These lessons span business strategy and the realities of the electric utility industry.
Timeline: What has this guy actually done?
After a handful of successful pilots and anacquisition, I parted ways with Whisker Labs in 2018.
I ended up joining an early-stage team atXthat shared my thinking on this specific problem space.
I cant say much of anything about this project, due to the secretive nature of X.
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Consumers dont care about energy
The ideal energy system is one that fades into the background.
No one actually 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.
This isnt to say that energy startups cant have exits that make money for founders and investors.
For utilities, downtime is often measured in fatalities and switching costs are massive.
There is huge institutional inertia impeding the adoption of new technology.
And realize that the people who write checks are typically not the people who will use your software.
Energy economics are a poor match for venture capital
Fundamentally, energy is a commodity good.
This translates to razor-thin margins for companies whose primary product is electricity or natural gas.
The way many successful companies avoid this problem is by changing the nature of the product they offer.
By framing your business around something other than energy/savings (e.g.
comfort, convenience, automation, luxury), you could escape the razer-thin margin game.
Examples:
5.
Utilities are some of the most-regulated and slowest-moving companies in existence.
They plan budgets in multi-year increments and introduce new technologies over the course of decades.
Three months later, youve made it through anRFPprocess and landed a $5 MM pilot.
They provide patient capital and, in many cases, dont take an equity stake.
But grants do have downsides.
You lock yourself into arbitrary demonstration milestones that tend to quickly diverge from where market opportunities lie.
Dont get me wrong technology innovation is obviously a primary means to addressing climate change.
Imagine how far theyll go once the rules actually incentivize them at scale.
I dont believe that well get where we need to go without a global price on carbon.
It seems insurmountable given the current political climate, but youd be surprised how much progress weve made.
That being said, I remain excited by the incredible work being done throughout the energy/climate startup ecosystem.
And investors need to know what theyre funding.
A utility might only have 20 people in their organization that will meaningfully use a specialized product.
So take these lessons with a grain of salt.
If youre setting out on a startup journey in the energy sector, your mileage will undoubtedly vary.
Im rooting for you.
#1: Nee energy tech, green tech, clean tech.
#2: By grid modernization, Im referring to technology often associated with the buzzword smart grid.
