Weekly Update

Can a Startup Make ZigBee a Lighting Controls Leader?

Only seven percent of U.S. commercial and industrial lighting is outfitted with energy-saving controls, according to EPRI estimates, but there’s a potential $1 billion in annual savings waiting to be achieved. Combined, those facts make the lighting controls market a likely field for acquisitions as incumbents seek to buy their way into innovation.

Potential buyers range from building controls makers such as Honeywell, Johnson Controls and Trane to lighting giants like Philips, Osram and General Electric. And there are demand response providers, including EnerNoc, Comverge and CPower. The fact that the building control space is dominated by such proprietary and incompatible technologies means that those first to market may end up shutting out the rest.

But perhaps not, if Daintree Networks has its way. The Mountain View, Calif.-based company has made a stealthy move into the lighting controls market; it’s taken its existing line of ZigBee testing and certification gear and rolled it into a software platform and wireless networking hardware design for retrofitting commercial lighting control systems. The idea is not to build its own gear, but to bring it to market via partnerships with the incumbents. CEO Danny Yu and Marketing Director Josh Slobin wouldn’t give names, but told me in a Friday interview the company expects to announce a big partnership in the next month or so.

Daintree has, until recently, made sensor network analyzers to test and certify ZigBee systems. That has given it a pedigree with hundreds of customers who’ve used Daintree’s testing gear (now discontinued, by the way). Like fellow lighting control startups Adura Technologies and Echoflex Solutions, Daintree’s lower-cost wireless approach puts it firmly in the retrofit camp — probably a good idea, given the current parlous state of new commercial construction and the vast, already-built market.

Rather than build its own gear, Daintree wants to convince vendors of traditionally proprietary technology they’re better off licensing or otherwise partnering with Daintree’s open standards-based solution. Of course, the capital cost advantages of the OEM partner route versus startups building their own equipment seem clear — but why would incumbents want to play Daintree’s game?

Yu and Slobin provided some convincing arguments for the case. Daintree’s established role in the ZigBee ecosystem should give incumbents confidence that the startup knows how to design software and hardware compatible across a wide variety of ZigBee-enabled systems, they said. ZigBee holds a lead in utility smart meter–home energy management projects in North America, which could give it pole position as a standard for commercial and industrial energy management as well. And, with the potential lighting control market still wide open, there isn’t necessarily an advantage to an incumbent pushing a proprietary wireless solution, Yu said. Instead, he sees the giants competing across one another’s customer bases to provide interoperable lighting control systems — and that means building to standards of some kind.

Daintree hasn’t explained exactly how it intends to structure its partnerships with incumbents, though Yu told me the company’s upcoming partnership announcement would shed light on that question. Daintree has raised an $8 million series B round from Lend Lease, a global property management firm, indicating some commercial real estate pros like the business model.

The big question, for Daintree and competing lighting control startups, is whether one of the incumbents is secretly working on its own solution to blow the rest out of the water. A recent GigaOm Pro report indicates that isn’t happening, which likely means the big boys are going to be shopping for innovation — and market share — soon. Will they break with proprietary tradition to choose a standards-based, interoperable solution? I’m curious to hear your thoughts — feel free to get in touch with me.

Question of the week

Can Daintree Networks convince incumbents that a ZigBee-based, interoperable architecture beats a proprietary approach to the wide-open market of lighting controls?