Home Depot looks to Silicon Valley for growth

Home Depot’s (s hd) history of acquisitions has run toward building products companies and home services, not Silicon Valley start-ups. But the home improvement retailer is showing that it is trying to be more innovative and forward-thinking with the purchase of online home services marketplace Redbeacon.
It’s unclear how Home Depot wants to use Redbeacon, which allows users to get bids on home projects by contractors using Redbeacon’s marketplace. The start-up, which first launched in 2008 and won a number of start-up competitions, said today that it would remain open for business for its users. It was generally well regarded for its ability to bring together consumers who needed services from contractors. Redbeacon uses algorithms that even look at Facebook connections to find the right contractors for a job.
Home Depot didn’t disclose the purchase price but said that the Redbeacon leadership team would remain in place in San Mateo, CA. The company was founded by former Google (s goog) workers Ethan Anderson, Aaron Lee and Yaron Binur. It has raised $7.4 million from Mayfield Fund and Venrock.

Redbeacon co-founders Aaron Lee, Ethan Anderson and Yaron Binur

The deal though shows that big retailers are increasingly looking toward Silicon Valley for ideas and inspiration about how to grow their business. By buying Redbeacon, Home Depot can get some lessons on how to tap users through online and mobile channels. And it helps them become more of a resource for people looking to remodel and improve their homes. Home Depot is not simply about being a physical store to sell goods and services but being a brand that people turn to for all their needs, including labor.
Home Depot has also been working closely on PayPal’s (s ebay) first trial of its in-store payment system. PayPal just said today that it expects to roll that out to all of Home Depot’s more than 2,200 stores by March. That’s another example of Home Depot getting with the times. Increasingly, retailers have to think about how to handle the changing needs of consumers, who are buying online and through mobile devices. Partnering with PayPal gives Home Depot a chance to be first with a new form of payment, but it also means it will likely get first crack at many of the other services PayPal plans to roll out, such location-based offers, in-aisle purchases, scanning products for inventory checks and other in-store services.
Big retailers are being forced to look this way. Walmart (s wmt) bought Kosmix and established Walmart Labs to help it evolve as mobile and social change the way people shop. Walmart Labs has turned around and started acquiring start-ups to help it get up to speed. The Gap (s gps) has done a bunch of deals with mobile and social start-ups to try and get ahead of new buying patterns. Rival Lowe’s equipped its workers with iPhones (s aapl) last year, in response to Home Depot’s deployment of Motorola (s goog) devices to help answer consumer questions.
As Venky Harinarayan, SVP Wal-Mart Global eCommerce and Head of WalmartLabs told me the RoadMap conference last year that retailers are still trying to understand the implications of social and mobile on commerce. But it’s clear companies need to move forward and embrace the changes in commerce. And that means increasingly partnering with technology companies and sometimes buying them up.