Why we invested in Phaidra

By Yaniv Lusana & Will Chung

Yaniv Lusana
GS Futures


Data centers are fundamental to the functioning of our increasingly connected world, serving as the backbone for countless industries and the bedrock of our global information infrastructure. These data centers’ rapid expansion and importance present unique challenges for our society.

Data Center Energy Surge

Recent data highlights a dramatic surge in data center growth. Driven by the escalating demands of new and rising sectors, global electricity demand is expected to double within three years, underscoring the rapid expansion of the data center market.

Bloomberg recently covered the International Energy Agency’s publishing of their Electricity 2024 reports forecasting and analyzing global energy needs between now and 2026. The publication cited, that over 8,000 data centers are operational, with a significant presence in the US (33%), Europe (16%), and China (nearly 10%), and further expansion on the horizon. In Ireland, a country experiencing rapid growth in this sector, data centers are projected to account for 32% of the national electricity consumption by 2026, a steep rise from 17% in 2022. Ireland’s current infrastructure includes 82 data centers, with 14 under construction and an additional 40 approved for development.

Source: IEC Electricity 2024

Newmark’s 2023 U.S. Data Center Market further elaborates, projecting U.S. data center power consumption to double by 2030, reaching 35GW. This growth is propelled by the need for AI and machine learning-ready racks, which significantly increase power requirements. However, the availability of power is emerging as a critical bottleneck, with major U.S. data center markets like Northern Virginia (the largest data center market in the world) facing near-zero availability: 0.2% of grid capacity remaining. Thus, spotlighting the urgent need for scalable power solutions amidst this unprecedented growth.

Issues such as energy consumption, data security, and the need for advanced technological infrastructure have become critical concerns. As the volume of digital information grows exponentially, ensuring the efficient and secure operation of data centers has become imperative, not just for the tech industry, but for the functioning of a modern society reliant on constant and instant access to information.

Broadly, in tackling data center energy consumption, we have two paths:

(1) infrastructure innovation such as integrating renewable energy into data center development, delivering more efficient hardware, and standardizing data center design and construction to reduce delivery hurdles.

(2) operational optimization such as advanced cooling, AI management, and server virtualization.

Both are vital in addressing the increasing digital demands and environmental sustainability in the data center industry.

In their efforts to reduce data center power usage, companies have largely focused on traditional methods like switching to variable-speed fans and raising ambient temperatures, but these have brought only modest efficiency gains– while requiring manual operational upkeep. Additionally, uniform solutions like adopting bigger, slower drives or fully transitioning to SSDs and cloud-based services have not universally fit the varied needs of data centers. Even as liquid cooling shows promise, its broad application remains challenging, highlighting the complexity of one-size-fits-all strategies in this sector.

Enter: Phaidra

That’s why we were so excited when we met Jim Gao (CEO), Veda Panneershelvam (CTO), and Katie Hoffman (President & COO) from Phaidra. A team uniquely suited to solve the energy challenges plaguing data centers through their significant work at Google’s DeepMind, where they developed AI solutions that reduced energy usage in data centers by optimizing cooling systems by 40%. By focusing on this key area, Phaidra’s AI is poised to significantly cut overall energy consumption, setting a new standard in the industry for sustainable and efficient operations.

Phaidra’s introduction of their AI Copilot agent, affectionately named Alfred, marks a transformative moment in industrial automation. Alfred represents a seamless integration with existing Building Management Systems or SCADA systems, employing reinforcement learning to make real-time, efficiency-enhancing decisions. This innovation is a notable departure from the rigidity of traditional industrial automation, which depends on hardcoded protocols.

Alfred embodies the blend of the meticulous attention to detail found in manual processes with the scalability and adaptability of advanced software. Just as expertly crafted software can be replicated infinitely at no extra cost, Alfred’s technology symbolizes a new era in facility management — combining the precision of traditional methods with the efficiency and continual improvement offered by AI. This approach is Phaidra’s answer to evolving industrial automation, revolutionizing how facilities are managed with a system that not only adapts in real time but also continuously learns and improves.

Unlocking energy efficiency

While global industrial energy costs are difficult to measure, our conservative estimates based on data and discussions we’ve had are $0.05/kWh-$0.10/kWh+ (with markets across Europe and Singapore showing figures nearly 2x that). Phaidra’s early commercial traction has come through pilot and deployments with Fortune 100 companies demonstrating huge energy cost savings. While the company believes that at-scale energy consumption can be reduced by 30%, 10% energy efficiency savings equals millions of dollars in saved operating costs. Every kWh saved in reduced cooling demand in a power-constrained space (i.e. co-located data centers) translates to increased power availability for revenue-generating services. This means Phaidra’s implementation can reduce power use for cooling and simultaneously provide increased capacity and revenue opportunities for co-located data center owners.

Phaidra’s ability to deploy their framework isn’t limited only to data centers. The team speaks to potential customers across varying industries, such as chemical manufacturing, green hydrogen production, and even glass manufacturing– but remains focused on the current segment. We’re confident over the long term the team will expand and help manufacturers and power plants alike in achieving their increased efficiency targets.

Phaidra is very fortunate to partner with the GS Futures team. Their deep understanding of the industrial and construction space — combined with an aptitude for scaling software SaaS companies — makes them uniquely well-suited to help grow our business. — Jim Gao Phaidra CEO and co-founder

We couldn’t be more excited to be working with the entire Phaidra team, its partners, and Phaidra’s fellow investors. We look forward to a partnership that will drive innovation, sustainability, and profitability for years to come.

To learn more about Phaidra, below are posts published by our co-investors: