After a decade of developing wireless smart grid technology, selling gear to cities and utilities in the U.S. and Russia, and raising around $40 million in venture financing, startup Eka Systems has been sold off this week. Well, at least all of its assets were sold. The buyer: Cooper Industries, which makes gear for the power industry, and plans to incorporate Eka’s tech into its smart grid automation networking gear.
While terms of the deal weren’t disclosed — making it hard to tell how well Eka and its investors made out — the deal is indicative of a growing number of acquisitions in the smart grid industry as large multi-national power players (like Cooper, Siemens) look to add on (or partner over) the latest technology. We chatted with Eka Systems CEO Dave Pauken this afternoon on the deal and the future of the industry:
Q). How will Eka fit into Cooper’s plans and technology?
A). They’ve got a power line carrier technology. That is good in the rural markets, but not as effective in suburban and urban environments. On the other hand wireless mesh [Eka’s technology] is very effective for suburban/urban environment. Many utilities have a complement of both environments and Cooper believes an integrated solutions to sell to utilities will be powerful.
Q). Terms of the deal weren’t disclosed, can you give me more details or at least a range of a price?
A). No, Cooper wanted to keep that confidential. I can say that it was a good result for Eka and a good result or Cooper.
Q). What’s your experience from selling the company, are large power players eager to buy technology in this space?
A). There’s an increasing level of interest among industrial companies that have traditionally serviced the utility industry to access new technologies. Technology is coming to the utility industry. When you look at the large multi-nationals you find they may be lacking technology and there is this whole plethora of companies built five to seven years ago that are offering tech for the utility industry. You’ll be seeing more and more of them being acquired.
The driving force behind the acquisitions are that the utility industry is capital intensive, has long sales and revenue cycles and companies need to have a big balance sheet, or have raised a lot of capital, to support the utility market. Utilities are also traditionally conservative by nature — a company like Eka can sell more of our solutions when you have a brand and stability from a company like Cooper behind you.
Q). These companies haven’t traditionally bought that many startups, compared to IT firms like Cisco (s CSCO) and Google (s GOOG). Do you think they’ve moved past the learning curve?
A). I think so. These large industrials have come to realize that they don’t have all tech they need within their own operations, and have to access it by buying and partnering. For them though it’s a difficult decision because it goes against the history of their companes. However, Procter & Gamble (s PG) is good example. Ten years ago they made a concerted effort to acquire and partner with tech companies and it has completely changed the company. The same things is happening in the utility industry. It is a stated goal of Cooper to acquire technologies.
Q). What are going to be other major acquirers in this space?
A). Any company servicing the utility industry will be aggressive. And also non-traditional companies moving into servicing utilities, like with Cisco investing in Grid Net.
Q). On that note, how much of a role do you think WiMAX will play in the smart grid?
A). I think that RF Mesh technology will have a huge share of the market in U.S. and worldwide. But it’s not the only solution that’s out there. And not necessarily the best for every situation. In the rural market sometimes you’re better off with power line carrier. You’ll see a combination of technologies, and it won’t be unreasonable for a utilities to use mesh, WiMAX, cellular, PLC etc.
Q). How has your company been affected by the stimulus funds?
A). I think the smart grid stimulus funds have been good in promoting awareness in getting utilities to move. The negative was that utilities would have made decisions to start deployments sooner, but didn’t because they were applying for funding. So that slowed the process down in 2009, but you’ll see that come flooding back into 2010. All that money will be spent on AMI and smart grid.
Q). Do you think some of the consumer backlash over smart marts is a major hurdle for the industry?
A). I think ultimately it’s been a communication issue, and a problem of communication between the utility and the customer. All the testing that I’ve seen shows meters are accurate.
Q). Cooper noted in the announcement that Eka has had limited deployment but will now be investing in getting the technology deployed. Has the company fallen short of the deployments it was seeking over the past decade?
Eka has deployments in the city of San Marcos, Texas and the city of Ruston, Louisiana and with utilities in Russia. We’ve got good technology and it’s also been deployed in a number of pilots throughout the country.
It took five years to get the tech developed. Our first deployment was in 2006 in Saint Petersburg, Russia. In 2008 we did San Marcos. Then the challenge that we had, and everyone had, was the market condition in 2009, as well as the challenge of getting the utility to make a decision to purchase tech from a venture backed company. That is a very difficult decision for them to make. But now having a strategic owner this thing can really take off.
Q). How much venture funding did the company raised?
A). $40 million.
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