Ambitious start-ups seek lightbulb moment for ‘smart home’ success

From music and books to telephones and taxis, Silicon Valley companies have upended countless products and markets over the years. Noon Home, a start-up launching this week, has a more prosaic ambition: it wants to disrupt the light switch.

"The switch has been around for 100 years now, but it's not sexy or engaging," says Noon chief executive Erik Charlton.

The Cupertino-based start-up has raised $50 million from some of the same venture capitalists behind Nest — the Alphabet-owned maker of smart thermostats and cameras — for its customizable lighting system, which plugs into existing bulbs and fixtures.

While Noon's proposition remains unproven, its well-financed debut is the latest indication that Silicon Valley is getting excited about the "smart home" again.

The concept of giving everyday household appliances cloudenabled smarts has rapidly passed through the Silicon Valley "hype cycle" of initial frenzy followed by steady deflation.

After Nest's $3.2-billion takeover by Google in 2014, there was a Cambrian explosion of connected devices targeting the home, from smart sprinklers to intelligent toothbrushes. However, many sank without trace and, until a few months ago, Nest itself seemed to have lost momentum after the departure of cofounder Tony Fadell last year.

Now, the growing popularity of "smart speakers" such as Amazon's Echo and Google Home has helped to rekindle excitement, because of the ease of having a central hub that can be controlled just by speaking.

"There is no doubt in my mind that the Echo has been a major catalyst," says Ben Bajarin, analyst at Creative Strategies. "It's just a question of what other products start to take off and really stick."

Noon's $400 "smart lighting system" is one of those hoping to tap into Amazon's Alexa platform. Its "Room Director" incorporates an OLED display — the same kind of touchscreen technology used in the new iPhone X — and bulb-detecting algorithms to create "layered lighting," with an array of scenes and moods.

Noon's $50-million funding is large for a company that, until Thursday's debut in US stores, had not begun to sell any products. Its backers argue the sum reflects the capital costs of building a highquality consumer product, as well as the scale of the opportunity: some 144 million residential light switches are sold every year, Mr. Charlton notes.

"It is one of these unloved, overlooked products that has relatively boring incumbents that haven't paid attention to the needs of the market," says Rob Coneybeer, partner at Shasta Ventures, one of Noon's earlier investors. "You probably hit a light switch at least 10 times a day. The only other product that has that level of engagement in your life is your smartphone."

There are few simpler technologies in the home than the humble light switch, which for most people works reliably without the addition of WiFi or Bluetooth.

To those who might insist that the light switch does not need improving, Mr. Coneybeer — who previously backed Nest — argues that the same complaint was levelled at smart thermostats. Now, the ability to program heating and air- conditioning from a smartphone, with a device that also learns from a homeowner's habits, has established a benchmark for the domestic "internet of things," selling millions of units.

"There has been a race to mainstream the smart home before it was ready," says Mr. Charlton. "What I fundamentally believe is, I don't want to create amphibious cars and I don't want to invent new product categories."

Even if adapting an existing feature of the home is an easier sell to consumers, the risks for any small hardware maker are high. Capital costs are steep and it could easily find itself competing against the seemingly bottomless resources of Amazon or Google.

"It's a very, very challenging space for start-ups," Mr. Coneybeer says. "The product has to be perfectly polished."

The potential prize, though, is large and growing quickly. IHS Markit, the market researcher, estimates that the North American market for connected home devices will more than double year on year to $7 billion in 2017, rising to $35 billion by 2021.

Yet it remains very fragmented, says Blake Kozak, analyst at IHS Markit.

"There are so many players in the smart home today, it's become incredibly crowded," he says. "Companies have to be creative to gain and maintain share."

One breakout from that pack is Ring, the Los Angeles-based maker of video- enabled doorbells. With more than 1 million customers, Ring has raised over $200 million in venture capital funding from investors including Kleiner Perkins Caufield and Byers and Draper Fisher Jurvetson.

"The smart home is happening," Ring chief Jamie Siminoff told the FT in an interview earlier this year. "What's not happening is 15 major new companies in this space. I don't think you're going to see that."

The relatively few successes for venture- backed companies in the market has put many early stage investors off, says Jeff Clavier, a partner at SoftTech VC. Besides Nest, the "jury is still out" on the market's potential for start- ups, he says. "Everything in this market today is still small, in terms of the number of households that have been penetrated . . . It's a very tricky space to invest."

Mr. Clavier was a backer of August, a maker of "smart locks" that was recently acquired by Assa Abloy, which owns Yale, for an undisclosed sum. August's sales next year are expected to be $60 million.

"We were thrilled for the outcome that August had but it hadn't scaled yet in terms of market penetration," Mr. Clavier says.

An August lock's wireless connection allows doors to unlock automatically as a homeowner approaches, by connecting to their smartphone, and it has expanded into videocamera doorbells to compete with Ring.

This week, Amazon announced it would work with Yale locks to introduce its new $250 Key system, that allows its drivers to open a Prime customer's front door if they are not home to receive a delivery. August, which is not an initial partner of Amazon Key, had been trialling a similar "in-home" delivery service with Walmart.

These services go beyond mere gadgetry to give connected devices a more tangible use — even if some customers might be nervous about the privacy and security implications.

Such developments meant the "timing was right" for the August buy, says Thanasis Molokotos, head of Assa Abloy's Americas division. "This is not a market where you want to hesitate."

While praising August's "highquality product and cutting-edge technology," Mr. Molokotos acknowledges: "There is a lot of junk in the market."

Despite the renewed momentum and investment, some remain concerned that too many smart- home devices are solutions in search of a real problem.

"Now you can control your lights with your cellphone — but why the hell would I want to do that? It makes my life more complex," says Mr. Clavier. "Just because you can build the product doesn't mean you should."