Driving Home Electrification at Scale — Why We Invested in Treehouse and ConnectDER
MassMutual Ventures Climate Technology Fund recently invested in Treehouse and ConnectDER, two companies providing complementary home electrification solutions. This article describes the key trends at play, outlines our investment thesis, and highlights the factors that led to our investment decisions.
Macro trends
Over the past decade, residential solar, electric vehicles, and electric dryers have become commonplace in American homes. More recently, consumers have begun to adopt home energy storage systems, heat pumps, and induction stoves. We see a confluence of trends that will drive home electrification for the next decade:
- Economic trends: The price of residential hardware has fallen steadily over time, shortening payback periods. In particular, the consistent decline in solar panel and battery prices over the past several years has reduced input costs for residential solar, electric vehicles, and energy storage.
- Technology improvement: The efficiency and customer experience of these devices has steadily improved. Solar panel efficiency has increased and EV range has expanded. Heat pumps are now effective in cold-weather states, boosting nationwide adoption.
- Social changes: Public awareness of indoor air quality is growing, which may further increase home electrification. For example, multiple studies now highlight the link between natural gas combustion in the home and childhood asthma, which has increased interest in induction stoves. Additionally, the market for ventilation systems is expected to grow steadily for the next decade.
- Policy shifts: US federal support for climate-related initiatives will decline sharply under the new administration, but many states and cities continue to support decarbonization, including home electrification. Faced with rising power demand, many utilities are exploring ways to leverage distributed energy resources and manage demand. When coordinated at scale, smart electrical devices in homes can offer grid operators more flexibility.
Our investment thesis was that successful startups in the home electrification space will share a common set of capabilities:
- Support multiple devices: The pace and scale of home electrification depends on consumer adoption of several different devices, each with its own value proposition to homeowners. Deployment of solar panels, EVs, heat pumps, and home energy storage will depend on multiple factors, including cost, installation complexity, power price dynamics, regional weather patterns, and government incentives at the federal, state, and local levels. Rather than bet on the adoption rate of a specific device, we focused on companies developing device-agnostic hardware and software solutions.
- Minimize customer acquisition costs: Marketing and selling new, relatively expensive technology to homeowners takes considerable time and resources. Therefore, we focused on companies with B2B2C business models and strong partnerships with recognizable, consumer-facing brands.
- Solve multiple pain points: Home electrification can be daunting for consumers and contractors. The process includes inspections, permits, infrastructure upgrades, financing decisions, and documentation to claim rebates and tax credits. We prioritized companies that were able to solve multiple pain points at once.
Our investment thesis led us to two complementary investments: Treehouse and ConnectDER.
Treehouse is “the electrical contractor for the 21st century” — a software-enabled installation platform that serves consumers, electricians, and partners looking to deploy clean, energy efficient technologies at scale. The company leverages its proprietary software to expedite the installation of EV chargers, energy storage systems, and other devices in homes and businesses.
We appreciated the following about Treehouse:
- End-to-end installation platform: Treehouse owns the entire installation journey and uses technology to automate and streamline much of the process. Treehouse’s technical platform integrates with its partners to capture property data, quote a price, design and permit a scope of work, and send the installation job to a certified electrician. Critically, Treehouse can integrate with its partners at the point of sale, reducing friction in the sales process and boosting their revenue.
- Valuable channel distribution: Treehouse has formed partnerships with auto retailers, major EV charger companies, and leading energy OEMs, including its recent agreement with Eaton. These partnerships have enabled the company to grow its business while mitigating costly spend on digital customer acquisition.
- Innovative business model: Treehouse offers nationwide coverage through a network of third-party electricians and its own workforce of electricians. This model allows the company to respond to changing demand patterns, meet the scale of its corporate partners, and deliver a positive and consistent customer experience.
Close-knit founding team: Led by serial entrepreneur Eric Owski, the founding team has a long history of working together and the mix of technology and operational experiences required to scale the business.
ConnectDER is a developer of “meter socket adapters” (MSAs) — devices that can be installed quickly and expand the connection between the home and the grid. Roughly two-thirds of US single-family residences may require an electrical panel upgrade to accommodate the next generation of devices — potentially a $100 billion obstacle to home electrification. ConnectDER’s MSAs make it possible for homeowners to plug in more devices while avoiding time-consuming and expensive infrastructure upgrades.
ConnectDER stood out to us for the following reasons:
- Clearly differentiated product: Smart panels and smart circuit breakers offer circuit-level control, which can help to free capacity for new devices. However, these tend to be expensive solutions that require in-home installation. For a fraction of the price, ConnectDER MSAs provide additional, dedicated circuits and are installed outside the home, significantly reducing both installation time and expense. The next generation of ConnectDER products will allow homeowners to disconnect their homes from the grid and operate as an independent microgrid in the event of a power outage, adding whole home resiliency.
- Proactive approach to regulation: ConnectDER is now available in 19 states and is actively securing utility approvals nationwide. The latest round of funding will expand the company’s distribution significantly.
- Enabling technology for ecosystem partners: Residential solar installers, energy storage manufacturers, and EV charging companies are all focused on driving down the total costs of their products. ConnectDER partners with leading installers and OEMs to slash installation costs by avoiding service panel upgrades or replacements.
- Seasoned management team: ConnectDER is led by CEO Ivo Steklac, an executive with deep experience in the EVs and solar industries, and Founder and Chief Product Officer Whit Fulton, who is an expert in product development, power, and utilities. ConnectDER has recently onboarded Senior Sales Executive, Derek Noble, as Chief Revenue Officer to lead its Sales and Business Development strategy and newly appointed Chief Financial Officer, Marty Cissell, who will oversee financial strategy, operations, and capital planning.
Our investments in Treehouse and ConnectDER reflect our fund’s focus on clean power and sustainable cities. Our connection to a leading financial firm with a long history of real estate investing and an in-house capital stack puts us in a strong position to support climate tech founders as they scale their businesses. We look forward to collaborating with Treehouse and ConnectDER as they accelerate the pace of home electrification.
