Hasta La Gadget!

Google just bought Nest for $3.2 billion cash, and that means the startup’s early investors Kleiner Perkins Caufield Byers and Shasta Ventures have struck it rich. Multiple sources say Kleiner invested $20 million in Nest and got a 20X return to pull in $400 million. [Update: Meanwhile, the deal returned “almost all” of Shasta’s second $250M fund.]

Nest didn’t disclose the size of its Series A and B rounds or who invested how much. That makes it’s hard to pinpoint who earned what on the sale of the home automation startup that sells smart thermostats and smoke detectors.

Shasta and KPCB funded all of Nest’s Series A round back in September 2010, just a few months after the connected device startup was founded. Then in August 2011, they both participated in Nest’s Series B, which also included Google Ventures, Lightspeed Venture Partners, Intertrust, and Generation Investment Management.

Multiple sources say Kleiner Perkins was Nest’s biggest investor, and was able to invest $20 million in Nest across the A and B rounds. Our sources say the $3.2 billion cash price Google paid for Nest will generate a 20X return for KPCB — which matches the 20X multiple Fortune’s Dan Primack heard from a source. The money came from 2010′s $650 million KPCB XIV fund, which means Kleiner returned over 60% of the fund with just its Nest investment. The treasure should also boost the status of KPCB partner Randy Komisar, who sourced the investments and sat on Nest’s board.

The win for Kleiner Perkins Caufield Byers is reminiscent of its early home runs on investments in Google, Amazon, AOL, and Intuit in the 1990s. Recently, it’s gotten a piece of huge exits like Facebook and Twitter as well as rising stars like Square and Spotify, but not until later rounds when potential returns are much lower. But with Nest, KPCB got in on the ground floor and will reap the benefits when the acquisition by Google officially closes.

Shasta Ventures’ Managing Director Rob Coneybeer, who led its Nest investment

As for Shasta Ventures, today is a massive win for the firm and its managing director Rob Coneybeer, who we hear fought relentlessly to get the $250 million Shasta II fund into Nest’s Series A and B rounds.

[Update: A source familiar with Google’s deal to acquire Nest tells us Shasta’s investment will bring it enough money to return “almost all” of the $250 million Shasta II fund. That means Shasta pulled in $200 million or more from the Nest acquisition.]

The Nest deal almost surely trumps other Shasta hits like Zenprise which was bought by Citrix, and Mint which was bought by Intuit. The returns could bolster confidence in limited partners and help Shasta raise its next fund.

Google Ventures also pulled in big money today, as it led Nest’s Series B and C rounds. Oh, and so did Nest’s founders Tony Fadell and Matt Rogers.

For the venture capital industry as a whole, the Nest acquisition may contribute to a frothy market for hardware entrepreneurs. If companies like Google are out there paying billions in cash for young startups that build devices instead of software, it may become easier for hardware tinkers to raise serious capital and move from their garage to a real laboratory.

[Additional reporting by Kim-Mai Cutler]

Click below to read the full story on Google buying Nest:

The Leading Exchange in a Business Getting Attention

CEO Mark Karpeles, along with Marketing Officer, Gonzague Gay-Bouchery, is running a company in the Shibuya area of Tokyo that has gained quite a lot of attention recently. That company, Mt.Gox, handles more than 60% of all Bitcoin trading volume worldwide and has assumed leadership in the space of this decentralized, alternative currency.

This, the leading exchange in a business opportunity that now features investment funds and that is attracting venture capital investment in both related companies and in Bitcoins themselves, with investors reportedly including Andreessen Horowitz and the Winklevoss twins.

Perhaps because of its size and leadership in the space, Mt.Gox has become the face of Bitcoins – and it has received the most scrutiny. Most governments, notably the US government, have taken a skeptical approach with Bitcoins and it seems as though Mt.Gox is one of the main targets so far. The US government has already taken action, recently freezing a US-based account operated by Mutum Sigillum LLC, a subsidiary of Mt.Gox, ostensibly due to compliance issues.

But Mark and Gonzague said they would not – and could not – comment on any issues related to the US government. And they said they are not bothered by what’s going on there.

This, the world’s leading Bitcoin marketplace, is a place of passion for what the currency means for the future of international business. Despite some recent inconveniences, they are confident about the future of Bitcoins and their future role in the global economy and I had the opportunity to hear it first-hand from these 2 leaders in the space.

Mt.Gox’s View on Bitcoins

First of all, they said, Bitcoins will not replace currency as it exists now. BUT, it could inspire the future of currencies. Today, some feel that currencies are stuck in a terrestrial, local mindset. US dollars, Euros, Japanese Yen – these are currencies used around the world but their supply, policies, etc. are dictated and controlled by the central banks or regulating bodies in their home domestic markets.

“Holders of these currencies are at the mercy of the system,” Gonzague explained, “your relative wealth in the world is tied to the economic well-being of your home currency. A bank can restrict or even control what you are doing. PayPal can restrict what you are doing. Maybe the credit card company will limit the amount that you can use on your card. Or, like a lot of us in the digital age, you don’t have a local telephone line or address, which can negatively impact your status with financial institutions.

“Bitcoins allow you to have wealth outside of the traditional parameters, have flexibility and ultimately have control over your finances. Wealth becomes truly global, it becomes transparent, and it becomes unencumbered by the restrictions – and exorbitant fees – imposed by the current financial industry.”

A “Decentralized Crypto-Currency”

Bitcoins, have been called a “decentralized crypto-currency” and both parts of that label are critical to why, its promoters feel, it is the model of the future of money.

Decentralized – There is no dispute that international travelers and business people have a real need for ease of access, and liquidity of funds as they operate across borders. But the current framework, according to Mark and Gonzague, is not truly global and is not efficient. Currently, during traveling, or when transferring money to clients overseas, people and businesses are levied with fees and taxes and have to wait up to several days to wire money or to receive wired money. Money transfers are subjected to a higher degree of regulation and scrutiny then are transactions made domestically.

Bitcoins, for the first time, offer an international currency, for international travelers and business people – a decentralized currency that is equally valuable and easy to use among anyone, anywhere, across borders or not.

“We are not Americans, French or Japanese,” explained Gonzague, “we are Earthlings. This is the first means for people to carry ‘value’ around the world, and it is the first chance for one ‘currency’ to be used anywhere – for example, 2 people, 1 in Paris, 1 in New Zealand – they can work together as if they are next door, making payments to each other, without fees, instantaneously, and with a common currency that both can use just as easily.”

Crypto-currency – Bitcoins have several technical advantages over other forms of currency. They are completely digital but they rely on cryptography (encrypting and decrypting as required steps for validity) and are virtually impossible to steal or counterfeit. One of the security fears of Bitcoins has been so-called “double-spend” where you pay someone in Bitcoins, retrieve it back and spend it again.

“Impossible.” Mark explains, quite convincingly. “The level of robustness of the cryptography used with Bitcoins is so great that it is almost impossible to have the amount of CPU to even try it. My estimates are that it would take 64 times more power than all of the CPU required to “mine” all 21 million Bitcoins.”

Another aspect of the cryptography that makes Bitcoins ultimately more secure and safe to use is something called a ‘block chain’ – a sort of transaction ledger. All transactions between holders of a Bitcoin are logged, proving the transfer of Bitcoins in payments between 2 parties and making it virtually impossible to steal. Within the block chain, the recipient of a Bitcoin, by virtue of how they are set up, would be logged, so the payer of a Bitcoin gets absolute proof of the payment recipient and the exact time when a transaction is made.

Add to these points a 3rd feature: Finite Supply and Inherent Value (like gold). Bitcoins take effort to be created (or “mined”) requiring massive computing power, and the volume at which they can be mined is strictly controlled through an algorithm, and ultimately, the absolute volume of Bitcoins is limited to 21 million. Also, Bitcoins are considered by many to be a better inherent asset than gold – unlike gold, there are no storage requirements, no insurance, no physical burdens, etc.

The combination of the 3 – Decentralized, Cryptography, Inherent Value – make Bitcoins arguably more reliable, more convenient, more transparent, and potentially more valuable for an increasingly globalized world.

Mark summed it up: “Who says that in a global economy, with communication happening instantaneously, with information available instantaneously, with people making decisions with implications straddling borders and jurisdictions, that my payment options should be limited to a currency tied to one arbitrary political territory of the world, whose monetary policy is in the interests of that territory, and whose currency can be printed or withheld at will without an intrinsic value behind it other than the faith I have in that lone government?”

Not surprisingly, currently there is no agreement by any government regarding what exactly Bitcoins are and how they should be handled. But it is a given that governments are not going to give up their control over monetary supply or financial transactions easily and general acceptance of Bitcoins, if it happens at all, will be a bottoms-up process.

What About Japan?

Which brings us to Mt.Gox’s status in Japan and its future. They have been in discussion with the Japanese authorities – the Financial Services Agency (FSA) – for 1 and 1/2 years about the business and how it should be regulated. And as an example of how difficult it is to accurately peg what Bitcoins are, the Japanese authorities, to date, say that Mt.Gox does not need a financial license. “There are 3 kinds of licenses for financial activities in Japan and what we do is actually not covered by any of them, so at the moment, the FSA says we are outside of their jurisdiction. There has been discussion about trying to fit us under one of the licenses or to make a new license for our business, but it is not clear where it is going to go at this point.”

To date, the vast majority of the company’s business has been outside of Japan, which is likely why there hasn’t been much concern by the Japanese authorities – yet. But this may change if interest in Bitcoins in Japan starts to grow as it has in Europe and the Americas.

Some More Background…

Some people think that Bitcoins are a Japanese invention and that Mt.Gox is a natural outcropping of that. But while the inventor of Bitcoins signed the registration documents as Satoshi Nakamoto, this was almost certainly an assumed name and even the Mt.Gox guys are not sure who exactly this person was. For Mark and Mt.Gox, their role came via a connection through another venture business.

Mark started another company in Japan called Tibanne which is a hosting and domain management business. Mark actually built a Bitcoin client in order to accept payments by Bitcoin for his hosting business. Through this, Mark met Jeb McCaleb, founder of Mt.Gox. McCaleb had started the company as an online card trading exchange called “Magic The Gathering Online eXchange” – hence the name, Mt.Gox. But when he built the Bitcoin exchange, it soon became the majority of the business.

And eventually, in a classic entrepreneurial “I liked it so much I bought the company” moment, Tibanne acquired 88% of Mt.Gox and it became a subsidiary of Tibanne.  McCaleb moved on to other ventures and Mt.Gox went on to become the #1 exchange in the business.

So What Does the Future Hold?

There are countless threats to the business, but in Mark’s view, countless ways for the business model to put its stamp on world business and the future of money and economics.

“Bitcoins have hit a certain critical mass of recognition, even if general acceptance is still sometime in the future. And we’re seeing the inevitable challenges and pushback felt in any new business model and leading edge opportunity. But if we can continue to explain the advantages of Bitcoins while providing a safe and robust service, we’ll be in a position to help reach the next important step forward toward a truly transparent, global world economy.”

Chris Dixon, the entrepreneur-turned angel investor-turned general partner at VC firm Andreessen Horowitz, today said that he believes the 3D printing movement has the potential to revolutionize manufacturing and that it is an area where he would like to make multiple investments in the future. In contrast, he described startups in areas like social networking facing “general fatigue”. Earlier this month, Chris Dixon and Andreessen Horowitz led a $30 million Series C round in Shapeways, a 3D printing company, where he has now joined the board.

Shapeways is indicative of an untapped opportunity in hardware, he said. “3D has been talked up a lot, but it’s received very little investment from traditional VC firms,” Dixon said today on stage in an interview TC Disrupt.

“For us, we think it’s a major, incredibly significant innovation. It will transform manufacturing and I can see us making multiple investments.” Indeed, a lot of the smaller hardware players have turned to platforms like Kickstarter instead not just to raise money but also to drum up consumer interest and profile for their projects. This has almost become like a testing ground, with the most successful then eventually converting that growth into more traditional investment routes for startups.

New York, he said, has become a kind of “hub” for hardware, and it has opened up the opportunity for new startups and new investing in the city. New York, he said, is at the center of what he calls a “hardware renaissance”, with the clever engineers who had in the past put all their efforts into working on social networks “now working on hardware devices.”

He said this is because social networks are in the middle of a “general fatigue” and so people have turned to wanting to do “something tangible.”

The huge rush of smartphone devices hitting the market has also had an impact on the larger market for hardware and wearable computing products, he said. “The smartphone explosion has lowered the cost for a lot of components and that has dramatically lowered the costs of producing devices,” he noted.

He points out that the kind of disruption that a company like Shapeways provides is “innovation at the high end.”

He also compared hardware developments to “the same forces that when you think about what the internet did for written work.”

“Before the Internet you had to go to a publisher and get an investment. Now you can publish you ebook or blog and it dramatically lowered the cost and enabled the long tail, democratized writing. We can see 3D printing doing that to manufacturing. You can cut a deal with manufacturing now and have a Shapeways printer and the batch size is one.”

Dixon also compared the general climate for startups in New York in general to life in San Francisco.

“There are plenty of great investors here and that attracts a lot of entrepreneurs. The one thing that is missing is a whole mid-level layer. If a company has a hit product and want to scale and hire employees 50 to 100. If you want to go international, or scale a sales force. If I want to figure out a monetization thing in San Francisco I can go to Google to get that.” That acceleration is still developing here in New York, he says.

San Francisco is similar to New York with a lot of consumer stuff. Down the peninsula you have infrastructure and hardware but San Francisco is pretty similar to the New York scene, taking technology and applying it to the real world.

Watch the full video of Chris Dixon’s interview here:

Amiigo, a fitness tracker bracelet, shoe clip plus app that can tell what type of exercise you’re doing thanks to its combination of hardware sensors and gesture-based software algorithms, has kicked off its crowdfunding campaign on Indiegogo.

The team behind Amiigo had originally planned to start crowdsourcing funds back in October but delayed the launch of the campaign to work on improving aspects of the technology and to raise a funding round by a more traditional route. This VC funding round (sum undisclosed) was led by a UAE-based fund called Alpha Investments. Amiigo still wants to couple the VC investment with crowdsourced funding as it says the latter is a way to build a community around the product and “find initial beta users”.

Amiigo’s Indiegogo campaign went live early yesterday morning and is already around two-thirds of the way to achieving its $90,000 funding goal. “We’ve had a lot of interest so far!” says Amiigo’s Abe Carter.

Carter says the system now has the ability to discriminate “very subtle differences” between exercise sessions. “To say not only that you are ‘running on the treadmill’ as opposed to ‘the elliptical’, but also that your running is faster today, or choppier or less consistent. This principle holds true with all exercises,” he tells TechCrunch.

“We’re building a feature where the user can actually record different types of running in a practice session, and then see how/where those are turning up during competition or performance. Additionally, by using activity recognition data from friends and/or standardized references, a user can get feedback on how closely his/her ‘run’ resembles that of a friend or some professional athlete. It can be used as a powerful learning tool.”

Carter says Amiigo users will help the system get even more capable — by providing exercise data to broaden and deepen its recognition system.  ”Amiigo will provide the initial reference database (full of well over 100 commonly performed exercises) and the recognition system to identify the activities, but it’s the users who have the ability to take it to the next level. That is one of the things we’re most excited about!” he adds.

The race for smaller and more innovative electronics is on, and Samsung has a stake in the space on multiple levels: as a seller of consumer electronics products itself, and as a component supplier for the products of other companies. To that end, today its investment arm, Samsung Venture Investment Corporation, announced it was leading a $20 million investment in Raydiance, a developer of laser precision solutions that are used in the manufacturing of very small, detailed components for medical, automotive and other devices.

Raydiance says the growth round will be used to expand its business into consumer electronics (like phones) as well as build out existing business serving medical and automotive customers. Existing investors Draper Fisher Jurvetson, DFJ-Growth and Greenstreet Partners also participated.

The investment is a strategic one, in that it will give Samsung better access to the technology being developed by the company. “The demand for smaller, smarter devices continues to grow,” said Jay Chong, investment director at Samsung Ventures, in a statement. “Raydiance solutions have the potential to significantly improve existing manufacturing processes and to enable exciting new products. We are investing in Raydiance to ensure that these solutions are available for a variety of high volume manufacturing applications.”

One of the distinctive points of Raydiance is that it uses a “femtosecond laser light source” for precision cutting through any material. Founded by people who come from the defense industry, Raydiance says it is the only company to have created commercial-grade ultrafast laser solutions:

The company’s breakthrough technology brings intelligent control, commercial grade availability and small form factor to ultrafast laser light. Raydiance bundles lasers in ready-to-integrate solutions – validated, factory-proven tools that save valuable time and money.

Raydiance solutions are in production today in the medical, industrial and consumer markets, but the aim is to expand the business also into consumer electronics, which would fit nicely with Samsung’s business in handsets, televisions and other products.