Gary Bloom Q&A: The Search-and-Rescue CEO Who Just Sold eMeter to Siemens
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sell the products, service the customers, deliver maintenance upgrades without bringing down the operation. Does the customer know when they are getting the software, what the issues will be, who fixes their problem, who to call for help.
X: How quickly or slowly are utilities adopting the software?
GB: We have landed some of the big players. Up in Canada, we have Ontario IESO, which has the biggest smart grid in the world, supporting 70 different distribution companies. Toronto Hydro is by far the biggest market implementation in the world that is processing interval data [recording electrical use by the hour]. So we do have some of the larger operations around the globe. The reality is that most of the big U.S. utilities made decisions [about smart grid programs] years ago, and we’re kind of waiting for them to go full-cycle. I believe you will start to see them go out for bids again, because what they have doesn’t do the job. The system in the U.S. will be a much slower moving market than what we expect to see in Latin America and Europe.
Our anticipation is that we will double our customer base this year. We are up to just shy of 40 customers around the globe, which is in the critical mass category. We don’t disclose our financials, but last year we grew bookings by 50 percent, and this year, by July we had exceeded all of what we did last year.
X: What’s the big difference between the U.S. and other markets? Why is adoption slower here?
GB: In the U.S., the process is that the utility comes up with a project, figures out how much it will cost, and puts it into the rates so that you and I can pay for it. The local Public Utility Commission sprinkles holy water on it, but it’s predominantly driven by what the utilities ask for permission to do. In Europe, Latin America, and Canada, the regulators go to the utilities and tell them, ‘You are going to change to smart grid by X year and here are the capabilities you are going to hand to the consumer.’
I think the market is going to evolve in rolling phases. The next major waves of financing in the next 12 to 18 months will be in Europe and Latin America. After that, probably China and the Asia Pacific region will take off. It’s harder to gauge when Korea, Taiwan, Singapore, and China will start, but Japan is already picking up because they need to deal with the nuclear situation. Germany is the same—they are taking production capacity offline, and if you want to curtail demand you need the customer to be able to see what they are consuming. Then if you look down the road two to three years, the vast majority of U.S. utilities will finally be admitting that their projects aren’t working, and they will start changing their strategies.
X: Are you profitable?
GB: We’re right on the brink of being cash flow neutral. If profitability is the goal, just tell me, and I’ll make it profitable. I just don’t think that is the best decision for the company. We are taking the money we collect from customers and investing heavily in innovation, customer acquisition, and customer success. We can now sell a lot of additional value into our installed base—additional layers of analytics and expert services.
X: You had a $12 million financing round in 2010. How much venture financing has eMeter raised altogether?
GB: The company had raised about $56 million before that $12 million, and has been around for over 10 years. That is a good news and a bad news situation. You can only imagine what my cap table looks like. The good news is that it’s a barrier to entry. I don’t believe the competitive landscape will shift over the next few years. In fact, if anything, a number of competitors are going away.
X: Who are your big competitors, then? Itron?
GB: We don’t see Itron as much. The one we probably see the most is Oracle. They are trying to do a completely integrated, vertical technology stack [for utilities]. We are saying, ‘Pick the ERP you want and whatever meter and network you want and we will integrate to any of them.’ There are also a lot of adjacent players trying to do one little piece like home automation or Web portals. But there aren’t a lot of players trying to build this information platform.
X: What’s it been like, as a software industry CEO, to try to adapt to doing business with the utility industry?
GB: It’s been a fun challenge. For me, running companies isn’t that difficult. For intellectual stimulation, I like learning a new industry. The hardest thing to get used to is the way [utilities] buy technology. It’s like the government. They buy technology through RFPs [requests for proposals] and they buy off a price list. You can sell yourself on differentiation, but they may well eliminate the best vendor because they weren’t the cheapest. But I think that will mitigate itself. If you are a utility and you use the RFP process and you have spent hundreds of millions of dollars and you didn’t get the value you wanted, you are going to rethink your suppliers in the future.