Tem Secures $75 Million to Revolutionize Electricity Markets with AI
In an era where artificial intelligence (AI) is both a driver of increased energy consumption and a potential solution to energy challenges, London-based startup Tem is leveraging AI to transform the electricity market. The company has developed an AI-driven energy transaction engine designed to reduce costs compared to traditional energy trading methods. By offering businesses the opportunity to purchase energy through its utility division, Tem claims it can help them save up to 30% on their energy bills.
Recently, Tem successfully closed an oversubscribed $75 million Series B funding round. The round was led by Lightspeed Venture Partners, with participation from AlbionVC, Allianz, Atomico, Hitachi Ventures, Revent, Schroders Capital, and Voyager Ventures. This investment values Tem at over $300 million, according to sources familiar with the deal. The fresh capital is earmarked for expansion into international markets, starting with Australia and the United States, particularly targeting Texas.
Joe McDonald, co-founder and CEO of Tem, expressed confidence in the company’s financial position, stating, We’re in a nice position where we kind of have control over our own profitability. So I could have chosen not to raise at all and had a lovely, nice bootstrap business in some ways. 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 operates as a marketplace, connecting electricity generators directly with consumers. The company initially focused on renewable energy generators and small businesses, believing that a decentralized and distributed approach enhances the effectiveness of their algorithms. However, McDonald noted that their model is scalable to enterprise-level clients as well.
Among Tem’s clientele are notable names such as fast-fashion retailer Boohoo Group, soft drink company Fever-Tree, and Newcastle United FC.
The company’s operations are divided into two main segments. The first, known as Rosso, is the transaction engine that matches energy suppliers with buyers. Utilizing machine learning algorithms and large language models (LLMs), Rosso predicts supply and demand to streamline transactions. McDonald explained that Rosso aims to reduce costs by eliminating multiple layers present in traditional energy markets, where various teams and intermediaries each take a share of the profits. By consolidating these processes into a single AI-driven infrastructure, Tem seeks to bring the price customers pay for electricity closer to the wholesale cost.
The second segment, called RED, is a neo-utility designed to demonstrate the value of Rosso. Initially, Tem attempted to sell its infrastructure to existing energy companies but faced challenges in gaining traction. As a result, RED became the primary utility utilizing Rosso, leading the company to prioritize its growth over opening Rosso to other utilities.
Looking ahead, Tem plans to make Rosso available to other utilities. McDonald acknowledged that while RED’s growth is significant, it is unlikely to capture more than a 40% market share, which could lead to monopolistic concerns. Therefore, the company aims to focus on expanding access to its transaction infrastructure, drawing parallels to platforms like AWS or Stripe.
In summary, Tem’s innovative use of AI in the electricity market has attracted substantial investment and a growing customer base. With plans for international expansion and a commitment to reducing energy costs through technology, Tem is poised to make a significant impact on how businesses procure and manage their energy needs.
