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Dropcam Founder: Selling to Nest and Google Was a 'Mistake'

A bitter feud brews at Alphabet.

Rachel Bracker for Re/code

In June of 2014, Greg Duffy sold Dropcam, his startup that produced home monitoring cameras, to Nest for $555 million. But if Duffy could do things over again, he wouldn’t sell.

That’s according to a blistering note the entrepreneur posted on Medium this morning, adding another dramatic turn to a bumpy week for Nest, the connected device company under Google’s Alphabet.

Duffy said he was compelled to write after comments Nest CEO Tony Fadell gave to The Information disparaging Dropcam employees who joined Nest. Here’s Duffy:

I would almost find such blatant scapegoating amusing if it weren’t so insulting to the team. Given that, I feel compelled to set the record straight.

Just before we were acquired, Dropcam was in the middle of a record year of sales, had a 4.5-star bestselling camera on Amazon, was rolling into large brick-and-mortar retailers with huge merchandising support, had innovative new products imminently launching, still had most of its financing in the bank, and our investors and team actively didn’t want to sell (it was my mistake to sell — but that’s a story for another day).

Other former Dropcam employees have echoed Duffy’s comments about being disillusioned when joining Nest, Google’s most expensive acquisition to date. In his defense, Fadell has claimed he was underwhelmed with the Dropcam team. Fadell was initially skeptical of buying the startup, according to a source familiar with the deal, but was convinced by Google’s then CEO (now Alphabet CEO) Larry Page.

A rep for Alphabet declined to comment. Nest reps did not immediately return requests.

In 2015, the “other bets” in Alphabet — the companies that are not Google — earned $448 million in revenue. Those came from Nest, Google Fiber and Verily (the life sciences business), but Alphabet did not break down the exact figures.

Duffy, who left Nest around a year ago then stuck at Google until this past fall, hinted that a bulk of Nest’s revenue comes from the Dropcam product. Last summer, that product was rebranded as the Nest Cam:

I can’t publish Dropcam’s revenue, but if you knew what percentage of all of Alphabet’s “other bets” revenue was brought in by the relatively tiny 100-person Dropcam team that Fadell derides, Nest itself would not look good in comparison. So, if Fadell wants to stick by his statement, I challenge him to release full financials (easy prediction: he won’t).

Update: No comment from Nest.

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