Welcoming David Energy to the Equal Ventures family

At Equal Ventures, we believe that leveraging technology to solve the challenges of climate change will represent one of the most pressing…

by Rick Zullo, Co-Founder & GP @ Equal Ventures

At Equal Ventures, we believe that leveraging technology to solve the challenges of climate change will represent one of the most pressing and important innovation dilemmas of our lifetime. While some of these challenges will be solved by advances in power generation technologies and material sciences, tremendous efficiencies are lost due to misalignments in the value chain. Nowhere is this more obvious than in energy efficiency for commercial buildings.

Buildings represent just under 40% of US energy consumption and present tremendous opportunity for increased efficiency. An oft-cited McKinsey report suggests that building energy efficiency represents one of the single most effective ways to cost effectively reduce our carbon footprint. Through the course of our thesis development, we witnessed several companies that demonstrated the ability to reduce total energy consumption by 10–30% through real-time, cloud-based energy management. These solutions achieve savings on par (or better) of large, capital intensive retrofits, but driven almost entirely by software with limited hardware investment. These solutions present perhaps the most significant energy impact of our lifetime. Yes, that’s a bold statement, but it’s a true one, given that commercial buildings spend nearly $200b a year on energy.

The problem with commercial energy efficiency, however, is that despite its immense promise, the opportunity has largely been unrealized. Although there are amazing paybacks (in some cases, less than 2 months) many building owners / managers have been resistant to adopt even minor software investments in energy efficiency (with revealed preferences of roughly 4–5 cents per sq.ft., despite energy costs of $2 per sq.ft.) Financing structures like energy-savings performance contracts (ESPCs) are available to only the largest, most adept building owners (our expert network suggested less than 5% of commercial building stock) and most asset managers lack both the budget and staff to implement real-time energy management solutions. Urban policymakers have recognized the need and enacted regulation in many of the US’s biggest markets that will levy significant financial penalties for those who fail to reduce consumption in the coming years. However, with stagnant adoption despite both the penalties and incentives to do so, it was clear to us that there was an inefficiency in the market that needed to be solved.

Solving for this dynamic has been a nearly 15 year journey for me. While at Deloitte Consulting, I advised numerous clients of energy efficiency challenges within their own real estate portfolios, analyzed the commercial/financial viability of emerging energy efficiency technologies for investors, corporations and government agencies and evaluated/implemented smart grid programs for commercial clients. I even got the chance to work on the Department of Energy’s weatherization program as part of the Recovery Act. When I moved into PE, one of the areas our firm reviewed most deeply was building management systems. In fact, energy efficiency has been a family affair for the Zullo’s, with my wife developing market-based building efficiency policies and programs for the Natural Resource Defense Council’s City Energy Project, serving on the Market Advisory Committee for LEED and (most recently) as Director of Environmental Impact for Jonathan Rose Companies, a triple-bottom-line focused real estate private equity fund, where her work has won numerous awards for innovative energy efficiency initiatives.

Through these experiences, I struggled to find a platform that could bring leading energy management capabilities to the masses — how could we make the other 95% of commercial buildings more sustainable? As part of our Equal Ventures research process, we spent months developing our thesis on how to offer commercial building energy management solutions to customers at low/no cost and monetize NOT by charging for IT, but rather through alternative methods that saved buildings money. (You can see a redacted version of our research here) We’ve seen this “counter-positioning” strategy work well in industries where buyers have low adoption / willingness to pay for software, and felt that this approach could have the potential to democratize access to leading energy management capabilities, driving tremendous amounts of environmental and economic impact.

With that, we’re incredibly excited to announce our investment into David Energy, a next-gen energy provider built for a renewable future. David brings real-time energy solutions to clients at a level of accessibility never before seen with the mission to create a real-time network of building energy supply and demand — a virtual grid. By operating as both the energy manager and a retail electricity provider, David has the ability to control both the supply and demand for the buildings in its network. This enables them to reduce consumption, shift load during peak periods and participate in demand response programs. And, as buildings are added to its network, David develops increasing capacity to manage supply / demand volatility to enable an increasingly resilient and efficient virtual grid. Most importantly though, it allows David to offer unprecedented prices to their customers, thus increasing accessibility to commercial energy efficiency.

We first met James, the founder and CEO of David Energy, through Sandeep Jain, a friend of the firm and one of the co-founders of Workrise (formerly known as RigUp) and were immediately impressed by his depth of knowledge on such a nuanced subject. James had arrived upon the same conclusion that we did, that software was simply a means of owning the data to modernize today’s grid and make buildings more efficient. The company has demonstrated the ability to intelligently automate building operations, resulting in substantial environmental and economic impact. With their latest partnership with Hartree, they’re well positioned to bring some of the most attractive electricity rates to market in a bundled offering that enables buildings to “invest” in energy without adding to their IT budget. To bring this mission to life, James has assembled a team that brings the worlds of energy and technology seamlessly. Together with his co-founder Ahmed (who has >15 years in building automation), they’ve built a culture with a diverse array of building engineers, ex-Googlers and established energy executives with a singular mission — “To enable a cleaner, cheaper, more resilient grid”. The company’s name signifies the enormity of their mission as a reference to David’s unlikely fete over Goliath. With trillions of dollars locked up into one of the world’s largest, most rigid and fundamentally broken markets, Goliath is an apt metaphor.

We couldn’t be more honored to lead David Energy’s seed round and welcome them to the Equal family as they take on this audacious mission.