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Daily news and analysis about the food tech revolution

Tony Fadell

Court Ordered Cinder Grill Maker to Repay Tony Fadell’s Investment Firm $294,736

Palate Home, the company behind the Cinder grill, was ordered by a San Mateo court in August to pay $294,736 to Tony Fadell’s investment firm, Future Shape LLC. The default judgment compels Palate Home to repay a $250,000 loan to Future Shape plus $43,737 in interest as well as $999 in costs.

We are not lawyers, but from reading the court documents it looks as though on January 14, 2015, Future Shape provided a $250,000 loan in the form of a convertible promissory note to Palate Home. The original $250,000 plus five percent interest came due on July 14, 2016.

We uncovered this judgment working on a story chronicling the troubles Palate Home was having manufacturing and shipping Cinder to its crowdfunding backers. The Cinder is countertop electric appliance that delivered sous-vide like precision cooking without the need for plastic bags and a circulating water bath, plus the ability to sear meats — something sous vide wands can’t do. Our very own Mike Wolf was a big fan of the appliance.

The fact that Future Shape was involved at all must have been a feather in the cap (and money in the bank, evidently) for Palate Home. Future Shape is the investment firm of Tony Fadell, who is famous for helping invent the iPod and for founding Nest Labs. The fact that he was involved at all seems like validation, at least at the time of the loan, that there was something promising in the Cinder.

Indiegogo updates provided by Palate Home Co-Founder and CEO Eric Norman over the past year outline manufacturing issues that his company was experiencing that were, in turn, delaying the shipment of orders to its crowdfunders.

What’s interesting is the timing. The Future Shape convertible note was issued in January of 2015, came due in July 2016, and Palate Home closed its Cinder Indiegogo campaign in June of 2017, raising $552,405 from 800 backers, almost a full year after the loan was due. The lawsuit from Future Shape was brought in April of 2018.

According to Indiegogo updates from Norman:

February 6, 2018 – A factory in China has 500 built Cinders (after delays caused by a faulty cooking plate) ready to ship to California.

April 2, 2018 – Palate Home still has not shipped grills to California. “Consequently,” writes Norman, “We’ve done everything we can to reduce our expenses. As things started to get tight, we reduced headcount and stopped taking any salary.

April 9, 2018 – In a Q&A style post, Norman writes:

What is the status of the grills?
They are built and accepted at the factory. Your grills are part of a larger order and the factory is not willing to release part of the order without payment in full. We’re in a bit of a Catch-22 situation: Selling more grills without shipping yours is (quite reasonably) difficult. At the same time, shipping your grills without the money to pay the factory for the full order would require us to sell more grills or secure a loan. We are exploring a few ways to solve this and ship to you.

That same day, Future Shape filed its complaint against Palate Home for breach of contract. Curious sidenote: according to a service of process court document filed August 23, 2018, a Summons and Complaint was sent to Eric Norman at the address listed for the designated agent on the corporation’s Statement of Information. “According to the process server’s declaration dated April 24, 2018, no company called Palate Home, Inc., is listed at this address. The current company at that location is called Shenzhen Valley Venture and the process server was informed that no one at that location had ever heard of Palate Home, Inc., or Eric [middle name removed by The Spoon] Norman.” To be fair, as you will read, there is a connection between Palate Home and Shenzen Valley, there could be any number of reasons someone at Shenzen didn’t know about Norman, especially depending on whom was interviewed.

July 2, 2018 – Norman says that he had reached an agreement to sell Palate Home to a Buyer that he says would have meant:

  1. All Indiegogo perks to be shipped with a target delivery of 3 months.
  2. Improvements customer service, software and recipe development, and shipping times.
  3. Initial cash payment earmarked to satisfy obligations to vendors.
  4. Royalties on future sales to provide a potential return for Cinder investors.

The problem, he says, is that the deal is being blocked by one of his investors. We should take a moment to recognize that Palate Home has more than one investor. According to Crunchbase (which, to be fair is not always up to date), Palate Home/Cinder has six:

  • Highway 1 (convertible note)
  • Zillionize Angel (seed round)
  • Scrum Ventures (seed)
  • Y Combinator (seed)
  • Angel List (equity crowdfunding)
  • Shenzen Valley Ventures (seed)

    • (Shenzen was mentioned by the process server in the previously mentioned court document)

This doesn’t appear to include the $552,405 raised on Indiegogo. Further, the $376,000 in total funding raised listed in Crunchbase seems to be just from the Angel List funding. Future Shape isn’t listed as an investor, and it doesn’t look like it’s $250,000 convertible note is listed. Doing the math, it looks as though at some point, Palate Home/Cinder had taken in at least $1.17 million, plus whatever money the company received from the remaining investors.

Going back to Norman’s update on July 2, 2018:

While investments in startups are generally considered to be long-term and non-refundable, we used a convertible note with one investor that gave them control over how to proceed at the maturity date. These notes are made to convert into equity at a future funding round. If a convertible note matures before such a funding round, there’s an expectation in Silicon Valley to either extend the maturity date – so much so that most notes give the company the ability to initiate conversion, and recent vehicles like the YC SAFE do away with maturity all together and simply convert at an equity event. While extremely unusual and unexpected, one of our investors asked for repayment at the maturity date. When we were not able to do so, they threatened legal action. This began a chain of problems for the company.

Norman writes that the “investor,” which is presumably Future Shape from the descriptions, agreed to a sale of the company and using that money to repay the loan. But, he writes: “Despite agreeing to this concept, this investor would not execute a written forbearance which killed any chance of moving forward.” Norman also alleges a number of clerical errors made by Future Shape in its filings.

August 5, 2018 – Norman writes “Since we were unable to reach a settlement agreement, we are essentially waiting for the court hearing which happens later this month.”

On August 17, 2018 a default judgment from the Superior Court of California, County of San Mateo (filed August 23), was issued against Palate Home ordering the company to pay $294,736. As we understand it, the default judgment was given because Palate Home basically did not present a defense.

In an update last week, on September 6, Norman wrote “Hello everyone. We are in discussions and I expect to have things wrapped up by the end of this month one way or the other, so if you can please bear us just a little bit longer. I greatly appreciate your patience.”

What exactly went wrong with Cinder? Is it dead dead, or does this lauded device still have a chance? Will Palate Home appeal? We have reached out to both Norman and Future Shape for more information, and will update this post if we hear back.

Nest Founder Launches Investment Firm, Highlights Investment in Solid State Cooling

Tony Fadell, the founder of Nest and the father of the iPod, has announced his next gig: founding and running a seed stage investment and advisory firm called Future Shape.

And while the company isn’t announcing it’s entire portfolio, one company Future Shape is highlighting is Phononic, a company which makes solid state cooling technology.

Readers of the Spoon will remember that Phononic has patented technology that enables a system manufacturer to build professional or home cooling systems without traditional vapor compression technology. Phononic’s technology utilizes the well known Peltier effect, a technique that has long been used for cooling systems in smaller areas like telecom closets but has not scaled to refrigerators or home cooling systems. Phononic hopes to change that. Much the way solid state RF heating market could have a disruptive impact on cooking devices, Phononic’s use of solid state/semiconductor technology could change industrial and home cooling.

When word broke last year that Tony Fadell had secretly been investing in startups, he mentioned Phononic as one of the investments. With the creation of Future Shape, it looks like he is essentially formalizing his investments into a company.  Interestingly, while Axios reports that Future Shape touts the fact they do not take board seats on companies in their portfolio, Phononic CEO Tony Atti told me that Fadell took a board seat back in 2014. It may be the case that Fadell’s early personal investments are slightly different in structure from the more formalized approach of Future Shape.

While Phononic’s early focus has been industrial markets for its tech, Atti told me last year that they see residential applications as a big part of their future. With the founder of Nest backing them, it will be interesting to see just where they take the cooling technology in the future.

Is Nest’s New Face Recognition Cam A Sign It’s Waking From Its Slumber?

One of the great mysteries of the smart home world over the past few years has been the relative quiet of Nest, the one-time connected home star that burst onto the scene with the launch of its impressive Nest Learning Thermostat and, two years later, a smoke and carbon monoxide detector by the name of Nest Protect.

After Nest got acquired in early 2014, updates slowed to a crawl, and much of the news that did come out from the company during this time was bad. While there was occasional news about Works with Nest and Thread, you were just as likely to read about management dysfunction under Tony Fadell and product recalls. The only wholly new product line introduced into the Nest family during this time was the Nest Cam, a product that, in reality, owes more to Dropcam (another acquisition by Google) than to internal development from Nest.

But now there are indications the company might be waking up from its long slumber. In a recent story in The Verge, Nest product manager Maxine Verson hinted that the rest of 2017 should be busy for the company:

Verge writer Vlad Savov writes, “Veron tells me Nest’s relative silence in recent times is about to be a thing of the past. “I am very excited about the next six months,” he says with a grin, “we’ll talk again soon and you’ll understand why.”

Savov goes on the speculate that the next product might be a cheaper home thermostat. A welcome addition to be sure, but I think for those who witnessed Nest’s early days of innovation, a lower-cost version of an existing product is hardly something to get excited about.

The product I’m excited to see is Nest’s long-rumored home security system. My own sources have confirmed the existence of this long-gestating project and, given Google’s patent filings in the space, I think a Nest home security system could be truly differentiated. Add in the fact they just introduced a camera with facial recognition capabilities – an interesting potential component of a smart security system – and we may be getting close.

Another potential product is a video doorbell.  While the market is certainly crowded at this point, Nest’s brand name and recent development of a Pro group that supports home builders and integrators could help a Nest video doorbell get traction.

Whatever Nest does, chances are it’s been limited to a certain set of products by its parent company. Alphabet/Google has let non-Nest groups develop products in some of the most interesting areas – voice assistants and mesh Wi-Fi for example – while Nest has largely stuck with thermostats and cameras.

One thing is certain: the company’s new Nest Cam itself is a sign of progress. With it, the company has started to integrate image-based AI into its Nest cams, a potential indication that it – like Amazon – sees computer vision as one of the key new frontiers in the smart home.

And who knows? Maybe now – if the new camera and hints being dropped are any indication – maybe Nest truly has something new and interesting up its sleeves.

Make sure to subscribe to the Spoon newsletter to get it in your inbox. And don’t forget to check out Smart Kitchen Summit, the only event on the future of the food, cooking, and the kitchen. 

Is The Anova Deal The Nest-Google of the Smart Kitchen?

Back in January 2014, I had just caught a ride to the Las Vegas Convention Center for the Consumer Electronics Show when I struck up a conversation with the two men in the back seat of the shuttle. They were executives from Nest, makers of the learning thermostat that had been the talk of the smart home industry for the past year, so I was naturally interested to hear what the company was up to at the big consumer trade show.

While we had a nice conversation, nothing stood out to me when I recalled the encounter a week later other than the two seemed to be in a pretty good mood. The reason I was even thinking about the chance meeting was I had just heard about Google’s acquisition of Nest for $3 billion, a huge sum of money and certainly enough to make any Nest executive happy.

I had similar thoughts a week ago when I first heard about Electrolux’s acquisition of Anova. I had just co-hosted a party with Anova at CES, and while everyone at the mixer had a good time talking smart kitchen with industry colleagues, the only indication from the Anova team that something may be in the works was everyone seemed to be in a good mood.

Last week’s news also got me thinking about other similarities between the two deals.  Much like Nest at the time, Anova was the leading independent startup in a nascent but fast-emerging connected home market, and so their acquisition by a deep-pocketed and established player helps to validate their market just as Google’s acquisition of Nest validated the smart home.

Which naturally leads one to ask, “Does that make Anova deal the Google-Nest of the smart kitchen?”

The answer to that question is yes…and no. In other words, it’s a bit complicated.

In the way of similarities, both Anova and Nest were experiencing fast growth. Anova saw its sales double year over year in 2016 and is on the verge of a million customers in the first half of 2017, while Nest hit the million customer market just around the time of acquisition.

Both deals also came at a time when awareness of their specific markets – smart home and smart kitchen – was starting to seep into the broader consciousness of the early mass market.

And of course, both made connected products with really high levels of consumer satisfaction.

But there are some big differences, perhaps the biggest of which being the types of companies who acquired them.

Yes, both were deep-pocketed suitors, but Google and Electrolux are very different types of businesses with different motivations. For Google, their core business is data and information. Sure, they have dreams of a growing hardware business, but these efforts, including their more recent Google Home product, is often motivated by a desire to further their ability to gather and distribute information to consumers in new and interesting ways.

As the world’s second-largest home appliance maker, Electrolux’s business – and motivations – are much more transparent: With the acquisition of Anova, they now have a new precision cooking hardware line they can sell. Anova and other early precision cooking companies proved this is a legitimate segment and Electrolux now has the opportunity to enter this market in a big way.

But perhaps the biggest difference between the two acquirers is their platform motivations.  Google clearly had platform aspirations with the acquisition of Nest, who’s technology they saw as the foundation for not only more of their own products, but as a platform around which they could offer to the broader industry to build third party products. Sure, the long and complicated story of Nest post-acquisition and the rise of newer approaches such as Amazon’s Alexa have changed the calculus a bit for Google and everyone else, but there’s no question that was the original vision.

For Electrolux, it’s clear they envision Anova’s product line as the foundation for more precision cooking and smart cooking products. And as is often the case when an established company buys a fast-growing startup, I could also see them trying to instill Anova’s innovation-centric startup culture and even let their newly acquired team take the lead on some of those efforts. But Anova’s precision cooking products are not a platform in the same way Nest products are a platform, nor were they intended to be, which is fine because Electrolux is not a platform company in the same way Google is a platform company.

There are other important differences. Valuations are much different today than in 2014. Hardware startups are not getting the same multiples we saw in early 2014.  And while Steve Svajian and Anova’s team are hugely capable, Google paid a premium to get an exec team led by industry legend Tony Fadell, recognized as the father of the iPod, the previous decade’s defining consumer hardware product. And while Anova has certainly filed for patents for innovation related to its immersion circulators, Nest’s IP portfolio was fairly broad in the area of the smart home.

In summary, while these deals have some similarities, in the end, the acquiring companies had very different visions and motivations. Google’s platform-centric vision of the world meant Nest’s technology would soon be positioned as a de facto standard around which the industry choose to coalesce, while Anova’s technology will serve as a platform for a company of one – Electrolux – to launch themselves into the smart, precision cooking market.