Sense — Next generation home energy monitoring
It isn’t easy to find noteworthy consumer-facing energy companies. Nest and Ecovent come to mind, but in Cambridge, MA there is another upcoming champion that is taking a new spin on what it means to be a consumer-facing energy company. Here is why Sense is an early-stage cleantech company (pre-Series A) worth betting on.
1. Next generation technology
The Sense team have found a way to do what utilities and homeowners could only dream of doing: monitoring and interpreting home energy usage at<1 second intervals. Why is this huge? Current residential smart meters only monitor home energy usage at 15 minute or 1 hour intervals, which is enough granularity to inform utilities and homeowners of day-long energy use, but not enough to make real-time decisions. Sense are jumping ahead of this curve by reading home energy usage in millisecond intervals. This allows them to distinguish an oven from a dryer (not possible at 15-minute intervals) and inform homeowners of whether appliances like ovens and dryers are off or on.
Sense are enabling a whole new range of human-technology interaction with their system — which is interfaced through an elegant smartphone app— and doing it all non-invasively at the home’s circuit breaker. It is a gamechanger in home energy monitoring technology.
2. A billion dollar market opportunity
Sense is also looking at strong IoT market opportunities for its product. In 2014, the U.S. Energy Information Administration (EIA) estimated that over 51 million smart meters were monitoring home energy use in America. In 2015, residential SaaS company Opower announced that it was tracking and analyzing 40% of those meter reads. If Sense captured 10% of this established home energy monitoring market, or 2 million homes, they would have a $600 million market size at their current price of $300, which is a reasonable price. Sense also have the ability to target the non-Opower serviced but smart metered enabled homes as well. Capturing 10% of this market, or 3 million homes, would add another $900 million to their market size and make Sense a $1.2 billion company.
Eventually, Sense can target non-residential markets like commercial and industrial facilities, and expand with their consumer-facing residential product internationally. The company is well poised to satisfy the growing and tremendous appetite for smart devices, which McKinsey estimates will grow 15–20% annually to 2020. Sense is therefore entering a fresh and fast growing market at just the right time.
3. A tight and experienced team
The Sense team is arguably its most valuable asset. The team is made up of consumer-facing technology veterans that are best positioned to do real-time home energy monitoring and load disaggregation (breaking down electronic signatures into individual appliances). The three co-founders — Mike Phillips, Christopher Micali, and Ryan Houlette—all worked at speech recognition software company Vlingo prior to forming Sense, which Philips co-founded in 2006. A large portion of the remaining Sense team includes former Vlingo employees that Phillips recruited to roundout the team’s technical capabilities in real-time home energy monitoring and load disaggregation. With so many former Vlingo employees and an abundance of expertise in the same engineering concepts that make speech recognition possible, if anybody can make a next generation energy monitoring technology, it is Sense. They have the talent, experience, and culture needed to make the company a leader in the fast growing market.
4. Early traction and differentiation
According to a SEC filing, Phillips and Micali invested along with partners from notable VC firms a $2.5 million seed round in Sense. The team has also sold early editions of their system to early customers and are beginning to pre-sell their latest edition with solar functionality. Both the large seed round and quick sales are indicative of Sense’s early traction, and online reviews to date are also positive. These early customers are probing into Sense’s competitive advantage over other home energy monitoring providers.
Unlike Opower and Bidgely — one of Sense’s closest competitors — the Sense team have opted not to deal with slow adopting utilities or coarse smart meter data, which are both unreliable for nimble startups. Instead they opted to sell their solution directly to consumers and in the process create a consumer-facing brand. There is an exception in competitors EEme and Chai Energy, which both use smart meter data to inform consumers directly, but its relative advantage against <1 second data is lower. Closer competitors are similar consumer-facing companies like Neurio and Smappee that are also selling plug-in, in-house solutions. However both are in international markets outside of America, so until global expansion takes place, Sense have command to prove that their consumer-facing system is superior to those provided by companies working with utilities and/or smart meter data.
By creating a strong consumer-facing brand, Sense can create the bottom-up power necessary to rise to the top of the American home energy monitoring market. Their ability to differentiate through technology and brand will be the winning ingredients. Sense is a new consumer-facing energy company worth betting on.
