At Energize we have been tracking the solar software market for years. For years we have known and spoken with the utility scale leader in this software market, PVcase, and today we are excited to announce our formal investment into the company. Energize is a major investor in PVcase’s $100M growth round and we are thrilled to help them scale their company globally and into the stratosphere of renewables. The company, cofounded by David Trainavicius (CEO) and Douglas Geist (CCO), is based in Lithuania. I have tremendous respect for the cofounders and their ethos, mission, product, and competitive spirit aimed at serving the customer. With the investment, I joined the PVcase board and Kevin Stevens as a board observer.

(Links to Energize specific posts “Why We Invested” can be found at the link.)

We are excited to join Irena at Highland Capital and Peter at Elephant in this round. Highland brings incredible growth equity experience and European exposure and Elephant specializes in capital efficient scaling.

This investment comes from Energize’s growth platform. Kevin Stevens and Meredith Breach were both foundational in executing the investment. But like everything at Energize, it was a full team effort as several team members engaged with the PVcase team dating all the way back to 2020. Our EDGE team has already engaged with PVcase and we were excited to be involved in PVcase’s recent acquisition of Anderson Optimization.

I have previously written about how the solar market will yield several large technology companies. One of those notes was an article I wrote for Forbes titled: “The Horizon for Solar: A Vertical Software Decacorn“. A consistent trend in the sustainability landscape is how much bigger the market opportunity grows each year. The solar market is a great example as the scale of the asset class continues to beat any recent expectations. This investment in PVcase is further belief in the asset class and how software will help deploy and manage more assets.

The climate sector currently has several private companies attempting to raise enormous funding rounds. Most of these companies raised $100-500M as recently as 12 months ago and are back in market already for similar, or larger rounds. Why? At their core, these climate companies are capital goods business with heavy capex requirements… for example: businesses that are building battery factories recycling factories, battery assembly plants, solar facilities, new hydrogen or nuclear related equipment. The ambitions are admirable, but the buzz-saw of the current market is not being kind to the raises and we are seeing “pay for play” provisions return and heavy preference stacks being offered to entice new investors into these deals. I’ve rarely seen that work out well…

I was speaking with the Head of Corporate Development at a Fortune 50 company this past week. His company has exposure and interest in the climate sector and is a likely acquirer for some of these emerging capex-type products. The firm had seen many of the prospective rounds and his commentary really struck a chord:

“These are all capital goods or industrial machinery businesses. The private market is valuing them like technology companies… 5-10x 2028E revenues…. but if these companies commercially succeed, and only a few of them will, we would look to buy them for the standard capital goods valuation levels… 6-8x EBITDA… and the disconnect between the current valuations and the success-dependent fair market value is already too wide”

We spoke for a bit longer, but the general takeaway was clear: just because a product is new & shiny, does not mean the business model or the eventual valuation, will settle in a different range than the underlying business model. Manufacturing and industrial businesses, whether for EV batteries or regular industrial products, settle around that 5-8x EBITDA multiple when achieving scale.

The energy transition is just beginning. I’ve covered here before how wind and (especially) solar have seen massive step-ups in deployment scale over the past decade. That scale was driven by:

a) select technological innovations

b) increased investment in capital goods factories to deliver the necessary materials

c) improved utilization of software to lower soft costs, manage scale

These three actions resulted in 90%+ cost declines of key energy technologies, and the lower costs brought these energy solutions to cost parity (or better) than hydrocarbon solutions, resulting in big deployment figures.

If solar is the story of the 2020s, then solar & batteries will be the energy transition narrative of the late 2020s and 2030s. EV batteries and storage batteries are starting from a small scale today but the absolute % growth that is planned for the asset type is going to alter the entire energy system. I saw a few graphs this week that reveal this scale, and wanted to share:

The top chart is from a Greenhill report, and shows that 78 GW of solar are installed in the US, and 231 GW are in the process of being installed, or 25% of total pipeline is actually in the ground today. When running a similar analysis for batteries, only 10 GW of batteries are in the ground today, but 72 GW are under development. When comparing that data with the bottom chart from Wood Mackenzie, you can see the true scale of the global battery market as all economies move to adopt and integrate energy storage and electric vehicles into their energy footprint.

To put the Wood Mackenzie report in perspective: today, there is 160 GW of battery storage globally. We are now adding that much stationary storage every 2 to 2.5 years and by 2029 will be adding more capacity annually than our existing volumes. Importantly, those figures do NOT include the chart on the right. This chart shows the scale of batteries in EVs and software defined systems will help those batteries become grid resources as well. At Energize we love these tailwinds and believe the distributed and controllable battery assets are perfect candidates for our digital thesis. Should be fun to watch this play out over the next decade.

Energize and Lux Capital co-led the Series A investment in ZEDEDA back in 2018. ZEDEDA is a technology infrastructure company that helps deliver cloud-level applications to the edge of the network. Why did we make the investment? The desktop worker is fortunate to have a computer with continuous WiFi and a computer powerful enough to handle local apps and internet to access the cloud.

Edge devices are usually independent and isolated machines that have low, local compute, poor IT infrastructure, and low connectivity to central HQ. As an infrastructure IT company, most of our impact-focused Limited Partners wanted more detail on how this tool helps enable a more sustainable future.

4+ years into the investment and many of those examples have emerged and I want to highlight two of them:

1- The gearbox in a wind turbine is very valuable asset. It sounds rudimentary, but the noise (clanks, bangs, friction) the gearbox makes is the simplest way to know the health of the asset. So how does a utility or energy operator listen to a gearbox from a thousand miles away? Simple: you put a small microphone inside the wind turbine’s gearbox area, and control it through a ZEDEDA node controller. This way, the O&M team at central HQ can turn on/off the microphone remotely…. and when “on” the ZEDEDA node controller can also run an “analytics app” on it locally that matches sound patters with fault issues… all digitally and automatically. The node then send back basic intel (limited by remote bandwidth!) and keeps preventative maintenance on track. The energy transition is increasingly decentralized and remote, and the ability to engage with and analyze these assets without having to deploy expensive engineers helps lower costs and increase safety. ZEDEDA helps deliver this edge architecture, and BIG energy companies use this software around the world for similar use cases.

2- The modern car is a computer. The pace of change from analog to digital is being accelerated with the electrification of mobility as OEMs are re-thinking their entire architecture. A major OEM is deploying ZEDEDA edge architecture across every dealership to help automate “over the air” software updates for vehicles in a more simple, and less invasive way. This is meant to deliver a better experience for EV drivers, further enabling the energy transition.

In summary, ZEDEDA is invisible to most people in the energy transition, but their technology is a key part of the new digital backbone for sustainability-focused corporates.

A couple months back I was on the “Entrepreneurs for Impact” podcast with Chris Wedding. At the end of the call he asked who else he should speak with, and we mentioned Mike at DroneDeploy and Casper at Monta. Well, Mike and Casper agreed and their podcasts were similarly released over the last few weeks. I think they are both worth listening to, and the links / summaries are below.

Mike, DroneDeploy

Here is a link to Mike’s episode, they talk about:

– Why he was happy to have an angry customer in the early days
– How drones can help reduce costs for climate and renewable energy solutions
– What a digital twin is and why they matter
– How they’re making work on critical infrastructure safer, quicker, and more productive by avoiding dull, dirty, and dangerous work
– How his love of remote control helicopters and a trip to South Africa helped start this business
– The role of timing in determining the success of a startup
– How AI and robots can make us superhuman
– How to procrastinate in a productive way

Casper, Monta

Here is a link to Casper’s episode, they talk about:
– How he grew his company from 0 to 150+ employees in just over 2 years
– What led investors to commit more than $60M to his company’s growth
– Why Monta aims to be the “Android of EV charging software”
– How their technology allows EV owners to optimize for the lowest power cost and GHG emissions for their charging
– Various hypotheses that they tried and abandoned for the current business model
– How beer among the early team at a summer house led to the core values they have today
– What radical transparency means for them around salary, equity, and financial disclosure to all employees
– Why half of the team is focused on R&D and innovation
– What led to EVs being 50-90% of new car purchases in Denmark, Sweden, and Norway

Energize led the $24M Series B into Smartcar in January 2022. We had performed extensive research on how innovation in the mobility landscape could enable the electrification of mobility. Ultimately we wanted to identify and invest in a software company that served as many stakeholders in the mobility space as possible. We felt there would be several bespoke solutions and believed that the software that connected all parties would be valuable.

What is Smartcar? As they define it… Smartcar is leading the way to open up access to those APIs, powering a new community of innovators in the mobility space.

When you read that sentence, the energy / electrification / sustainability movement does not immediately jump out. And yet, we saw the roadmap to those solutions. This week, one of the applications we knew was on the horizon was finally revealed! Uber intends for their entire fleet to be electric. About 5% of rides today are electric and those used to be planned irregardless of the state of battery charge for the EV driver. The announcement this week is that Uber now connects with the driver’s electric vehicles to match trip length with battery charge & availability… and that communications protocol is all done through Smartcar.

In addition to that type of announcement the company has built the communications and control layer for several EV charging applications that utilities, building owners, and fleet managers leverage to integrate, manage, and optimize EV charging.

In addition to the charging management applications, the company is also the communications layer for several of the emerging EV charging networks themselves. Network use cases include helping customers make reservations, understanding state of charge, and proximity to charger are all shared (with customer approval) through Smartcar.

Smartcar is truly the digital communication highways for the EV movement. This is how an API company is accelerating sustainability.

We have some investments in the climate software arena that are very tangible combinations of digital and climate: Aurora Solar designing rooftop solar, Patch as a marketplace for the carbon markets, etc.

We also have a few investments at that “digital X climate” intersection where the climate connection is harder to grasp. These companies tend to be more “digital infrastructure” and the pipes behind the emerging asset owners, managers, or parties driving new business model innovation. When we make these investments, some of our more climate focused LPs tend to scratch their heads. But these companies are equally important in the sustainability transition and we now have the data and commercial progress to prove those initial expectations. Examples from the portfolio include:

• Smartcar: API platform for the connected car
• DroneDeploy: reality capture platform (air, ground) and analytics
• Sitetracker: project management and deployment software for decentralized assets
• Nozomi Networks: OT cybersecurity for connected assets
• Handle: payments flow for construction
• Beekeeper: frontline employee communications and engagement

I’m going to cover these companies and their sustainability use cases in the next few weeks. In some customer/industry cases, I am happy that Energize had the foresight to see how emerging technology could be leverages in the sustainability markets. In other cases, the use cases ended up different than even we expected! Overall, should be an interesting topic.

JT