August 17, 2014

Samsung Acquires Smart Home Startup For $200 Million

Eric Hopton for - Your Universe Online

The South Korean electronics giant Samsung has pushed itself to the forefront in the booming smart home market with its acquisition of SmartThings, the “connected homes” startup.

Samsung announced the deal on its website on Thursday and described the company as “the leading open platform for the smart home.” It is believed that they paid around $200 million for SmartThings. This is not just a big indicator of Samsung’s intentions to be at the center of the Internet of Things, it is also a great success story for SmartThings.

This is also another example of the potential of crowdsourcing. SmartThings began life back in 2012 when it set out to raise $250,000 on Kickstarter and came away with $1.2 million. Their offer was simple but attractive: to build a system that would allow consumers to monitor and control connected devices in their homes using a mobile device app. It was so appealing in fact that, according to Edwin Chan at Reuters, the company went on to raise a further $15.5 million in venture capital from a number of sources including Greylock and the Russian investor Yuri Milner.

Although the deal requires SmartThings to move to Palo Alto, California, to become part of Samsung’s Open Innovation Center, it will run as an independent subsidiary headed up by its current CEO and founder Alex Hawkinson. In his SmartThings blog Hawkinson said, “It has always been our goal to create a totally open smart home platform that brings together third-party developers, device makers, and consumers.” This statement reveals what made SmartThings so attractive to Samsung.

Hawkinson and his company have been committed to running an open platform from the beginning. As Daniel Wroclawski writes for USA Today, the home automation market has “labored since its inception under the divisive influence of competing closed standards.” Consumers were being forced into choosing one of a number of closed proprietary systems including Samsung’s own products.

The new Samsung/SmartThings deal looks set to change all that. SmartThings aims to offer totally open systems and is even planning, according to Wroclawski, to “make its products compatible with Apple’s HomeKit platform.” The prospect of rivals Samsung and Apple cooperating in this way would be a major sea-change in the market though, as Wroclawski points out, it remains to be seen “if Apple even allows a Samsung-backed SmartThings to get onboard.”

Samsung by no means has the field to itself. Google, for example, was convinced enough about the market potential for the Internet of Things and connected home technology to pay $3.2 billion for Nest Labs back in January this year. Nest Labs, another Californian company producing advanced home alarm and thermostat products, was set up in 2011 by two former Apple employees Tony Fadell and Matt Rogers. The Google acquisition of Nest Labs may dwarf the Samsung takeover of SmartThings in terms of the dollars involved, but a lot of people in the know believe the Samsung deal could have a much greater impact in the sector if it succeeds in capitalizing on its championing of the “open” platform for connected home technology.

As David Eun, head of Samsung’s Open Innovation Center puts it “We are committed to maintaining SmartThings' open platform, fostering more explosive growth, and becoming its newest strategic partner.”


The Silent Intelligence: The Internet of Things by Daniel Kellmereit