FirstFuel Refuels with $23M to Develop Software for Utilities
Some people tend to think of smart meters, solar panels, and energy audits in the same way they think about home improvements. But the owners of commercial property such as office buildings, shopping centers, and warehouses are taking a growing interest in renewable technology as a way to cut their electric bills.
Utilities know that, and they’re looking for software companies that can help them understand and sell new products to those customers. One beneficiary of that is FirstFuel, a Lexington, MA-based company. FirstFuel announced Wednesday it has raised $23 million in a Series C round. With the new funds, FirstFuel has now raised a total of $45 million since its founding in 2010.
FirstFuel makes software that utilities can use to analyze the energy consumption patterns of their commercial and industrial customers. FirstFuel’s customers can then use the data to sell new products and services to customers, and offer energy efficiency and demand management programs.
The idea is similar to what Opower and Tendril are attempting to do, but unlike those companies, FirstFuel is focused on commercial buildings such as offices, stores, warehouses, and industrial properties.
Over the past few years, most discussions of smart grids, smart meters, and other technology to improve energy efficiency have focused on the residential market. But commercial customers make up a huge percentage of utilities’ clientele, and that means there is a huge business opportunity for startups that can help utilities sell new services or improve energy efficiency for those customers, FirstFuel CEO Swapnil Shah said. About 20 percent of the $1 trillion spent per year on energy goes to commercial buildings, he said.
FirstFuel wants to capitalize on that, but there’s a catch—commercial buildings have much different energy usage profiles than homes, and there’s a much greater variation between an office building, mall, and warehouse than there is between single-family homes, Shah said. So FirstFuel has focused on designing software able to analyze the data those properties generate. He believes it can help utilities and energy providers understand customers to a degree they’ve never been able to before.
Until now, Shah said, utilities didn’t know much about their customers, in part because they didn’t have to—there was virtually no competition in the industry as most utilities were privately owned and regulated monopolies, or owned and run by municipalities. Deregulation intended to spur competition has led utilities to market themselves, and new technologies such as affordable solar panels mean there are new products and services utilities can sell, and potential new revenue streams as they try to become the central conduit and supplier for customers, Shah said.
That’s led utilities to a place where they’ve learned a basic business truth almost every other industry knows.
“You can’t serve the customer if you can’t understand the customer,” Shah said, and utilities are recognizing that and have become interested in customer intelligence software from companies such as FirstFuel.
It’s all part of “a sea change” in the industry that’s creating a new market for energy services and software. Navigant, an industry analysis firm, expects that amount to reach about $14 billion this year.
Shah and his investors expect that amount to grow substantially. Next World Capital led the round and is a new investor, along with Electranova Capital. Next World partner Tom Rikert will join FirstFuel’s board. Prior investors, including Battery Ventures, Rockport Capital, Nth Power, and E.ON, a Germany-based electric utility, also participated in the round.
Rikert said Next World Capital is backing FirstFuel because its sees the global utility and electric industries as being on the verge of a transformation. In addition to deregulation, new technologies, and new business models, the traditionally very slow moving industry is finally adopting software-as-a-service and big data.
His firm only backs enterprise software companies, and that’s what Rikert views FirstFuel as—a SaaS company that just happens to be in utilities, which means it won’t be susceptible to the booms and busts that seem to plague the energy and cleantech industries.
The new cash will be used to help FirstFuel expand its market reach and deepen relationships with existing customers, Shah said. FirstFuel currently is focusing on the domestic market, but plans to reach into Europe are in the works. It has about 25 customers, including utilities and government bodies such as the U.S. Department of Defense and the General Services Administration, which manages the federal government’s buildings.
Currently, FirstFuel compiles data from more than 1 million meters, and its energy audit software has identified projects that could account for $400 million in savings, Shah said.
If all goes according to plan, within about 5 years FirstFuel will have compiled the largest database about commercial buildings’ energy use. Shah calls that a “treasure trove of data” just about any utility or energy service provider would want to tap into.