Energy efficiency company Opower has raised $50 million in third-round financing, but CEO and cofounder Dan Yates says the company “didn’t need to raise the cash” — the company is already breaking even, and will use the cash to accelerate its growth.
The funding round was jointly led by Accel Partners and Kleiner Perkins Caulfield & Byers. While some industry watchers say that Kleiner Perkins has been moving away from cleantech and back to investing in Internet companies, this deal seems to illustrate a lot of the green investing trends of the moment, like a move towards capital-efficient investments — a sentiment that Yates echoed. (Disclosure: VentureBeat shares an investor with Opower, MHS Capital.)
“A lot of these guys now have scars on their back and have learned the lesson that these massive infrastructure projects are not a great place to spend venture dollars,” Yates said. “”Efficiency is a low-hanging fruit. This is all less expensive than wind and solar and biofuels. It has no partisan politics associated with it.”
Investors are searching for more capital-efficient investments (Opower is a software-as-a-service company) and there’s a rising interest in energy efficiency. In fact, it was the hottest segment in green investing last quarter, with 17 deals worth a combined $162 million.
Yates said, the funding round will be used to accelerate the company’s growth as the energy efficiency sector continues to grow. For example, the company now plans to hire about 50 workers next year.
“We otherwise would have waited another year or two years to make those hires,” Yates said. “It’s a huge market. There’s really no incumbent in this space.”
The company has risen to become something of a darling in its field. It is best-known for using a behavioral science-based method of printing energy bills that compare your energy use to that of your closest neighbors, and using human competitiveness and targeted energy-saving tips to get an average of 1.5 to 3.5 percent in energy savings off each bill. Opower also makes several other customer engagement, energy efficiency and demand response solutions, and utilities buy into a mix of its offerings.
Traditionally, it has been hard to get consumers engaged in saving energy, as well as the different techniques that are out there, like automation. Part of Opower’s value proposition to utilities, Yates says, is that it helps them get it smart meter rate cases approved because it can demonstrate better consumer engagement and payback on investment. It’s especially relevant given some of the uproar over smart meter deployments lately, such as PG&E’s struggles in California.
“This stuff is super boring,” Yates said. “We’re always reminded how lame the energy efficiency is compared to the Xbox.”
So Opower’s angle, Yates said, is to not inundate consumers with information about “lame” energy usage data, which doesn’t work anyway, and focus on an approach to the customer that requires less effort on their side.
“People want to be checked in with once a month with this stuff. They don’t want to check in all the time,” Yates said, saying that’s why home energy displays don’t work. Bills like the ones Opower produces are a “much more comprehensible platform.”