As AI data centers drive up electricity prices, London-based startup Tem thinks AI could help solve that, too.
Tem has built an energy transaction engine that connects to AI and lowers prices compared to other energy traders. The company signed up more than 2,600 business customers across the UK with the promise that buying power from its energy services division could save them up to 30% on their energy bills.
The startup recently closed a $75 million pre-paid Series B round led by Lightspeed Venture Partners with participation from AlbionVC, Allianz, Atomico, Hitachi Ventures, Revent, Schroders Capital and Voyager Ventures, TechCrunch has learned exclusively.
The round values Tem at more than $300 million, a source familiar with the deal told TechCrunch. The startup plans to use the funding to help expand into Australia and the US, starting with Texas.
“We’re in a nice position where we’re kind of in control of our own profitability. So I could choose not to raise at all and have a nice, nice bootstrap business in some ways,” Joe McDonald, co-founder and CEO of Tem, told TechCrunch. “Well, we’re not that kind of business. We know what we want to achieve as someone who wants to go public over the years.”
Tem is a classic market game that connects electricity generators with consumers. The company intentionally started with a focus almost exclusively on renewable energy generators and small businesses to fill both sides of the ledger. “The more decentralized and distributed, the better for the algorithms,” McDonald said. “But this works as far as business goes.
The company’s customers include fast-casual clothing retailer Boohoo Group, soft drinks company Fever-Tree and Newcastle United FC.
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Tem currently runs two different businesses. One, called Rosso, is a transaction engine that connects suppliers with buyers. Machine learning algorithms and LLM help predict supply and demand here.
Rosso’s goal, McDonald said, is to reduce costs by removing several layers that are present in current energy markets. “In each of them you have different teams doing different jobs, taking different levels of profit from back office to trading, from trading desks to other trading desks, and probably a total of five to six intermediaries that allow the flow of money to move from one side to another,” he said.
With AI, he said, “You now have the opportunity to replace people, labor costs and disparate systems into a single transactional infrastructure.” The aim is to bring the price customers pay for electricity closer to wholesale costs.
The second part of Tem, called RED, is a “neo-utility” built to prove Rosso’s value.
“When we started, we tried to sell our infrastructure to energy companies and we got nowhere,” he said. RED is currently the only utility using Rosso, and McDonald said its growth prompted the company to prioritize it over opening Rosso to others.
At some point, however, Tem plans to allow other utilities to enter.
“It doesn’t really matter how good (RED) is; it’s not going to get past 40% market share. And it shouldn’t because it becomes a monopoly in itself. So I’d much rather go get access to all the transaction flows,” McDonald said.
“Long term, we really don’t care who owns the customer, who owns the generation, as long as our infrastructure is used,” he said. “This is just an infrastructure play in the same way that AWS or Stripe was.”