Lessons from the field – focus on profitable growth

When we founded Tendril in 2004, our vision was to build the application platform for the “Internet of Things”—a platform designed to bridge traditional enterprise computing with a rapidly emerging class of smaller devices. In other words, our quest was to build the “tendrils” of the Internet.

After exploring a number of markets, we selected the energy industry and decided to focus on creating the platform for the energy Internet.

We believed that technology trends, policy, and consumer sentiment would usher in a new era of energy management, and that belief was reinforced by the smart grid funding included in the stimulus bill and in a wave of DOE grants. Shortly after the bill was passed in 2009, almost every utility in America began issuing requests for proposals for smart grid projects aimed at updating their infrastructure and delivering new energy management options to consumers.

Tendril was on the forefront of this wave, building the industry’s only open platform and enabling the creation of a new era of smart hardware and software applications. This platform would enable energy management applications like Tendril Energize, along with smart appliances, EVs, and a number of other goods and services. We demonstrated the power of that platform by delivering our own hardware and cloud-based solutions to utilities—with the goal of capturing as many pilots as possible and then scale from there.

We have been able to secure major deals, including a million plus home engagement with Duke Energy and significant deployments with companies like Origin and others. But this success did not come without missteps resulting from a miscalculation as to how the market would develop.

We believed we were in a land grab—so did Google, Microsoft, and a number of start-ups aiming for their patch of earth in the smart grid gold rush. But in growing our business to $100 million invested, 40+ clients on three continents, almost 4 million households on our platform, and over 500 third-party developers building apps on our platform, we were reminded of one key lesson we sometimes forgot in our passion for our mission: the utility industry moves slowly.

We based our business on the premise that the energy industry was ready to move en masse to a smarter, more connected environment that might lead to lower kilowatt revenue in the short term, but would create a new, dynamic, environmentally sustainable energy marketplace for products and services that would be more lucrative and viable in the long term.

But as we enter 2013, we have learned a lesson. Many utilities don’t have the economic path to justify the investment in consumer energy engagement in the short term. Utilities are businesses too and have responsibilities to shareholders. If they can’t prove out the short-term ROI, then they will wait until they can or until regulations change—allowing them to invest in the future.

Our aim is to be the company that executes best with a handful of top-tier customers and not one of the companies faced with supporting perpetual pilots with dozens of utilities totaling less than 1 million homes. This is the new race—to win the meaningful deals with the most innovative and progressive utilities who are ready to go to scale. I believe that we are winning today with the industry’s leaders and innovators, and we’ll be well positioned to capture major market share when the rest of the industry is ready.

So what will Tendril do differently in 2013 based on these lessons learned?

We still believe that our vision is right. By engaging with consumers using an open platform, utilities and other energy service providers can move from a one-size-fits-all model to one where different segments of consumers engage in different ways and at different speeds, increasing customer satisfaction, revenue, and profitability and positioning the utility for the future. We believe that almost nothing about the last 40 years will help predict the next 10 and that utilities who understand this will prosper, while those who don’t will struggle.

Moving forward, we are going to focus our business entirely on that first group of forward-thinking, industry-leading clients who embrace this new model of consumer engagement and want to reach scale quickly. This is no longer a land grab to win pilots that have no end goal of scaling across broader service areas. Rather, it is about service-area-wide deployments that scale across a global industry.

What does this mean for those utilities that aren’t ready to move to a scaled deployment? It means that if you need a vendor to help you check a compliance box, we may not be right for you. But if you want a partner that will help you do a better job of taking your customers on a journey to a higher value relationship and to demonstrate to regulators that you are a respected public service provider, we’ll be there to help.

So why should utilities bet on Tendril? Because we are today an at-scale provider with the experience to get your customers engaged—and keep them engaged. Because we have a solution that can help you build a navigable path to true consumer engagement using a modern, open, extensible and secure technology platform. Because we have a track record of success that we will continue to build upon.

A more laser-focused Tendril will be profitable. Tendril has made the important step to wean ourselves off venture capital. Our great syndicate of deep-pocket investors has just given us growth capital to give the management team options for growth, but 2013 will be our first profitable year—utterly liberating in these lean venture capital times.

So I bring you a more focused and profitable Tendril. I know in my heart that this is good for our customers, good for Tendril and—dare I say it—good for the industry as a whole. We think this is a bold decision: to say less is more when it comes to our customer base; to challenge regulators, consumers, and progressive utilities to pull other utilities along the energy journey that the grid, the country, and the world needs to embark upon; to declare that the energy service provider industry can be different and engender stronger, more collaborative relationships with its customers; and to make the difficult decisions that make this vision a reality.

For those of you who share this vision, we look forward to working with you in 2013 and beyond as we challenge and disrupt the industry. We invite you to join us as we dare to think differently, leveraging innovation, courage, and the belief in what is possible.

How should you view Tendril in 2013?

• Profitable
• With capital for growth
• Open, extensible software platform
• Applications for energy efficiency, demand response and competitive retail markets
• Vibrant 3rd party developer community