How Startups Evolve from Ideas to Startups: eMeter | CTO of eMeter, Larsh Johnson

That kind of leads to the idea that started this journey for me personally way back in the '80s, which is in order to have that information be useful, you actually have to know when you use power at your location. So if you're obligated to pay for power at your home, there's a meter there. Historically, that meter has been read once a month. No idea whatsoever when you're using that power throughout the day. No idea how that usage correlates with the price or the cost. The only way to have that correlation is to install what today we call smart meters, which are effectively recording your energy consumption every hour of every day and reporting that so you can settle a transaction. During this hour, I bought this much power. I will settle that against the market price, which was this much during that particular hour, and that will be my bill. Now, that is very, very rare at the retail level for residential customers. It's more common for large industrial customers. This has been something that's been going on for a while. But our idea was to say, well, let's make that available to residential customers. And that's what sort of started our journey into this. And I say our because my co-founder and I, Cree Edwards, started both CellNet Data Systems and then a follow-on company, which is eMeter. The idea was by pricing power properly, we could avoid peaks. By putting instrumentation at the customer premise, we can detect power outages. We can monitor the grid operations because we know the power flows throughout the network, because now the final connection of the customer to the network is well known. What's happening now is we can also use this to balance renewables, because as more and more solar and distributed generation go online, we're seeing more power flows coming in from places that need to be metered, homes, businesses that might have their own sources of power, and now more and more they're sources of power storage. I'm going to get to that point, but the idea is metering helps us cover all of these different dynamics. Way back when, back in 1985, we founded a company and we made a pitch to PG&E. We said, we will provide this instrumentation system. We will collect data. We will have hourly information for every point in your grid, and we will bring that information up to your data center every day so that you can always You always have a picture of what's going on in your power network. Time synchronous, every hour for every point in your network. Very valuable. Well, PG&E, this is pivot number 1. PG&E said, no, what we really want is we want just a meter device that will record that same hourly information, but we'll go out and read it manually. It doesn't have to be online. So it's just a data logging device at the home. We said fine. We started building those products. We started shipping those. Got into business, raised some money, did the startup thing. Then went back to our original idea, which is let's build a network. In the late '80s, early '90s, we launched a radio frequency network in order to have all this information coming in from these meters coming back into a utilities data center. We developed a technology stack that was Pretty complex. Lots of radio stuff, some software embedded firmware. You can imagine what it takes to build what amounts to a brand new network, kind of like a mini cellular network, but it's purpose-built for this kind of telemetry and control for utilities. Now, we started to work on that when we came to pivot number 2. This was technology these companies were not ready to absorb. They didn't want to take on the risk of operating and maintaining the technology. So what we did at this point was to create a new business model where we said, rather than actually selling them the gear, licensing them the software, and shipping it all out the door and saying, good luck, we said, we'll install the radio systems. We'll install the meters with the radios in them. We'll run it all from a network operations center in Kansas City. And all we'll do is send you data. So we'll send you the data every day. And we'll connect that into your information systems back in your offices. So you're basically a service provider? And we'll do that under a 20-year service contract. And so, our first win was in Kansas City Power and Light. They signed a 20-year service agreement whereby we would actually give them, as a fee per meter per month, information that would be collected through the network that we owned and operated, and then provided service for, for 20 years. What that did was de-risk the value proposition to the customer, provided them with a service level agreement, and and allowed us to actually start moving the technology into the market and build the business, which then ended up taking off. We had an IPO in '96, and then by the end of the decade, we had something like 16 million meters that were being read through this wireless network that was owned, operated, and managed by us as a company. So a very, very important transformation, which was The technology was embryonic in the utility industry. They weren't prepared to absorb it, so we provided it as a service. So today, software as a service is certainly one of those areas where people are taking that same kind of risk on instead of having to ship the customer the software. What we also found, though, was all this great data was coming to this company, or to these utility companies. At this point, we had about, I think, a dozen utility companies around the US. that were using our services. We asked them one day, what are you doing with the data? They said, well, after about 30 days we purge it. We went, oh my God, what are you doing here? Today with big data analytics, this is like the beginning of big data for the utility business and you're throwing the data away. What are you guys, crazy? So we said, no, we're gonna work on that. So we basically, at that point, CellNet was, again, a public company, independent, and so Kriya and I who had founded CellNet, also founded then eMeter, where we said, well, look, we're going to create a platform for you to actually start using this data. This became a software as a service model. Back during the California energy crisis, our first customer launch was to actually provide this kind of service to Pacific Gas and Electric for their very largest customers, where we basically hosted a data center, we hosted software, we would acquire all the data from the metering devices in question, and then we would manage it and provide them back a service, which was deliver the data they needed for billing, and then host a website so that their large customers could go on and find out exactly how much they were being billed and what their power consumption profiles were. So fairly early stage back in '99, 2000, 2001. And this was really a SaaS or a hosted services model. Well, what happened is we got the attention of some big companies. We partnered with IBM. We started looking at how we could pitch this this capability to other large energy companies. And we got some traction, but it wasn't really until another pivot when a company down in Florida, in Jacksonville, Florida, said, you know what, we like what you're doing, but we want to buy the software. Now, if you guys have looked at software and so forth, it's pretty complex. If you're running it out of your own data center, you're hands-on, your people are running it, it's not so hard sometimes because behind the scenes you can do whatever you need. I mean, you can be typing away madly at a keyboard, and the customer thinks it's an automated process. You can be uploading a new version. You can be working through all sorts of backend stuff that's absolutely smoke and mirrors, but on the screen at the customer side, it looks just fine. Well, we were kind of doing that with our software, providing it as a service, right? Because they didn't ever see us. We were in a little bank building, 6,000 square feet, former branch office. And we were running this stuff. Then someone said, well, we want to buy the software. We're going, oh my God. I mean, that means we actually have to make it work without us. That's not easy to do. Anyway, we started that process in 2005. We had some initial success with some flagship companies and also secured, I would say, our first real institutional round of venture money at this point. Previous company, we'd raised a lot of money as well, but this was the first venture institutional money that came into eMeter in 2006. We were approached by Siemens. If you don't know Siemens, it's one of the Global 50 companies, about 350,000 employees globally. They approached us because they have a very large business in the energy sector, and they saw what we were doing as very complementary to their product line. They approached us about going into a global supply and distribution agreement, which we really thought, that's great, because now we can take this globally. Then in conjunction with that, they made a minority investment. There was a stimulus bill that many of you may recall that was passed in about 2009, actually late 2008, stalled things for a little bit until funds actually started flowing in early 2010. That was a good milestone because that helped a lot of our customers actually start to buy some of our product as well. Again, another nice financing from Sequoia Capital. In the end, we end up today, I think we have about 80 customers globally. There's about about 20 different countries that we're operating in today. I think we total something like 60 million customer metering points that are sort of in the sphere of influence using our software products deployed. Siemens acquired the company in January of 2012. So now I'm, and the rest of the company, are part of the Siemens Digital Grid organization, which is about a $2 billion unit within the Siemens portfolio of energy-related companies. Great. Products and services. So fast forward that to today.