When energy software company Opower starts trading on the New York Stock Exchange, most likely Friday morning, it will show how young tech entrepreneurs can tackle meaningful problems — like energy efficiency and climate change — and still achieve the Silicon Valley dream of financial success. That’s in contrast to the mantra that all of the young talent and investors are flocking to a flood of startups building decidedly less world-changing products, like social chat and photo-sharing apps.
Opower’s founders — friends Alex Laskey and Dan Yates — are the poster children for this seemingly growing meaningful tech movement. They founded the company in the spring of 2007 and back then it was just an idea to shed light on peoples’ energy data, which became a little startup called Positive Energy. They changed the name two years later after raising venture capital money and bringing in their first 20 utility customers, and grew the company out of Arlington, Va. with another office in San Francisco.
From politics to energy
I met Laskey, a former political campaign manager and Harvard grad, early on at one of the various tech and energy conferences that the industry (and the media) go to. Over the years we’d usually find time to grab coffee and share a laugh about the hectic startup life. He was also a local newspaper reporter for a year back in the 90s, so clearly he wised up much faster than me.
Over the years at the dry, old-school utility events he stood out because he wasn’t over 50 and droning on about rate payers (what utilities call customers). But at the frenzied exuberant cleantech events that popped up in the Valley around that time, he also was unusual because he actually had a reasonable business model, a focused market and a strong vision (this is the era when super risky expensive ideas, like Solyndra, actually got funding from the Valley).
When Laskey came out to San Francisco in 2011 for an onstage interview with me at our digital energy conference Green:Net, he charmed the pants off my sometimes partner-in-crime Om Malik. That was when I knew that Opower might have a chance to be one of the breakout energy and cleantech stories some day — they were were doing something that made financial sense, something that was catching on and they were inspiring people. Laskey’s charm also made its way into a TED talk in early 2013 where he had someone cart a wheelbarrow’s worth of coal on stage to help tell Opower’s story.
I know Yates less well, but he’s been the CEO that’s helped usher the company to where it is today. Opower has been so successful because they started off by building relationships with utilities back in their early days and started selling them something that was low cost and easy to use compared to competitors. Opower’s inaugural product was software that would take the energy data of utilities’ customers and create a detailed itemized bill that was mailed to the customer. Using behavioral analytics, the bills would include happy and unhappy faces and other techniques to shame or encourage the customer to reduce their energy consumption.
The reason a utility would buy this service is because collectively reducing the energy demand of customers is a much more low cost way to meet demand than to build new power generation. And for utilities that operate in states, like California, that need to reduce their customers’ energy consumption to meet state mandates, Opower works for that, too.
But now Opower has built out a comprehensive software-as-a-service product for their almost 100 utility customers who have stuck with them along the way. Not only do they do the mailed detailed reports, they also deliver much of their behavioral analytics and recommendations over utility websites, via emails and via text messages. They also have newer software products, including smart thermostat software that can control thermostats remotely (like Nest with regular connected thermostats) and a demand response platform. Demand response is when a utility turns down collective customer energy consumption remotely when energy demand on the grid spikes (like a hot summer afternoon).
A conversation with Yates a couple weeks ago about the next-generation of Opower’s software impressed on me just how far Opower has come from its early days of mailed paper bills. He called Opower “the customer engagement platform for the [utility] industry,” which is a simple but elegant way to illustrate how much Opower can do with its customers beyond getting them to turn down their energy. Opower’s next steps to grow and succeed — which our analyst Adam Lesser says it needs to do to impress Wall Street — will be to convince its utility customers to adopt these newer products, as well as bring in new utility customers.
Of course the founders didn’t build the company alone, though they maintain pretty large shares for founders that have taken VC money (22.4 percent for Yates and 17.4 percent for Laskey, before the IPO). Early on in 2008, Valley firm NEA backed them with $14 million and the firm now maintains a 21.8 percent share. Kleiner Perkins and Accel came in a later round and both hold 5.4 percent of shares. NEA partner Alex Kinnier joined Opower in the summer of 2012 as the SVP of devices and real time services. He’s a former Google exec and Khosla Ventures Partner, and is helping Opower deliver more of those next-gen products.
Opower’s success in selling its software to utilities translates directly into energy and carbon emissions savings, and thus it’s making a significant mark against climate change. Over seven years, their software has erased 4 billion kilowatt-hours of energy and cut electric and gas bills by $454 million.
Kinnier tells investor, and former Google colleague, Hunter Walk in an interview published this morning, that Opower has been seeing a big spike in technical talent who want to work on products that make the world a better place. Kinnier says that every Opower employee has an annual impact of taking all their Facebook friends’ homes (average of about 500 of friends) off the grid for a year.
If that kind of environmental upside is bringing in young talent and inspiring entrepreneurs, then the Opower founders will have succeeded wildly, even beyond their obvious financial win (their shares will each be worth north of $100 million). Opower’s IPO also shows that when done right, Silicon Valley can fund so-called cleantech successfully and can help incubate technology that can make the world a better place. Here’s hoping Opower’s IPO can help kick off a trend of meaningful startups with successful outcomes.