yeah, I've been reading yourstory, I've been digging through
the internet, finding differentthings to try and piece together
the E.
Kobe story.
And I've got questions because Ithink when you read it and you
read in between the lines,you're trying to figure out what

(03:47):
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 thisDavid versus Goliath story and
this theme of how small butmighty teams overcome the odds.
And your David versus Goliath isinteresting because you you
actually show up on the scenewith some really legacy

(04:10):
Goliaths.
And then as you build yourtechnology, a big juggernaut
Goliath sort of walks in andsays, I'm interested in this
space too.
Well, let's let's go back andlet's tell the story from the
beginning, try to get a sense ofit.
Um uh I I overly wrote thenarrative here of this like
moment where you come home to afrozen house and and and maybe

(04:31):
there's this aha moment there,but you've you've also told me
that the aha moment sort ofbuilds, and that's sort of
actually the where it cascadestoo.
So, what where's the origins ofthe idea of EcoBee?

SPEAKER_02 (04:42):
I think, you know, the origin story was really um I
was working as a partner at aventure capital firm.
Um, you know, woke up one dayand decided not what I want to
do with the rest of my life.
Uh, and so I quit and I um, youknow, had some time on my hands,
so I said, like, okay, I'm gonnatry and, you know, figure out
how to reduce my environmentalimpact.
And uh so went out and I bought$26,000 of solar panels.
I was on my way to buy a ToyotaPrius.

(05:04):
My wife was like, honey, thisgoing green thing is gonna break
us.
Um you know, and so from therecame the insight that heating
and cooling is 40 to 60 percentof your home's energy.
So actually better managing yourheating and cooling is the best
thing that you can do.

SPEAKER_00 (05:17):
Um where does where does that where does that
interest for you aroundenvironmental consciousness come
from?
Because that so you go, youknow, you're at the you're at
the VC, you're you're workingthere, you decide to to to take
some time away and and dive intothis.
But that means that passion hasbuilt for that curiosity, that
that interest.
Where does that come for you?

SPEAKER_02 (05:35):
Yeah, my dad grew up in a small town of probably
like, you know, uh, I don'tknow, maybe a hundred people in
uh upstate Michigan, middle ofthe woods.
His father ran a lumber millthere.
Uh and so, you know, we werealways outdoors.
Outdoors.
Right.
And uh, you know, he was a bigfisherman, and so he would take
me fishing with him, um, which,you know, at the time I don't

(05:56):
know if I enjoyed it that much,but now I do.
But we did some interestingthings.
Well, one of the things we didwas um my dad was very uh
self-sufficient and he felt likehe could build anything.
And and so he did.
And so one of the things webuilt together was a collapsible
canoe because he wanted to beable to take his canoe with him
wherever he wanted to go.
And so he had this idea that Icould build a canoe, I can fit
it into a briefcase.

(06:17):
It was a very large briefcase.
We built like tents, we builtlike, you know, whatever it was,
like, you know, he's like, youdon't have to go to a store and
buy that.
I can make that.
Well anyway, but that also likeyou know had an impact on me in
terms of you know, that ideathat you can, you know, that you
can make things, that you can dothings that, you know, um
anything sort of possible kindof thing.
Yeah.

SPEAKER_00 (06:36):
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 inherentwith your family, this outdoorsy
environmental love for nature,love for uh uh for this
beautiful planet that we're in.

SPEAKER_02 (06:53):
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 Ihelp improve things?
I'm hugely optimistic about thefuture because things are uh,
you know, you know what?

SPEAKER_00 (07:05):
Tell me, tell me about that because I don't want
I I actually want let's let's gothere because that's an
interesting place for us tostart because I would say
there's a lot of people who arenot.
There'll be a lot of people wholook at the situation we are in
environmentally and the politicsaround it, and especially how
the politics has shifted aroundit and are actually quite
dystopian about it.
Right.

(07:25):
Um, I'd like to be optimisticabout it.
So tell me what that view.

SPEAKER_02 (07:29):
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, youknow, one of the things we
talked a lot about at Ecobee wasthat, you know, historically
with green what I will callgreen products or
environmentally favorableproducts, there is sort of this,
you know, it costs more and itdoesn't work as well, right?
But I think actually thatsustainable products cost less

(07:52):
and work better.
Um, and so if you take, forexample, electric vehicles, in
China, an electric vehicle nowcosts 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, theygot a lower center of gravity,
they handle better.
They, you know, less movingparts, less moving parts, less
maintenance, less cost.
Um, and so, you know, I thinkit's only a matter of time

(08:15):
before, you know, electricvehicles take over.
It's 52% of car sales in uh inChina.
It's 27% of car sales in Europeright now.
And so yeah, so there's EVs, youknow, the next one on a consumer
basis is really heat pumps.
Heat pumps are already betterthan uh than uh, you know, gas
furnaces, for example.
Um, you know, they're four timesmore efficient than uh than even

(08:37):
the most efficient gas furnace.
Um, you know, and so as you sortof electrify things, um, good
things happen.
And then on the other side, onthe generation side, um, solar
power is already the cheapestpower anywhere.

SPEAKER_00 (08:49):
Okay.
So you sort of have this generalsense of consciousness around
the environment because of yourupbringing, because of being a
fisherman with your father,these trips, these canoes.
You have this general sense ofbeing a builder.
Um, what what were you doingbefore the venture capital firm?
Where did you take a few stabsat entrepreneurship?
Did you build some of your ownstuff?

SPEAKER_02 (09:10):
Sure.
So um, you know, I'm engineeredby training, studied math, uh,
went to work at a company calledCapital.

SPEAKER_00 (09:18):
Well, you understand the thermodynamics of it all.

SPEAKER_02 (09:20):
Went to study, uh, sorry, went to work at a company
called CA Electronics.
So one of the CA Electronics isan amazing Canadian company.
Um, you know, and they builtflight simulators.
Used to have 80% of thecommercial flight simulation
business.
And um, you know, you go intotheir factory and they had these
massive boxes that were the sizeof like, you know, a two-car
garage, but it's up on stiltsand it goes up and down.
And what was very cool when Istarted there in the late 80s

(09:43):
was that you could get yourpilot certification for a 747
without actually ever flying ina 747.
And they were really the firstones to be able to do that.
It was a super cool company.
Um, and the problem with civilaviation is that it's a boom
bust market.
Like, you know, it's sometimesit's great.
And then, you know, for years,like, you know, they would sell
like, you know, 120 simulatorsand then they would sell like

(10:05):
four, right?
Because the market was just boombust.
So they were trying to uh extendinto other areas.
One of them was um energydistribution, and they built
control systems for electricdams and cities who wanted to
distribute, you know,electricity through the cities.
And that section of the businesswas so messed up, right?
And so nobody, nobody wanted tobe in that section, right?

(10:27):
And, you know, one day they'relike, hey, we need someone to go
to China to go run this projectin literally right in the middle
of China.
If you took a map of China andyou 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 soundsreally cool.
I'll put my hand up and do that.
And um anyway, and so I went andI I worked on that system and I

(10:47):
learned quite a bit.
Went whenever wherever there waslike disaster, that's where I
went because disaster wasopportunity.
And it gave me responsibilitythat I, you know, at 24 I had
150 engineers working for me,not because I was qualified, it
was completely unqualified, butbecause nobody else wanted the
job.
Because I've read because I putmy hand up.

SPEAKER_00 (11:07):
And I was like, I'll go to this rural China.

SPEAKER_02 (11:09):
Like I, you know, like I was super cool.
Like, why would you know?
And and it's amazing becauseChina is so different now.
I remember thinking like, youknow, China will never catch up.
Like there were probably like ahandful of cars, like seven
cars, like because people justdidn't have cars.
Everyone was on bikes, right?
It was like it was a totallydifferent world.
And then I went back in 2000,you know, call it 10 years

(11:31):
later, and it totallytransformed, right?
Like just, you know, modernskyscrapers, cars everywhere.
Like it did just like it whatChina accomplished is truly
incredible.
Growth there, yeah.
Um anyway, so that's where Istarted.
But one of the problems with CElectronics was that I had this
horrendous boss, and he was sohorrible that I had to quit,

(11:53):
right?
And um, you know, usually peoplewho say, like, if you had a
horrible boss, that's a horriblething.
But for me, it was uh, you know,it was good because it forced me
to quit.
So I was walking out the doorserendipity.
This guy that I'm that I used towork with says, like, hey, you
should really check out thisinternet thing.
So this is 1994.
Mark Andreessen was still astudent at the University of
Illinois.
Um, you know, there were no webbrowsers.

(12:14):
And I'm like, okay.
And anyway, I go off to awhistler and uh go skiing for
six weeks.
And uh while I'm out there, I'mlike, geez, if I watch another
episode of The Simpsons, I'mgonna shoot myself.
And so, you know, go back homeand started one of Canada's
first internet serviceproviders, which we built into
Canada's largest internetservice provider, uh, took it
public in 1995.

SPEAKER_00 (12:35):
What was the name?

SPEAKER_02 (12:36):
Uh so the company that went public was called
iStar Internet.
My company was InforM.
So we merged three companiestogether 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 podcastabout like how bad things can
get, that was like the Keystonecops and the the stories I could

(13:00):
tell you, I don't think youwould even believe, but uh it
was true.
Anyway, so we left.

SPEAKER_00 (13:05):
And but this is good, you this is where your
story is forged, right?
Like this is sort of what I, youknow, kind of uncovering what in
these David vs.
Glide stories is who are thesefounders and and how are they
forged in the fire of it all?
And so you've got this buildermindset that's environmentalist
in your upbringing.
You have this engineeringmathematical mind that you study

(13:27):
and you spend again at 24,you're in, you know, you're in
China with 124 engineers workingfor you.
So you you you develop skillsjust because you have to and you
have no choice.
And then you go off and buildyour first company and and a
bunch of mergers andacquisitions, a bunch of roll
up, and you learn manage moremanagement and business by fire,

(13:50):
and and and you have some earlysuccesses, but also some really
difficult moments on onmanagement and what it looks
like to actually align people ona single vision of where things
are going.

SPEAKER_02 (14:00):
Yeah, yeah, yeah, yeah.
I did it was not good at that atthat time, that's for sure.

SPEAKER_00 (14:03):
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'spretty cool.

SPEAKER_02 (14:09):
And so my head exploded and I was like, okay, I
quit.
And uh at the time, JohnAlbright, who was the uh venture
capitalist who put that role uptogether and and and helped us
go public and funded it, youknow, he asked us to help him
and he was looking at deals.
And the idea was he would do aninvestment and and we might
become the co-CEOs of the nextcompany.
And so we and he invested and webecame the co-CEOs of a company

(14:31):
called Isolation Systems, whichbuilt virtual private networking
equipment, which allowed you toencrypt your data, send it
across the internet, which atthe time was a lot cheaper than
using private lease lines, whichis what most people were doing.
Um and so we built that businessum and successfully sold it to
uh a company out of Bostoncalled Shiba, who was in the
modem business.
They were trying to get into thenetworking business.
Um, and that was great.

(14:51):
Uh, you know, that was fun, Ithink, because it it gave me the
opportunity to see how uh, youknow, 500 people build companies
versus you know the world.
And then, you know, fast forwardto 2007, after years, I was
like, I don't want to do thisanymore.
And uh and so I quit and thenstarted eco being.

SPEAKER_00 (15:06):
That's really cool.
That's a really cool background.
I think that's that'sinteresting.
It's fascinating to see all thedifferent pieces, the you know,
time spent as an engineerbuilding, the time spent as a
first-time entrepreneur kind ofmerging, getting that uh, you
know, to an IPO, then time spentas a you know, co-CEO in terms
of management, and then just thebreadth of companies that you
get to see.
So you leave, you've got thishunch for being environmentally

(15:29):
conscious, you start investingin that in your own home, in
your own personal life, and yourealize that the biggest
opportunity to reduce yourfootprint is your elect your
electricity at home.

SPEAKER_02 (15:42):
Yeah, then you're you specifically manage you
better manage your heating andcooling.

SPEAKER_00 (15:46):
Yeah, better managing your heating and
cooling.
And um what's what the wheredoes where does that rabbit hole
take you?
But the moment between decidingI'm doing this for myself to the
moment you realizing there's aproduct here and and and there's
a there's a gap in the market.

SPEAKER_02 (16:00):
Yeah.
Yeah, I mean people say, like,you know, what do you do?
Wake up one morning and decideyou're gonna start a thermostat
company.
And I was like, yeah, prettymuch.
Yeah, yeah.
Um uh, you know, obviously wedid some market research and
stuff like that.
And, you know, I think the youknow, you could clearly see that
the products in the in themarket weren't internet
connected, they weren't smart,they were difficult to use, like

(16:20):
all that was well known.
Um, and so you know, could we dobetter?
What if we could use math andscience?
What if we could use data likeenergy prices and weather and
you know, how much better couldwe do?
Uh and so I think we had a goodview as how we how we could
solve a better mousetrap.
You know, we just work on themarket sizing and, you know,
determine the market was bigenough and uh, you know, and

(16:42):
that the impact that we couldhave would would be good.
And then, you know, beyond that,it was uh, I mean, it was funny
actually, because when we we hadfour original uh co-founders, uh
so myself, Mark Malchiondo, JohnMetzelar, and Brian Parkinson.
And uh John was our our hardwareguy because we knew nothing
about hardware.
And uh so we go out to visitJohn, and John's like, okay,
which one of you guys is theHVAC guy?

(17:03):
And we all look at each otherand we're like, there isn't one.
Which one of you guysunderstands consumer
electronics?
And we're like, nope, you know.
And uh not that I'd recommendthat's the way to start the
business, but you know, we hadno we had no expertise, right?
But we did have the belief thatI think that, you know, if you
can, you know, if you can pickup a book, you can read, if you
can learn, you can do a lot.

(17:24):
And uh and I think that sort ofum ethos really, you know,
helped us.
One of the things we thoughtabout a lot when we were
building EcoBee is how do webuild a learning company, right?
And uh, you know, if you thinkabout 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, youknow, you got a you have an
executive assistant, you're onlike the 44th floor of you know,

(17:46):
fancy office building, and yougot your own parking spot, you
know, when you're giving allthat up.
Getting all getting all themoney you need at the time,
like, you know, like uh, youknow, to start a thermostat
company, no one gives a shitabout thermostats.

SPEAKER_00 (17:57):
And they're not sexy.
Like you're not, you're not likeI'm starting like today, I'm
starting an AI company orwhatever, right?
It's not the sexy thing.

SPEAKER_02 (18:04):
Totally not sexy.
And then what are you gonna dosix months from now?
The implication really beingthat like thermostats are
already as good as they're evergonna be.
You can't do any better thanthis.
And, you know, as you sort offast forward, you know, you
know, we were talking about, youknow, AI and sensor fusion and
far field voice and you know,all kinds of technologies that
are in that product that uh, youknow, that make it that make it

(18:24):
very different than just athing.
And so I think, you know, theyou know, that idea of like how
do you create a learningcompany, how do you really think
about, you know, buildinginnovation um and continuing to
kind of you know move the ballforward, I think is is is is
really, really important.
And that kind of came from Ithink from that ethos of
probably a little bit arrogant,but you know, we can learn

(18:45):
things, we can do things, we canchange.
Yeah.

SPEAKER_00 (18:47):
Yeah, it's not, it's not, I don't want to say it's
arrogance because it's notarrogance that you know the
answer.
It's it's confidence that I canfigure out the answer.
Yeah like that I have the toolsto build my way through it.
So you get together with yourforefronters, like the you know,
you kind of put together yourlittle founding team, trying to
find people who'll beinterested.
Um, you know, I'm sure you yougo through a few.

(19:08):
And what's the first steps?
What's the first steps that youguys uh put together?
You do you do your marketresearch, you realize there's an
opportunity here, you get theseco-founders together.
Is it building the prototype?
Is it what's what's the first uhkind of months look like?

SPEAKER_02 (19:22):
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, wewe literally called up heating
and cooling contractors andsaid, Hey, I'm Stuart, I'm
working on this new product.
I'm really excited about it, I'dlike your help.
You know, do you mind if we ridearound with your uh with your
technicians?
Right.
And so we spent like the firstthree months riding around with

(19:42):
HVAC technicians, you know,picking their brains.
Um, and there were a few thatwere, you know, super, super
helpful and you know,foundational and helping us
think about the market and youknow what makes for a good
product and all that kind ofstuff.
And uh anyway, so so that'sthat's really how we started.
And uh then we built our firstproduct.

SPEAKER_00 (19:59):
And uh I love that ingenuity.
Like, I don't know how manypeople genuinely think Jenna
call up HVAC companies and say,I want to ride around and like
like I I think you say it socasually, but I've personally
worked with enough founders thatthat is just like that is so
that's brilliantly simple, yetso powerful.

SPEAKER_02 (20:17):
Yeah, I mean I think you have to you have to accept a
lot of rejection, right?
So there was like the firstcouple calls, I was like, okay,
people are gonna be like click.

SPEAKER_00 (20:24):
They're like, no thanks.
You're not you're not ridingaround.

SPEAKER_02 (20:26):
Yeah.
But I think um, you know,generally speak speaking, people
want to help.
Yeah, right.
And so I think, you know, itdepends on the way that you
phrase it, right?
If you're trying to sellsomebody something, then I think
they're naturally reticent andtheir guard is up.
If you're like, hey, I'm justlooking for some help.
Do you think you could help meout?
Uh, people generally want tohelp.
And not everyone, you sort ofhave to psych yourself up that
I'm gonna, you know, it's gonnatake me 50 calls to get, you

(20:48):
know, to get three or somethinglike that, right?
Like it's uh your success ratiois not gonna be that.
And there were lots of peoplewho were like, you're doing
what?
You're a loser, right?
But but you know, that's justpart of it.

SPEAKER_00 (20:58):
So you do some customer discovery by riding
around, you get some insights.
What do you do with thoseinsights?

SPEAKER_02 (21:04):
You know, they already went into the first
product, and you know, it'sinteresting actually because you
know, one of our um, you know,opportunities or challenges or
whatever it was was that we hadthis, you know, this twin.
And so Nest was our twin.
And well, you know, it was youknow, people used to say, like,
you know, uh, why can't you belike Nest?
Like, why aren't you just likeNest?
Right.
And that was like a dagger tothe heart, right?

(21:25):
You know, and and and I think,you know, the real insight there
was it wasn't that we were nottrying to be good, but we didn't
know what good was, right?
And that difference between, youknow, wanting to be good and
actually being good are twodifferent 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.

(21:46):
One was we we didn't really knowhow.
And then the second part wasthat, you know, we we set the
bar too low.
I tell people we were like, youknow, we were the champions of
the you know, North TorontoMinor Bantam Hockey League, but
we thought we were playing inthe NHL.
We didn't realize we were notplaying in the NHL.
And then Nest came out and Nestuh showed us that you know we
were not in the NHL, right?

SPEAKER_00 (22:05):
This is what this is what professional looks like.
Is what this is what innovationat the top tech companies look
like.
Yeah.

SPEAKER_02 (22:13):
What we learned was like you can't you can't make
compromises, can't makecompromises on certain things,
right?
That was an existential momentfor us, and that really forced
us to kind of like double down,think about what it takes to be
really good and then to becomereally good at those things.
And I think you know, one of themost rewarding things was that,
you know, the team wasconstantly improving, and that
you know, there were times whereyou're like, it's amazing.

(22:35):
Like you can just see that we'regetting better and better and
better.

SPEAKER_00 (22:38):
In those early moments of building Ecobee, when
do you go for when when do youfind yourself going for
investment?
Like how how early in thatjourney did you seek some
venture capital investment?
Was it some of it self-funded inthe beginning?
What was that what was that likefor you?

SPEAKER_02 (22:52):
Yeah, I funded like the very early parts of the
business.
Um, but because I had therelationship with John, John was
very interested in investing inthe business.
And then Tim Jackson was atFrench Capital Company out of
Waterloo.
Anyway, they both wanted toinvest in the business, and so
we did a three million seedround sort of six months in, and
that really started the ball.
And then we went from there.

SPEAKER_00 (23:09):
Now that worked out for you because you had the
relationships, but I read onlinethat the sort of subsequent VC
was really tough.
You know, I I had a quote here172 VC rejections.
I'm often told thermostats areboring.
That's tough because you youworth inventor capital.
You think if I'm if I'm you, Iwould have thought, like, oh,
I'll definitely get the capital.

(23:30):
Like I I have the network, Ihave the context, I have some
proven experience, and look atmy business plan, like I know
this works.
How does I guess this is this iswhere I sort of pair your
mission-driven drive with thiswillingness to take 172
rejections.
Like I think that that, youknow, how was that for you?

SPEAKER_02 (23:49):
Well, I think what you know, one of my favorite
quotes about venture capital isfrom Scott, Scott Adams, and I
think it's like venture capitalis the only profession where you
get paid an outrageous amount ofmoney to be wrong 90% of the
time, right?
And if you keep that in the backof your head while you're
getting rejections, I mean, foran industry, one of the reasons
I left actually is because likefor an industry that is wrong so
often, they are the most certainof themselves of anyone that

(24:09):
I've ever met, right?
And so I'm like, okay, you know,whatever.
Like, you know, we're gonnawe're gonna keep going.

SPEAKER_00 (24:16):
You don't see you don't see what I see.
You don't see the opportunity,the environmental opportunity.

SPEAKER_02 (24:20):
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 ayear, everyone's convinced their
business is going to infinity,and you know, like one of the
500 you see is probably going toinfinity.
So when we started, people werelike, you know, Stuart, nobody
wants a$250 thermostat.
Like, you know, just not gonnahappen, right?
And then Nest came out, and thenNest was all the rate, right?

(24:41):
And they had tons of publicityand you know, they did
incredibly well and all thatkind of stuff.
And then it was like, of course,everybody wants a$250
thermostat, but Nest has alreadywon.
And so, you know, it's a winnertake all, you know, you might as
well go home now, right?
And uh and it was interestingbecause before, in the
beginning, they looked at melike I was a moron, right?
And then like after Nest cameout, they looked at me with
pity.
They were like dead man walking,like you're dead, she just don't

(25:04):
know it yet, right?

SPEAKER_00 (25:05):
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, lowmoments and and ready to quit
moments, ready to throw it in?

SPEAKER_02 (25:17):
Yeah, we had low.
Yeah, I mean, we had lots ofthose.
I mean, I think you know, therewere like plenty of you know
existential moments.
I mean, one of the things when,you know, when Nest got
acquired, we had spent a yearworking with Google on an
integration, right?
And we were going to be theirthermostatic choice in this, you
know, connected home vision thatthey had.
And then literally like the weekbefore it launched, they called

(25:39):
me up and they're like, tomorrowwe're gonna announce that we're
uh acquiring uh Nest.
And uh all the work we've doneis off and thank you very much.
Click.
Like we just spent like, youknow, a good portion of our uh
that's a double ouch.

SPEAKER_00 (25:55):
Yeah, there's like a the partnership ouch, and then
uh I we now have a new bigcompetitor.
Yeah.
And were you you you were awareof Ness before Google purchased
them?

SPEAKER_02 (26:06):
Yeah, yeah, yeah.
No, definitely before becausethey they launched maybe two
years beforehand.
And so um, you know, and TonyFidel is an incredible
individual, and um, you know, hewas the father of the iPod and
significant contributecontributions to the iPhone.
And so, you know, I say he'slike the Sergei Buka of consumer
electronics, like he's like areal, he's the real deal.
Yeah.

SPEAKER_00 (26:26):
Um, and uh so we definitely So they've yeah,
they've got this powerpowerhouse founder, and now
Google and it's unlimited money.
How did you and the team feel inthat announcement in those
moments of you've seen how goodNest 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 warchest.

SPEAKER_02 (26:46):
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 (26:57):
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 (27:03):
So the moment Nest launches, I think like that was,
you know, that was probably theyou know, the lowest low.
There were plenty of lows, butthat one, that one was, you
know, was one of them.
Uh we're probably like 30 peopleat 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 teamsoldiered on, right?
And I think there weredefinitely some people who were
like, I I don't see this workinganymore.

(27:25):
But the core group, I think,stayed together, which was
amazing.
And then we figured out a way.
We figured out a way to, youknow, to continue to survive and
thrive.
And then, you know, fromcontinuing to survive, it became
like, okay, how do we getbetter?
And that really became like alearning thing, which was
incredibly powerful because, youknow, then everyone could see
it.
Everyone could see, like, wow,we're actually like good.

(27:45):
Like this is, you know, and theycould see what they'd done,
right?
And that sort of pride ofownership.
And like, you know, I was hereand I thought it was good, but
but maybe it wasn't quiteworld-class.
And then it was like, wow, likethat is that's good.
Yeah.
Uh, you know, I'm proud of that,right?
Uh and so uh, you know, thatcreated, I think, a huge kind of
slingshot, if you will, or muchmomentum behind the company

(28:06):
because we kind of went throughthis downside.
And then once you went throughthe downside, then you're like,
we can get through anything.
Like, you know what I mean?
Like we've, you know, this isbad 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 confidencethat, yeah, yeah, no, actually,
like, I think this can go.

SPEAKER_00 (28:23):
Isn't that interesting, right?
The the like surviving thelowest lows is actually often
the moment in our in our historyof like, oh, if I can get
through that.
What was what was your in in inthe moments of Nest's release
and the team feeling down aboutit, some people leaving?
I'm sure you and your foundersfeeling a level of anxiety.

(28:45):
What was your strategy?
What was your thinking?
I don't take you as someone whogets up there and does a big
motivational speech foreveryone.
Like, but what was like, okay, Ineed to, I maybe do need to
control the narrative for my ownteam a little bit.
Maybe I do need to talk to themabout what our strategy is or
what we're gonna learn fromthis.
Like how did you and yourfounding team react in what you

(29:07):
needed to build with the teamduring those moments?

SPEAKER_02 (29:09):
So I think we were in a bit of a tough position
because we were about to releasea new product.
Uh, we were maybe like sixmonths away from releasing a new
product.
And the question was like, okay,do we release a new product,
which we kind of knew was notgonna be wasn't gonna be dead on
arrival, but it wasn't gonna bea winner?
Or do we, you know, cut andswitch gears?
And we decided to keep goingbecause we felt like we couldn't

(29:30):
last two years withoutsomething.
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 becameimportant for us.
Uh, and uh, and then thatallowed us to continue, which
allowed us to build EQB3, whichis really sort of like the next
generation that um, you know,that took the company to a

(29:50):
totally different level.
We had this partnership withJust Energy, but to make that
work, we needed this low costthermostat or lower cost
thermostat.
And so um we completed it, theydid an equity investment.
investment into the business,which was which was fantastic.
So, you know, one of the thingsthat was fortunate is as we were
going through all these VCrejections, is some of our
largest customers invested inthe business.

SPEAKER_00 (30:08):
So during that difficult period partnerships
really help carry you throughduring that stage.
In in in in some ways from astrategic perspective, you know,
Honeywell sort of has strongchannel partners through their
contractors.
Nest sort of and you knowpositions itself as this the
iPhone of home, the glamour.

(30:31):
Where do you take yourpositioning when you when you
sort of see these come out?
Where did you go, okay, ifthat's happening, where does
EcoB fit into this?

SPEAKER_02 (30:40):
Yeah, I think maybe separate uh channel strategy
from product strategy.
So product strategy was reallyabout how do we win with
customers, right?
So when we thought about Google,um, you know, they were
spending, you know, the whispernumbers we were losing$600
million a year on the business.
And you know, they were doingSuper Bowl ads and NFL ads and
um you know they bought everybus shelter and every subway in

(31:01):
North America, right, whateverit was.
Like they had like they hadstuff everywhere, right?
And so we were like, we cancompete with that.
Like that's not yeah, yeah,yeah.
We can't, you know, there's noway we're gonna be able to spend
don't try and you know outGoogle Google with something we
said quite a quite a bit.
Our strategy was really aroundlike how do we draft behind that
advertising.
We felt it was still a researchcategory.
So people were going to like dotheir research.
And so we really focused onwinning with customers and

(31:24):
getting great customer reviews.
And so that was all about um youknow one having great customer
support, which we knew wassomething that Google was not
going to do.
You know, we had, you know, sortof internal measurements around
net promoter score, which wasreally our key tracking and
keeping our net promoter scoreabove 70 as a way to think about
like are we delivering forcustomers or not.
And then if we you know if wedidn't weren't maintaining 70,

(31:45):
then you know we're gonna goback and rather than building
new features, we're gonna tryand improve on whatever
customers you know seem to have,you know, what their biggest
pain points are.
And um you know and so thatworked out really well for us.
And one of the insights we hadwhich you know helps when you're
actually spending time withcontractors and riding around
trucks is, you know, we had thisgreat product we're like we've
built this internet thermostatit's gonna be amazing.
Control through your phone,blah, blah, blah, blah, blah.
Look how amazing your customersare going to love it.

(32:06):
They're like, we don't want tosell that.
Right.
And what we misunderstood wasthat you can have the best
mousetrap, but their businessmodel is totally different and
they're worried about customercallbacks.
So there's a problem with yourthermostat and a customer calls
me and I have to go out thereand fix it for them.
I don't get paid for that.
So what we did was we turnedthat around to it would be a
huge strength for us.
And so realizing that thesepeople were uncomfortable, they

(32:27):
also want to stand in front of acustomer and look stupid.
Right.
So if it doesn't work and it'syou 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 atraining program where we uh
created mock-ups of actual likefurnaces and air conditioners
and we would go out to acustomer site and have many of
them and everyone would get athermostat and they could

(32:49):
practice installing it on thesystem so they could get good at
it.
Right.
And then they got to take thethermostat home with them and
install it in their own home.
And then they had it in theirown home in their own phone.
Right.
And then when they went into acustomer site and customers said
like which one of these internetthermostats should I get
contractor was like I've got oneon the phone.
This one's the best one by far.

(33:09):
And that uh you know thatcreated huge, huge dividends for
us.
And again that was somethingthat no one else did for
whatever reason.

SPEAKER_00 (33:16):
No.
You've you've got this you knowreal obsession over customer
support that I kind of notice inthe work like you know some some
stories but you you know tookcalls customer service calls
early on right that I stillanswered customer customer
calls.

SPEAKER_02 (33:30):
So then if you think about like what Google, there's
no way you're gonna letter fromeither Sergey letter uh you know
or or Larry, but but you know anemail from the CEO.
Wow that's pretty cool.

SPEAKER_00 (33:38):
And you know those go on Reddit and blah blah blah
blah blah blah blah and you andI think that's that's brilliant
because that's what you you youuse your size to advantage.
Just sort of what we can we kindof constantly say in these David
Rissa Goliath stories is thatGoliath is too big to get to get
a letter.
Totally.
But when they hear from the CEOand they get on a call there's
just so much weight to it.
Yeah there's so much what'sbetter and you're like I'm not
really doing I I would say thesame thing my customer service

(34:00):
report saying we just we'll getto this and we'll fix it right
but there's an element of ohthey care.

SPEAKER_02 (34:06):
Yeah yeah totally well that's the best is like you
know when somebody picks up thephone and they call and they're
like you're like hello EQBsupport and they're like who am
I talking to?
How are you talking to Stuart?
I'm the CEO they're like whatthat's like the best and uh you
know same with same withcustomer emails but the other
benefit too is that you know Ithink a lot of companies
customer support is consideredlike you know the backwater and
you know kind of like you knowthe just the you know the the

(34:29):
bottom of the barrel kind ofthing.
Nobody cares about it and andit's like kind of a dead end
job.

SPEAKER_00 (34:32):
And all staff want to get out of it.
Yeah.

SPEAKER_02 (34:34):
And so and it's a hard job, right?
But I think if the if thebusiness values customer
service, you know, we had somegreat customer service leaders
and they show that you know thisis important and and you know we
invested in people's learningand and and stuff like that.
Like Andre who runs customerservice now is she's she's
unbelievable.
She's the best manager I thinkI've ever met in my life.
But it created you knowtremendous loyalty in that group

(34:57):
certainly improved our scores.
And then when we thought aboutour brand it was one of our core
pillars because again we knowthat like installing a
thermostat can be dauntingdepending on who you are.
It's the beginning of yourconnected home journey we want
it to be a good one.
And you know certainly we saw itas a place where we could
differentiate ourselves andagain thinking about competitors
they were not they weredefinitely not focused there.

SPEAKER_00 (35:18):
Yeah that's really cool.
And and it comes to productinnovation really in your case
you've got this customer servicestuff you've got these little
not these little but you've gotthese brand wins and you've got
these service wins but reallythe shift for EcoB becomes this
sort of product innovation whichis the sensors, right?
The additional before we get tothat how did the insight for
that come?
Where did where did the insightfor this product innovation,

(35:40):
these sensors come from or howdid that come to be?
Because you've you're buildingthis learning organization.
And so I'm sure these ideas areflowing, they're bubbling.
Walk me through that.

SPEAKER_02 (35:49):
Yeah I mean I think again like goes back to I think
you know being customer focusedand I think a lot of other
founders have talked about youknow being customer focused and
you know I used to send the thecustomer emails to everybody on
the team like everybody, right?
So everybody could see what ourcustomers were saying because
you know I think it's easy to bekind of like detached from your
customers but not when you'reactually like listening to them

(36:11):
on the phone or or reading theiremails.
And anyway people said like loveyour product it's amazing but
you know I have these hot andcold spots in my house and if
you could solve that for me Iwould love you forever.
And uh and so that kicked off athe campaign to figure out how
could we solve hot and coldspots in your home.

SPEAKER_00 (36:26):
Because essential thermostat, you know, you've got
one room that's exactly one roomthat's hot or comfortable in
your hallway but it's notcomfortable yeah wherever it is.
And that's when people fightover the thermostat like I feel
like that's a good ad like youknow like you know my wife
always wants to turn it up and Iwant to turn it down.

SPEAKER_02 (36:42):
Totally and so that was that you know that was
totally transformational for us.
And you know that's another goodlesson is that like it takes
people a long time to followright it took Google five years,
I think five or six years tofollow and honeywell similarly
so we had a long time where wehad like that clear isn't that
interesting we're often soworried about that as founders.
Yeah.

SPEAKER_00 (37:00):
We're worried that like oh if we innovate the next
yeah like the big the big guysthe Gawyits are just going to
turn around and and take ouridea.
What we're seeing here is thatthere's a you're saying a five
year period where where you ownthat innovation.
So so you you realize this youknow they tell you there's cold
spots, hot spots, so you startto do some discovery around this
what what does that look like?
What does discovery look like?

(37:21):
What is the product innovationkind of process look like there?

SPEAKER_02 (37:24):
Yeah I think you know we sort of just ideated
what could be right like whatcould be what would be great
what would be I think so that'sone thing is like you know ask
yourself with what would begreat and try and stick to that
as opposed to like working yourway down and we kind of ideated
around what would be great thatcame out with a bunch of
answers.
Then we did a bunch ofprototyping to see if we could
make it work.
Right.
So let's try putting it alltogether and you know and seeing

(37:48):
how it can work.
And then from those prototypes,you know, we said like okay I
think we can make this workwe'll put it into a product
there was a bit of a uh a timewhere we were like not a hundred
percent sure we were pretty sureit was going to work and we
launched you know and I don'tthink we would do that again.
Because the challenge with highvolume manufacturing is is that
once you get something outthere, if it doesn't work, you

(38:09):
know, the cost of bringing itback.

SPEAKER_00 (38:11):
So we were lucky because we got it cost of
reversibility is too high onthat is way too high experiment
with high volume uh as well.

SPEAKER_02 (38:18):
Yeah yeah and you have a million pieces out before
you can even like you knowwhatever you do anything right
like there were times where youknow people had you know tried
to do the right thing but youknow had unintended
consequences.

SPEAKER_00 (38:28):
This is really interesting I want to I want to
open this up because um in theworld of organizational
psychology I sort of borrow fromAlex Osterwald here you know we
talk about the explore phase andthe exploit phase of a business.
And so you're sort of sayingthat we've got things that work
we've got our manufacturingbelt.
Yeah and you know as Toyota isnot going to build this concept
car on the belt.

(38:48):
Yeah and I need to build theconcept car over here, take what
works from it, add it to thebelt slowly and innovate that so
that your exploit parts theparts that are capitally
efficient have a return kind ofcome back and do a return.
And then you've got these labs,these explore new ideas.
Now what's interesting is thatyou typically see that in the
Goliaths we find that ifstartups try and do that too

(39:09):
early, what ends up happening isthat they're actually chasing
too many different products.
There was a moment that thatbecame right for you and what
was that moment was it that thecentral product was returning
enough profits that a lab couldyou know kind of innovating on
the side here allowed for that.

SPEAKER_02 (39:25):
Yeah I think the you know again the challenge with
hardware is you know is it's notfungible, right?
So you know you can't really youknow put things in and take them
out or it you know it's it'shard to do right you're not
releasing software updates andpatches as quickly.
And there's a cost, right?
So if you say like for examplelike you know I'm gonna put in
an air quality sensor that airquality sensor costs$3, like$3

(39:47):
is important to you in your billof material and you know how you
make your margins and all thatkind of stuff.
And so you can't say okay we'regonna put one in and then we'll
take it out if it doesn't workor whatever it is like I mean
you can but it it it's not superefficient and you know we do a
few things but very few thingsright and so I think for us, you
know, once we got into retailand we got into high volume
where you knew that like comingout the other side like you know

(40:09):
you're gonna be manufacturinghundreds of thousands of these,
let's call it, then there's toomuch pressure in that cycle in
terms of making the timelinesbecause you got to have retail
lined up and a bunch of otherthings lined up to make it all
work, that you can't experiment.
Right.
It's just it's uh it'll you knowcost of experimentation is too
high.
Yeah on the on the end of it.

(40:30):
Yeah I mean if you have like athree month delay which is
totally possible inexperimentation phase or a six
month delay, you know, you blowthe timeline for the whole
product which blows a lot ofother things.
And so having 90% certainty thatwhatever it is that you're doing
is going to work before you evenlike you know do anything um was
pretty important for us.

(40:50):
And it does slow you down.
But on the other hand, it justcreates much better quality out
the other side.

SPEAKER_00 (40:55):
That's a good uh so you've got you got Ecoby labs
and all these ideas andexperiments are running through
that all these additionalfeatures are running through
that you're using this filteringlens of is it going to be on the
box like to try and and slowlybut surely this this idea of the
sensors kind of c comes to bewhat does that product journey
look like in terms of what wasthe was there a technological

(41:18):
innovation there that allowedfor those sensors or was it
simply hey this just hasn't beentried that the pieces are it's
kind of Lego pieces are there.
We just kind of put themtogether?

SPEAKER_02 (41:27):
Yeah I think um you know the sensors themselves, I
guess you know high level theywere Lego pieces, right?
Like there were innovationsclearly around them about how
the sensors worked um you knowhow tracking worked for example
so we had this idea that wasn'tjust temperature sensors or
motion sensors.
So we knew if you were in theroom we had to do like a
hysteresis like did you justwalk into the room or did you
just like are you actuallysitting in the room and spending

(41:48):
time there as an example and soand then how you know the
sensors kind of worked becauseyou might have sensors that were
off by let's say two or threedegrees you don't want things
jumping by two or three degreesin terms of your control
algorithms and that kind ofstuff.
There was quite a bit of nuanceand smarts around how that all
worked but I would say the basehardware there were Lego blocks.

(42:09):
Now, you know again a thing thatwe learned was wireless
connectivity is a challengingthing, right?
And it's black magic and there'sthere science but it's not a
clear science.
And so really becoming good atuh at wireless, you know, is
again you start thinking aboutlike what are the the
capabilities that ourorganization needs to acquire in
order to be really good.
You know, spending time thinkingabout what those are wireless

(42:32):
was one of them.

SPEAKER_00 (42:33):
And what when when when you noticed a gap in the
capabilities in the team, whatwas your strategy there?
Was that to to send you knowsomeone with adjacent knowledge
to kind of try and explore that?
Was it to hire some talent whohas uh key expertise in that
what was sort of the people sideof that the team team
perspective yeah both.

SPEAKER_02 (42:52):
I mean so we one of the things we did was we spent
time with Amazon like reallyunderstanding like their process
for wireless development.
And so that helped us a lot umand benchmarking ourselves
against you know their productsum because we'd been working
with um you know wirelesscontractor uh and like
engineering contractor who didthe design and they were like
this is awesome this is greatthis is amazing right yeah it

(43:15):
doesn't feel like it's greatright but you know it's hard to
know right it's hard again likethat question of what good is
right um and so then we startedbenchmarking our products
against other products and werealized that actually we
weren't all that great right andso then it was like okay how do
we solve this and you know whatdoes Amazon do?
And so that was a good start andso they helped us a lot and uh
because they came in as a theywere part of an equity round a
very short basically but um butagain like that was that gave

(43:36):
you access to them as a partnersor that because um because they
were launching Alexa we were bigon the Alexa platform.
So again like how do you competewith Google?
One of the ways is you know youpartner with you know Amazon or
Apple or you know the the enemyof my enemy is my friend kind of
thing.
Right.
We partnered heavily withAmazon.
They were launching Alexa.

(43:57):
We saw Alexa as being like ahuge benefit to consumers and so
you know as being a key featurethat we wanted to to support
they supported us quite a bit isinteresting.
I think the investment wasactually like the beginning of
the end kind of thing becauseyou know they wanted to do a
much bigger investment but theywanted control or certain kinds
of control, let's call it right.
And we didn't want to give thatup and so you know the original

(44:19):
investment was slated to be muchbigger.
It ended up being a very smallinvestment.
Because they couldn't um get thecontrol.
Yeah so that we didn't have togive up control.
And I think that you know inretrospect uh you know started a
bit of a souring relationship.
Anyway, so that was kind of thebeginning of the end of that.
I think our Amazon relationshipis still good.
So it's maybe not the beginningof the end is too strong a word,
but but it was definitely not asgood as it was uh sort of 20

(44:41):
years.

SPEAKER_00 (44:41):
And what you thought it could be.
Yeah.
Yeah.
So so in in the opening up thisthe sensors kind of this product
innovation this becomes a reallybig swing for you for you.
And I think you positioned it asthe thermostat for homes with
more than one room, which isfunny and like cheeky and you
know like I think a very cleardistinction.
Right.
Like you call out the problem inthat nice little marketing you

(45:03):
know tagline which you knowmarketing taglines don't always
work that way but that was sucha like a nice clear product
innovation and messaging thatthat really aligns.
In addition to that productinnovation there's a a slight
other kind of software decisionwhich is also to just be open
platform.
I think that's that's it like inreading a bit of your product
strategy that seems to also beone of the the reasons you get

(45:26):
this influx of customers whileNest sort of says well we're you
know kind of closed we'reworking only with Google homes.
Yeah.
Right.
So there's there's interestinghow how does how did how did
that product decision come to besort of you know where was the
thinking around that and how didyou take advantage of of that?

SPEAKER_02 (45:42):
I think we thought about it you know pragmatically
like how how can we win?
And I think you know one of thethings we thought was that the
phone that you have in yourpocket was going to be a big
influencer on your smart homeecosystem.
And so you know while Googleobviously has a very strong
platform with Android there wasa whole Apple ecosystem uh that
you know was 60% of the marketin North America and probably

(46:02):
higher penetration in our coredemographics.
And so um you know winning withApple you know was a big deal.
And so supporting uh home kitwas important and and these
companies were getting into theconnected home ecosystem.
So they didn't know a lot aboutthermostats, right?
So we helped both Apple andAmazon write the connected home
spec for their thermostatportions, you know, which helped

(46:23):
them and and definitely helpedus.
And so you know the Amazonrelationship was super important
for us as was the Applerelationship and and and we
became kind of like the you knowif you're in the Google
ecosystem, you know, buy nest ifyou're in the Apple ecosystem
buy EcoB, which was you knowwhich was phenomenal for us.

SPEAKER_00 (46:39):
I mean that that brand positioning with Apple's
brand also really helps, right?
That's like it's like yourApple's choice.

SPEAKER_02 (46:45):
And they put us in Apple stores and you know a
whole bunch of other stuff whichhad you know huge halo effect on
uh on on us and the product.

SPEAKER_00 (46:52):
Yeah yeah that's uh so the tide starts to turn
what's the indicators for youthat that you get it you get
that momentum but how's thatfeel?
How's that momentum feel?
How's the team doing what aresome of the team decisions?

SPEAKER_02 (47:03):
Yeah you know that was like a phenomenal period for
the company because we're youknow we're growing and we're
getting better.
When you know if you look atsort of the the way the market
went right when we startedHoneywell had like I don't know
60% market share something likethat.
You know and then there were abunch of other people then we
came in and you know 1% share 2%share 3% share we're sort of
slowly building right um andthen Nest comes and Nest takes

(47:25):
80% share overnight.
And uh and so then Nest has 80%share right uh and we're now
like at five or six percent orsomething like that.
Right.
And then um you know E2B3 comesout and uh centers and you know
we have much betterdifferentiated positioning and
you know and then we start togrow.
And so you know by the end of itI think Ness is about a 50%
share.
We were about 30% shareHoneywell was probably like 10

(47:47):
or 15% share and that was likethe market basically we were
ascending and and so that wasreally good and our competitors
were generally descending.
And so um while we were stillthe number two brand so it felt
really good and and you couldfeel the momentum.

SPEAKER_00 (48:00):
Yeah.
And let's talk about I mean theteam the team dynamics the
culture you've got an evolvingteam dynamics and an evolving
culture.
Right the culture of the earlydays where Nest comes out and
you're sort of surviving.
Your goal is survival to lastlong enough to figure out your
next step, right?
And then the culture during thisthis sort of upswing we talk a

(48:22):
lot about team dynamics atUnicorn Labs and we talk a lot
about how managers and foundersaffect those team dynamics.
How much intention did you dodid you have around team
dynamics and maybe differentlyat different stages you shared
with me a bit earlier, you know,at one point when you go from
200 employees to you know 400you sort of saw it and sensed it

(48:43):
more because you've doubled thethe team so the culture now is
so much more but maybe let'slook at those stages and would
love just a reflection on someof the core elements.

SPEAKER_02 (48:52):
Yeah I mean I think um you know probably most what
we did was formalize it.
Right.
So I think like for a lot ofentrepreneurs when you're you
know up to a certain size, youknow you're you're interviewing
every person.
And so you kind of interview forculture um kind of you know just
intrinsically right it's justsomething you do and you got a
feel for it and like you knowwhether this person's going to

(49:13):
fit or not.
You know, then you stopinterviewing everyone and then
then you're kind of relying onother people to uh to do it.
And Tony say used like you knowI hire people based on whether
I'd like to go uh out for a beerwith them.
And I think that is the worstway to hire someone because you
know when you look across yourorganization like who somebody
would like to go out for a beerwith is like completely vastly

(49:33):
different.
And so that feels to me like isnot a good way.
And and um you know it comes inin a bunch of other ways.
And so what we really tried todo was like first of all say
like here's what's important inour culture, which is what you
know what we value what wereward.
Right.
And then that went into ouremployee review process.

(49:53):
So you know there was obviouslylike a you know job skill
portion but a sort of a value uhportion was important you know
and and so it gave you thechance to talk to your manager
about those different things andhow you fit into it.
And then also in the hiringprocess right and so in the
hiring process, you know it waspart of our scorecard and again

(50:14):
you had job competencies butthen you had sort of like the
the value competencies and youknow the assumption is is that
like you know we're all goodhiring people, right?
But but I think that the datashows that people are actually
horrible at hiring people.
Anyway and so and so how do youyou know shift the odds in your
favor um you know and I think atleast like one of the
realizations to me was it cameout of an interview and I
realized that people wereinterviewing for like completely

(50:36):
different things were importantto them versus to me.
And I didn't I didn't I I justthought you know we all think
the same thing like you knowwe're hiring a uh you know a
controller or something likethat, right?
Like that's a controller likeare we all asking for the same
things?
No they we were like way offbase.
And there's that book TopGrading which there's lots of
parts I don't like about it.

(50:57):
Top grading top grading by GHSmart anyway.
And I don't love everythingabout it but but one of the
things they talk about is isthis idea that you know past
success is the best predictor offuture success.
And so this idea ofunderstanding like what people
have done that's been you knowtruly extraordinary or great or
good or you know whatever yourlevel of bar is and
understanding what that is isreally really valuable to

(51:19):
understanding and and and andagain when we talked about you
know interviews and hiringpeople were always like oh I
like you know I like Mary.
Yeah she seems pretty good youknow and you're like okay you
know what do you like about her?
Well you know she's been anaccountant before and you're
like okay but you know and sokind of getting to like you know
so you know one of the thingsthat we that that was part of

(51:41):
our values was initiative as anexample.
So like give me an example ofwhen Mary took initiative you
know and you know and then let'stalk about what that thing was
and decide whether we think it'sa good thing or a bad thing or
you know let's turn the top 10or you know whatever it is,
right?
But at least you can talk aboutsomething other than like my gut
feeling was that you know thisperson was reasonable at that

(52:01):
kind of thing.
Right.
And so how do you tease thosethings apart?

SPEAKER_00 (52:04):
Yeah.
I like that.
So so one of the core focusesfor you in building the culture
was really a focus from a CEOlevel as to who we're hiring.

SPEAKER_02 (52:13):
A lot of it's who we're hiring I think you know
and then again it gets to thisyou know where are we going to
invest right and so it gets intoyour strategy.
Where are you going to invest?
And so you know and those tooksmall and and large things.
So for example we had a Let's begreat program everyone in the
company had$1500 that they coulduse for books, education,
whatever they wanted as anexample we had a library, right?

(52:35):
And so you know the idea ofhaving a physical library with
books in it, you could put booksin it, you know, all these
things that you know kind ofsaid we're learning and
experimenting.
One of the things we did in ouroffice design, we really tried
to focus our office design oncollaboration.
So if you walked into ouroffice, first of all everything
was whiteboard paint.
So you could just like jot downan idea wherever you are all the

(52:57):
high hallways were super wide soyou could walk like three or
four abreast and have aconversation.
We put a our lunch area right inthe middle and it sort of
centered on this idea thatpeople have been meeting in town
squares for forever.
And that's where you went to getthe news and to see people and
all that kind of stuff.
And so we created like a townsquare and then the idea of town
square with like shop windows onthe town square where you had

(53:19):
these like interesting storesand things like that.
So we put our hardware lab likeright in the middle of the town
square.
And so you could look through aglass window and you could see
all the 3D printers and like allthe prototypes we were building
and all the stuff.
People were like, no we're gonnagive away all the secret sauce
and all this like no no no it'slike this is like you know
showing people that we're likeinnovation business, get excited

(53:41):
about things, ask questions likewhat do you think that is like
you know and so how do youcreate an excitement engagement?
And I think you know againthat's where sort of like that
idea of like you know value,culture and strategies, you
know, the more of these thingsthat you can say these are
important to us.
This is where we're investingand vice versa we're not doing
some other things.
And there were definitely someother things that we didn't do.
So for example like RSPcontribution we did not do right

(54:03):
and people were like you needRSP matching contribution or
whenever we get good people I'mlike you know which you know
which$500 on education or$1500on RSP contribution.
And other people can decide likeyou know what's right for them.
Yeah but for me it said like heythese are the things that are
important and we're trying tosend a signal and a message that
you know these things areimportant.

SPEAKER_00 (54:24):
Yeah I like that.
I think that's that I think thethe learning culture piece
you've doubled down on that withthe learning fund with the books
with the just having it out infront of people.
Yeah right I think to to to touse the different tools or the
3D printers or so on and soforth.
Right.

SPEAKER_02 (54:39):
Like and then to take some risks on some new
technologies and some new thingsand you know not just in um you
know in the uh in the productside but also for example like
training contractors like thatwas a new thing like hey let's
try this out let's see if itworks and you know different
ways to really experimentationculture.

SPEAKER_00 (54:56):
Yeah and that's what I mean that comes back to the
labs here.
That really allows you tooperate here and and have this
experimentation culture inaddition.
Yeah.
So so let's bring this sort ofto its to its climax you know
you've got five years beforeNest really starts to follow
innovation.
And that's a real moment ofpride like okay the the the the

(55:17):
big guys have followed us interms of the innovation um I'm
sure that restabilizes someparts you know maybe they they
they like in terms of marketshare but you continue to do
really well what happens postthem following your lead how's
your team feel when they sort offollow your lead what does that
next phase look like yeah I meanI think you know that's probably
another way that you knowstartups are different from big

(55:39):
organizations, right?

SPEAKER_02 (55:40):
And so, you know, I don't know what the feeling was
inside Ness but from outside myperspective was like people get
bored and they move on right ifyou're in Google, you know
you're trying to become you knowand you're the VP of this you're
trying to become the executiveor senior VP of that or
something else.
And so you know there's there'sa new shiny object inside Google
where you're trying to go.

(56:01):
And so you know I think theirchallenge is like how do we keep
people excited and about thisthing.
Right.
And they have people who aremoving through that organization
right who are now like my guessis I don't want to call them
tourists but you know what Imean like they're they're
they're here for a bit and thenthey're two years.

SPEAKER_00 (56:18):
It's uh like a lot of tenures a lot of VP tenures
two years, 2.5 years and thenthey jump the next and what real
impact are you having?

SPEAKER_02 (56:24):
Yeah and I think in a perfect world you've got the
mission and the vision right andso within Google the mission and
vision is you know is muchprobably different and bigger
and you know they're they'rethey're tackling other
challenges, right?
And so um but within the EcoBeat this is it.
Like this is the only thingthere is right.
And so I would hope it feelsmuch more important and people
are much more committed andtherefore you know the
competition in some ways feltlike it got a bit easier.

(56:46):
Like I'm not happy that theyadded sensors like I wish they
hadn't of course but but youknow what I mean?
Like I it also felt like on somethings they started like, yeah,
I kind of give up.
I mean and I think you knowagain one of the challenges for
a big company like Google orAmazon 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 millionor even a billion dollar

(57:08):
business doesn't do much foryou.
You know, AWS is now whatever itis, I don't even know what it
is, but it's like you know, it'stens of billions of dollars a
quarter probably right.
And so you know the thermostatbusiness isn't right.
It's just not the same strategicimportance.
Right.
But if you have your mission andyour goal and your core and your
vision and you know that is youknow 100% of what you do that's

(57:28):
another good reason why youshould be able to outcompete.

SPEAKER_00 (57:30):
So that takes you to this final stage where there's
an interested buyer.
Yeah acquired by generic yeahand so what are the what are the
few years before that?
And what makes you go with thispartnership to get it to get
acquired, to go with it and andyou stay on as CEO for a few
years.
So tell me about that.

SPEAKER_02 (57:48):
Yeah so I think you know a few things like you know
people always talk about exitsand and exits is a is a thing
that really uh bothers mebecause exit is a very VC
centric way of thinking of theworld and and um you know sure
the VC exits they get theirmoney back or whatever and they
make their money and everybody'shappy but um but for you the
founder the the business doesn'texit that like the business

(58:10):
keeps going right that's inisn't that that is interesting.

SPEAKER_00 (58:13):
Right we use the word exit.

SPEAKER_02 (58:14):
Yeah but no I don't know how they manage to co-op
the world to like thinking oflike Simon Sinek has this great
book called the Infinity gamewhere he talks about like you
know you know chasing yourmission and your mission really
you know going on right and itit's not about you know
individual things it's about howhow to you know make sure the
mission survives and thrives.
And so you know that's reallythe way that we thought about

(58:36):
you know the acquisition and notso much as an exit.
And actually in retrospect Ishould have been much stronger
in communicating that this isnot an exit because there were a
bunch of people in the companywho were like okay my job's done
see you later goodbye rightwhich was uh which was
unfortunate but I think you knowand and one of the things that
happened when we when we didinformp was um you know we sold

(58:56):
the business or we merged thebusiness and and you know went
public and and it was like okaythat's an exit and you know
wonderful isn't it great and youknow you put some money in your
pocket and then you watch themlike take what you had built and
you know put your heart and soulinto and you know run into the
ground two years later andyou're like oh that was really
disappointing actually rightthink you know here a lot of
founders who are like oh I'mgonna build a business I'm gonna
sell it and then I'm gonna startagain and it's like maybe you

(59:18):
know the the money is you knowis nice it's short lived I think
the the sort of the thrill ofthe of the sale and then and
then watching you know what youbuilt go into the ground is is
is quite disappointing.
And anyway, so all to say thiswas as part of sort of like the
general acquisition and I thinkwhy it worked out so well was
because you know we had a verysimilar vision for the future.
There were lots of areas whereyou know we needed them and

(59:40):
there were lots of areas wherethey needed us.
And so that sort of you knowmutual need I guess uh also made
for a very good partnership ifyou will and a good transaction.
And I think you know what wasmost important for me was that
the business was going to thriveand survive.
And then a lot of the Eco Bpeople have taken more senior
positions within Generac.
And so I think it's gone verywell at least I hope from for
for both Side.

(01:00:00):
Certainly for me, I you know, Ilove uh Aaron Jagfeld.
I think he's a super smart guyand uh you know, nothing but
great things to say aboutGenerac.
But a big part of that thoughtprocess was, you know, how do we
make sure the business doesincredibly well in the future?
When we were looking at doing anIPO or doing another private
fundraise, and the acquisitionjust seemed like you know, the
best way forward given the otherchoices that we had to actually

(01:00:23):
move the roadmap forward.
To move the roadmap forwardbecause we were going to need to
raise some additional capital.
There were some new markets thatwe wanted to go into.
Um, you know, we talked a littlebit about, you know, the energy
markets, right?
So energy, I think, is superexciting.
It's like a, I don't know,multi-trillion dollar market
that is going through rapidchange.
But as people know, the thething about renewables is that

(01:00:43):
they're not constant, right?
And so that creates thesetremendous volatility in
electricity prices.
So, for example, in Texas, ifyou can avoid the 50, 50 most
expensive hours of the year, so50 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 utilitybill cost.

(01:01:04):
And so if you think about thatand you're an intelligent
appliance like a smartthermostat, and you know that
you shouldn't run during thesehours, and they're not 50
continuous hours, no.
50 hours like, you know, playsthrough 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 thenalso what's happening in your
home, are you home, or you'reaway, then you know, being a

(01:01:26):
smart appliance and knowing,like, okay, odd, you're you're
home now.
So I'm gonna make a differentdecision than if I know you're
not home, but energy'sexpensive, or maybe energy is
free right now, right?
And so there's all kinds ofthings that you can do to gain
the system to createsignificantly better outcomes
for customers.

SPEAKER_00 (01:01:42):
That's the theme that I kind of picked up on is
so much more than a thermos.
Like that that was the that'sthe mistake that people
initially judging it was, right?
Which is again takes me back tothat I mentioned the Steve
Bauman moment, so much more thana phone, right?
You know, no one would pay$450for a phone, no, but they'd pay
for a computer in their pocket.
Yeah.
Yeah.
And and what they're doing hereis, you know, you're you're
transforming the entire energysystem in a home.

(01:02:05):
Yeah.
Yeah.
Um, which is uh which is whichis really cool to see.
Bring this home and and end itoff.
Often when I do these Davidversus Goliath sort of story
comparisons, you're looking atthis battle and it's competitive
and so on and so forth.
I think what's beautiful aboutyours as I was researching it is
when it's mission-based, bothDavid and Goliath can live and

(01:02:27):
fulfill the mission.
It's not them against eachother.
Where's Nest today?
Where the where are they in inthat world?
Like are they are theycontinuing to push innovation?
Is there anyone else that'spushing the smart home
innovation the way EcoBcontinues to?

SPEAKER_02 (01:02:41):
Yeah, I think they are.
I think you know that that ideaof like a worthy competitor.
I think they're a very worthycompetitor and you know, they're
definitely pushing hard.
Amazon is pushing hard, Amazon'sin the thermostat business now.
You know, they're they'repushing hard, you know, and the
dynamics are are different.
And so there's, you know, theirnew connected home standards uh
called matter.
So that creates new challengesand opportunities, you know, for

(01:03:01):
eco-be in the connected homespace as an example.
And so anyway, it's exciting.
And I think all of that's whatwhat makes it an exciting place
to be because it is notstagnant.
And it may look, you know, kindof like again, like this idea of
like, oh, just thermostat, whocares?
Right.
But um, you know, actually themarket is, you know, there's
just a lot going on.
And, you know, maybe it's likethe duck with, you know, above
the water looks calm and notmuch happening, but under the
water, there's like all kinds ofstuff happening.

(01:03:23):
You know, it's like that.
And and you know, and and that'swhat makes it super exciting and
dynamic.

SPEAKER_00 (01:03:27):
Well, Stuart, thank you.
Thank you.
This was this was really good.
Lots of insight and tons ofstuff 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.