Tendril Networks - being smart about energy

Saturday, August 2, 2008

Over the last month, I have written several articles on smart energy. Yesterday, I also posted on the interesting parallels between cellular wireless and smart energy industries. Today, I will focus on the company that got me interested in smart energy in the first place - Tendril Networks.

Tendril Networks is a smart energy startup based out of Boulder, Colorado. Tendril was started with the intention of providing Zigbee middleware that can enable a multitude of applications. Since Adrian Tuck came on board as its CEO, Tendril has turned around and solely focused on the smart energy vertical. Smart move, I should say. Today, the company seeks to be a niche player offering a complete end-to-end solution for the utility company and the consumer.

Tendril, unlike other players in this market, has taken a customer-centric approach to the smart energy problem. The company’s philosophy is simple – give the consumer the choice. Consider the following situation -

It is peak summer and you cannot stay inside your home without the air-conditioner. It is very likely that your neighbors think the same way. The resulting peak utilization leads to capacity limitations. In a model being promoted by Tendril’s competitors such as Comverge (NASDAQ: COMV), the utility company steps in and turns off these high utility devices. This outage helps the utility company recover from this peak capacity crisis but may potentially ignore consumer inconvenience.

Tendril’s Residential Energy Ecosystem (TREE) begs to differ by passing the control and choice onto the user. The in-house display, Insight provides usage and cost details to the user. Examples of such data include variable electricity prices, current and projected usage and costs, price increase and emergency situations. So, if the utility company senses peak hours, it can send out warnings and spike the price and let the user react to it as against forcing an outage.

Besides the residential gateway that controls the devices and their usage, Tendrils’ USP comes with its backbone software portal. This portal, aptly named Vantage, allows the users to remotely control these devices and define rules for various signals from the utility company. You may, for example, decide that you want your heater turned on when you come home from office, no matter what the current rate of electricity is.

Tendril does have its share of challenges. It has to compete with existing metering and devices companies to gain foothold. Besides, it has its task cut out in terms of being able to convince the consumer of its benefits. If the device is not mandated at homes, the utility company may not see value in its solution. After all, if it can neither prevent outage nor monetize it enough if the consumer does not feel the need for TREE, then the entire model fails. Perhaps a work-around would be for the utility company to mandate TREE with subsidies for the devices.

Tendril looks to deploy its end-to-end solution in around 50000 homes by the end of this year by partnering with utility companies. The company has grown from less than 20 beginning this year to about 60 employees to match the rapid recognition and success it is gaining in the smart energy market. Adrian expects the company to grow to around 150 by the end of 2009 commensurate with the 10-folds deployment increase that it hopes to achieve during the same period.

Tendril raised $12 million recently and is looking for a much larger round of financing by the end of this year. For VCs and private equity companies looking at Tendril for an investment, I will say that Tendril is well-positioned to exploit growth in the smart energy market. This is true for the simple reason that the company has all components that have the potential to drive the value chain (read my previous article on the value chain here.) Depending on how the industry moves, the company has the ammunition to very quickly adapt, discard or outsource commodity and low-margin components to carve out a sustained revenue stream.

For me, Tendril is for smart energy what Qualcomm was for wireless twenty years ago – a bold startup with a complete, novel solution that efficiently addresses the capacity problems dogging its industry. Whether Tendril will meet with the kind of phenomenal success that Qualcomm has had will depend on the company’s understanding on the value chain drivers and also the strategic and tactical acumen of Adrian and his team.

[Note: In case this article sounds too esoteric, I would encourage you to read the previous Smart energy articles I have published here, here, here, here and here]

Posted by Vijay Nagarajan at 9:06 AM  

1 comments:

sounds like a great product! When will it be available to the public?

Anonymous said...
August 3, 2008 at 1:51 PM  

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