Google Acquires Nest for $3.2 Billion

By Matthew Milner, on Friday, January 24, 2014

It’s time once again for a Pop Quiz For Profits!

Ready? Here we go…

What do these 3 start-ups have in common?

  • Uber, a taxi company
  • Airbnb, a service that arranges short-term lodging
  • Nest, a maker of thermostats

Need a hint? It’s a six-letter word for dull.

That’s right, folks. Taxis, lodging and thermostats are BORING.

But these companies have something else in common, too.

They’ve already made their investors billions – or are about to.

Wait a minute… could “boring” be a good criterion for early-stage investing?

Let’s take a look…

An Uber-Good Investment

In October 2010, investors put $1.25 million into Uber, a taxi company.

At the time, the company was likely valued at about $5 million. Fast-forward 3 years and Uber was valued at a staggering $3.5 billion.

That's a 55,000% increase in value in only three years --  for a TAXI company.

Short-Term Lodging… Short-Term Growth

Airbnb is a hospitality service. The “bnb” stands for “Bed & Breakfast.”

For those willing to share their home in exchange for some income, Airbnb allows you to rent out your spare bedroom (or your whole place, without you in it) by the day, week or month.

In 2008, it was valued at about $1 million. This year, it was valued at $2.5 billion. That’s a 250,000% increase it value.

A Billion-Dollar Nest Egg

In 2010, a company called Nest was founded.

Nest is a thermostat. Yes, like the one you have at home – although, to be fair, this one is more beautifully designed.

Just 3 years later, Nest was acquired by Google for $3.2 billion. In cash.

Its early investors made a fortune.

Blueprint for Billions

How did these companies achieve billion-dollar success?

Step 1. They focused on a massive market – a market that’s been around forever…

Taxis. Thermostats. Lodging.

Boring? Maybe. But think about the benefits of boring:

No need to spend millions of dollars proving there’s demand; no need to spend years educating consumers about the value of your product.

Step 2. They applied technology to make an established market or business more efficient, more profitable, easier to use, or better to look at.

When Wayne and I are searching for the next great early-stage company to invest in, we often talk about the importance of a huge market -- and we’re not put off by a huge market that, at first blush, looks boring.

In fact, we’re thrilled by it.

There’s gold in them boring hills.

Abe’s Market

A few weeks ago, we published a research report for you on a company called Abe’s Market.

Abe’s is a grocery store.

Yes, we know: some folks might think groceries are a little dull...

This isn’t bio-tech, or virtual-reality glasses, or a new-fangled digital currency that’s aiming to overtake the dollar.

But the fact is, groceries are one of the biggest businesses out there.

And Abe’s is using technology (and some smarts) to attack one of the fastest-growing areas in groceries: the $100 billion market for natural foods and products.

We think it could turn into a great company – and just as importantly, a great investment.

If you’re interested, you can read our analysis here >>

Although Abe’s is no longer accepting new investors, we’re doing research now on several other companies that might produce big investment gains by attacking big old boring markets…

Stay tuned – we’ll bring them right to your inbox.

Happy Investing!

Best Regards,
Matthew Milner
Matthew Milner


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