Over the past five years, I’ve worked at two startups in what is now being called the altitude tech sector (See #). Given the recent surge in absorption in this space, I anticipation it would be advantageous to record a scattering of acquaint that I’ve abstruse from this experience. These acquaint span business action and the realities of the electric annual industry.

Timeline: What has this guy absolutely done?

I left Twitter in early 2015 with the goal of award software opportunities in grid addition (S).

Soon thereafter, I met a couple guys who were leaving LBNL to start a aggregation around a novel analysis technique for ecology home energy use. I joined them as the first agent of Whisker Labs, where we set about making it cheaper and easier to mine residential energy data. After a scattering of acknowledged pilots and an acquisition, I parted ways with Whisker Labs in 2018.

I then spent some time developing an idea to abode painpoints I’d empiric while alive with electric utilities at Whisker Labs. I ended up abutting an early-stage team at X that shared my cerebration on this specific botheration space. I can’t say much of annihilation about this project, due to the backstairs nature of X.

The afterward unordered and abstract list reflects my cerebration about startups in the energy space, decidedly those that aim to sell software to utilities.

1. Consumers don’t care about energy

The ideal energy system is one that fades into the background. The cutting majority of people don’t ever want to think about how electricity is delivered to their homes or how much of it they’re using. No one absolutely wants to look at time series plots of energy usage. They just want the lights to turn on when they flip a switch or yell at Alexa.

Early adopter types might enjoy seeing in real time how much power their solar panels are breeding or their car is drawing, but this is not functionality that will drive user assurance or acquirement at scale.

2. Exits are altered than those for acceptable tech startups

To be blunt—you’re apparently not going to sell your altitude tech startup to Facebook. In the event you  get acquired, a statistically likely buyer is an oil major like Exxon Mobil, an automated giant like Siemens, or a European annual like E.ON, Enel, or ENGIE. These companies aren’t going to pay $10 MM per agent or cater to your taste in programming languages or abundance software.

This isn’t to say that energy startups can’t have exits that make money for founders and investors. But the scale of these exits and the appearance of accepting companies is about not what you see for software startups in other venture-fueled verticals.

3. You live or die by the trust you build in the industry

Energy is the ultimate archetype of an industry where “build it and they will come” doesn’t work. For utilities, blow is often abstinent in fatalities and switching costs are massive. There is huge institutional apathy adverse the acceptance of new technology.

Overcoming this apathy takes a long time and requires that your team accommodate deep accountable matter experts who can speak the accent of the industry. As in any other action setting, you need to build real relationships with stakeholders up and down your target customer’s org chart.

And apprehend that the people who write checks are about not the people who will use your software. As a consequence, the affection or state-of-the-artness of your technology often won’t be a primary contributor to your success.

4. Energy economics are a poor match for adventure capital

Fundamentally, energy is a article good. This translates to razor-thin margins for companies whose primary artefact is electricity or accustomed gas. If your business involves affairs to these companies, then you accede their commodity-driven nature, making it very difficult to accomplish allotment that are adorable to investors used to SaaS companies with 80% margins.

The way many acknowledged companies avoid this botheration is by alteration the nature of the artefact they offer. By framing your business around article other than energy/savings (e.g. comfort, convenience, automation, luxury), you can escape the razer-thin margin game. Your overarching mission can still be to save energy or reduce emissions, but as a by-product of a admired annual that barter will pay real money for. In customer settings, this access can also help work around the fact that most consumers don’t care about energy (discussed above).

Examples:

  • Instead of batteries, sell cars.
  • Instead of home energy ability solutions, sell smart thermostats.
  • Instead of bartering energy ability solutions, sell employee comfort.

5. Beware the annual sales cycle

The arctic pace of the annual sales cycle has a big impact on cash administration and fundraising for startups. Companies aiming to sell to utilities need to be extra alert of runway and plan far in beforehand the absorption metrics they can realistically raise money on.

Utilities are some of the most-regulated and slowest-moving companies in existence. They plan budgets in multi-year increments and acquaint new technologies over the course of decades. Staying alive as a annual vendor or annual provider requires aspersing your company’s burn rate and abrading calm enough early pilot projects to show absorption to the next round’s investors.

For instance, say you start a aggregation with money from accompany and family to build a artefact that will help utilities decarbonize the residential sector. In order to raise money in 9–12 months, institutional investors will expect to see one or two signed pilot agreements and approved advance appear the milestones of these pilots.

So you send emails, get on the phone, and rack up airline miles to sell the capacity out of your idea. You argue a decision-maker at a annual across the country that your artefact is the absolute fit for a affirmation activity they’ve been planning for months. This person introduces you to an controlling with “Innovation” in their title and helps you advance a case for why your artefact is absolutely what they’re attractive for.

Three months later, you’ve made it through an RFP process and landed a $5 MM pilot. The pilot is split into three phases over the course of the next five years, with most of the money coming in the last phase. $500k lands in your bank annual for phase zero, which only extends your runway three months once you factor in the people you’ll need to hire. Seven months has passed since your friends-and-family round and you’re losing sleep over the number of parenthesized numbers in your banking spreadsheets.


An aside on allotment — grants (for instance, from the Small Business Addition Research program or the Department of Energy) can be an another source of early stage allotment that is better suited to many energy projects than acceptable VC. They accommodate accommodating basic and, in many cases, don’t take an equity stake. Grants can help get an R&D activity off the ground after having to jump on the VC treadmill right out of the gate.

But grants do have downsides. You lock yourself into approximate affirmation milestones that tend to bound bend from where market opportunities lie. Customer development should always come first, and you run the risk of accepting aberrate with the care and agriculture of grant milestones.

6. Policy is more important than technology

As far as angle the abating curve appear 1.5° C is concerned, I think policy and authoritative reform is currently a larger source of advantage than technology. In particular, carbon appraisement (if done right) is the single most able tool we have to reduce global emissions.

Don’t get me wrong — technology addition is acutely a primary means to acclamation altitude change. But I feel more and more that we’re abutting the point at which technology has gone about as far as it can within the borders of a 20th aeon policy regime. Buying EVs and solar panels make us feel good, but only represents bordering advance while oil subsidies artificially prop up the centralized agitation engine and attack accounts laws give bounden fossil fuel companies undue access to hamstring the deployment of clean technologies.

Even within an afraid policy framework, solar, wind, and batteries are proving to be cost-competitive with fossil fuels in many geographies. Imagine how far they’ll go once the rules absolutely incentivize them at scale.

I don’t accept that we’ll get where we need to go after a global price on carbon. This is why I advance with the Citizens’ Altitude Lobby to build political will for a civic carbon fee and allotment policy in the US. It seems insurmountable given the accepted political climate, but you’d be afraid how much advance we’ve made.

Closing words of encouragement

As I’m sure this essay has made clear, five years of architecture technologies for sale to utilities has left me rather burnt out by the slow pace and legacy nature of the energy industry. That being said, I remain aflame by the absurd work being done throughout the energy/climate startup ecosystem. I don’t mean to dissuade anyone from taking the plunge, but founding teams need to know what they’re signing up for.

And investors need to know what they’re funding. Energy is not the realm of hyper-growth SaaS apps that can scale to 10 actor users in the blink of an eye. A annual might only have 20 people in their alignment that will advisedly use a specialized product. And it could take three years of sales and affiliation airing to get a artefact paid for and congenital into circadian work.

So take these acquaint with a grain of salt. If you’re ambience out on a startup adventure in the energy sector, your breadth will assuredly vary. I’m acclaim for you.



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