Prioritizing utility in its family social network, Life360 raises $50M from ADT to tackle the connected home

By Michael Carney , written on May 14, 2014

From The News Desk

When it comes to social networks, the largest battleground that has yet to be won is the family. But that may have changed today, thanks to news that Life360 is bringing on $50 million in new funding.

The first $25 million tranche of this mega round has closed, coming from strategic investor, security giant ADT. The remaining capital is expected to close in the next month, according to the company, coming from a second strategic investor as well as follow-on participation from the company’s existing investors. The deal values Life360 at approximately $250 million, according to sources close to the company.

So where did Life360, with its more than 33 million registered families, succeed where so many others – cough, Path – have failed in their attempts to build intimate social networks?

The short answer is by focusing less on casual entertainment features like photo and link sharing, and more on utility in the way of location sharing, emergency communication, and other premium services – which are available as a combination of free and paid services. With this in mind it’s not hard to appreciate the strategic value of the ADT relationship.

With the connected home quickly moving from fantasy to reality, the race is on to create the software hub that will power this world of smart devices. Everything from security systems to lighting to heating and cooling can now be networked and programmed to respond to homeowners’ behavior patterns and personal preferences. But the challenge remains getting the data necessary to power these systems.

It’s a task that typically requires building complex mobile apps, then getting users to download them and to sign off on being tracked digitally – no easy task for even the most beloved companies. Life360 has the existing user base and the trust of its users to ask for this highly sensitive data, as well as some of the most efficient location tracking technology in the industry. Through this new partnership, the companies’ joint customers will soon be able to control their connected homes through the Life360 app.

The ADT partnership didn’t start with an investment in mind, but rather began last fall as an acquisition discussion, according to Pando sources. The deal fell apart when the two parties couldn’t agree on terms, it seems, but was reborn as a strategic investment a few months later. Nonetheless, it seems evident based on the size of the check ADT’s writing and the frankly unprecedented access the company is giving Life360 to its customer relationships, that this is very likely the beginning of a deeper relationship.

“We didn’t have a number in mind. In fact, we weren’t really raising money – I didn’t even have a fundraising deck,” co-founder and CEO Chris Hulls says. “We just asked ourselves, ‘What do we need to not have to raise money ever again?’ And obviously ADT wanted to own a meaningful slice of the business. So that’s how this happened.”

But despite the close ties between ADT and Life360, the startup is not abandoning its plan to be the definitive hub of the connected home, including partnering with other security companies. For example, it’s currently integrated with AT&T Digital Life. Life360 already has a private API that it’s integrated with a handful of partners and plans to make that API publicly available by year’s end. Life360 has also integrated with nearly a dozen automotive companies, including its publicly disclosed partnership with BMW, that will bring family social data into the dashboard of the next generation of vehicles.

In terms of monetization, Life360 gets paid both a lead-generation commission for the customers it drives to its partners – including ADT – and also, in many cases, a recurring revenue share. This is in addition to the company’s own subscription fees for its premium services. Unlike companies that are selling eyeballs to advertisers, Life360's monetization is a far cleaner exchange of value.

Early on, Life360 was considered by many in Silicon Valley to be little more than a niche location sharing app. But the company has wisely moved well beyond that overly simplified use-case. “We’re not (just) a child tracker,” Hulls say. “Yes location is a feature we offer, but we view the real win as establishing ourselves as a hub, which is why we’re starting to work with these legacy infrastructure providers.”

For ADT, this deal represents another step in a larger technology roll-up strategy that has seen the company partner with McAfee and acquire Canada’s Reliance Protectron in the last year. It’s a savvy move for a legacy company that needs desperately to reinvent itself for a mobile-first and connected world.

For Life360, this round – like the acquisition discussions that preceded it – is in many ways about dedicating more resources to what's already working for the company and staking its claim as the one platform that “owns the family,” according to Hulls. This means building out a pipeline of non-location sharing features, the CEO says, and putting the final touches on its API ahead of its upcoming public release.

The six year old San Francisco company has just 50 employees today, but has already opened 20 new engineering roles as part of a planned doubling of the team in the near future. The company has now raised $76 million from investors that include Duchossois Capital Partners, BMW i Ventures, Facebook, Google, Expansion Venture Capital, DCM, Bessemer Venture Partners, Fontinalis Partners, Seraph Group, 500 Startups, Comerica Bank, Lighthouse Capital Partners, Social Leverage, LaunchCapital, Venture51, Bullpen Capital, Kapor Capital, Band of Angels, FF Angel,and Qihoo360.

Life360 and ADT are not alone in recognizing the opportunity to own the connected home. Google has been taking steps in that direction with its acquisition of Nest and has hundreds of millions of latent Google+ accounts it can leverage should it decide to offer a utility-focused family social network. Amazon too has been sniffing around in this area, while both Apple and Facebook seem like natural candidates to tackle the home, although we have yet to see concrete evidence of such plans. Add to this list the growing number of startups like Revolv and others looking to place themselves at the epicenter of the Internet of Things and it becomes clear that this is a crowded and competitive market.

With today’s deal, Life360 secured itself a sizable partner and a potential downstream acquirer. Following this deal, the company’s biggest challenge going forward will be to continue prioritizing its users by placing utility ahead of monetization. In this way, it may benefit by being a partner rather than a subsidiary.

It seems like we’re seeing a convergence in the races to “own the family” and “own the home.” Together, perhaps Life360 and ADT can pull off the clean sweep.