Gary Bloom Q&A: The Search-and-Rescue CEO Who Just Sold eMeter to Siemens
Some Silicon Valley CEOs moonlight as racecar drivers, others as winemakers. Gary Bloom, the outgoing CEO of San Mateo, CA-based eMeter, is probably the only one who spends his off hours as an emergency-response volunteer.
Bloom trained a Menlo Park, CA-based FEMA disaster team that helped with the federal responses to Hurricanes Ivan and Gustav. And as the leader of the San Mateo County sheriff’s rescue team, he directed search operations after the PG&E natural-gas pipeline explosion in San Bruno, CA, last September. But the pipeline disaster, which leveled an entire neighborhood, “was not the normal kind of search and rescue,” Bloom says. “It’s usually lost hikers in the mountains, or Alzheimer’s victims.”
Now Bloom has pulled off a rescue of sorts for his own company. Siemens Industry (NYSE: SI), the Atlanta-based U.S. wing of the German electrical and engineering giant, announced yesterday that it’s acquiring eMeter in a deal expected to close this month, just 20 months after eMeter’s board brought Bloom in to give the smart-grid startup the enterprise-software credentials it needed to compete.
The companies aren’t disclosing the financial details of the acquisition. But it’s likely that eMeter’s investors—who include Sequoia Capital, Foundation Capital, Northgate Capital, and DBL Investors, and who had together poured roughly $70 million into the company over 11 years—are breathing a sigh of relief. “It’s a positive outcome for the shareholders and the employees,” says Kyle Arteaga, eMeter’s global head of corporate communications. “Everyone is going to see a return on their investment, which isn’t always the case in cleantech. I think everyone is quite happy.”
EMeter’s entire 175-person workforce will be joining Siemens, with the exception of Bloom himself, who says he will step down as soon as the deal closes. That’s not a total surprise, given his history as CEO of Veritas Software and as a high-level executive at Oracle and Symantec. “Gary has the DNA of a CEO, not a division leader,” says Arteaga. “He completed the task he was invited to do.”
That task was a formidable one. It was to take eMeter, an aging startup with its roots in the utility and telecommunications industries, and make it into a company that could compete with the likes of Oracle (NASDAQ: ORCL) and Itron (NASDAQ: ITRI) when it comes to selling utilities the software they need to make sense of data from the growing number of smart meters at commercial and residential sites.
“The founders [Cree Edwards and Larsh Johnson] have an unbelievable amount of smart-meter and utility experience, but if you walked down the halls of the company, nobody had enterprise software experience,” says Arteaga. “Gary started bringing in new executives and partners in sales, marketing, business development, and product management who all had enterprise experience, and we really started operating like an enterprise software company. When we did that, we doubled our customer base, our deals became more profitable, and the company was worth more.”
The Siemens acquisition offer wasn’t the first one eMeter had received—but it was “the first time that it presented enough of a value to the shareholders that it was taken seriously,” says Arteaga, who attributes the larger offers to Bloom’s leadership.
I met with Bloom back in August and talked with him about the company’s technology and the personal challenges of making the switch from the business software industry to cleantech. Though the interview took place well before an acquisition was in the air, we hit on many of the themes that likely made eMeter an attractive purchase for Siemens. An edited writeup of our conversation follows.
Xconomy: Why did the eMeter board hire you?
Gary Bloom: I think they hired me for my ability to run a company. We are selling to a big industry, and we have to operate like a big company to service that industry. I have big-company experience. This is the smallest thing I’ve run, shy of the Menlo Park fire and disaster team for a year.
X: What struck you most, when you arrived at eMeter?
GB: What I saw coming in here is one of the last two industries in the world that has not transformed itself with technology. I lived through the telecom transformation and I watched Wall Street adopt electronic trading systems, but if you look at healthcare and the utility industry, those two haven’t transformed themselves at all, and the common denominator is the lack of centralized data. Utilities would be much more successful service delivery platforms if they had more information about consumers and how they consume electricity and how their systems work. The reality is that they have no data.
In the healthcare world, I can get more information about your dog than I can get about your child, because the dog has a microchip in him, but if it’s a child, I don’t even know who they are. The utility sector has been running just as blind. They don’t have enough information to run their businesses efficiently, engage with customers, and know what to change. When you get smart meters, you get much better information. Instead of knowing what customers do every month when the meter reader comes out, you can know every 15 minutes.
Now the question is, once I have that data, what do I do with it? Can I reduce truck rolls? Can I get ahead of an outage? Why not send people an alert saying ‘Your power is out at home, it’s 120 degrees out, why don’t you stay at work?’
X: How does eMeter help with that?
GB: What we do is provide that information platform. Our competitors just replace the meter reader with an e-meter. We say it’s about collecting a vast amount of data in order to operate differently. It’s like the difference between Sears Roebuck and Amazon. Sears put up a website where you could put in the order number and go to the store and pick it up. Amazon came along and collected a lot of data about what you searched for and bought and clicked on, and they did a ton of marketing analysis around that, so that now they can say that if you are buying a new high-definition TV, you should also buy HDMI cables. Roll that forward 10 years, and Sears is closing their stores and Amazon is the biggest e-retailer in the world.
The parallel for the smart grid is that it’s hard to get the benefit [of e-meters] if all you are doing is collecting the data. We enable utilities to improve operational efficiency. We give them a Web portal that they can launch to their customers where they can manage their energy, water, gas, and other utility services. Right now people don’t get enough information to have any clue why they have the big bill they have. But over time, with global warming, most of the population is going to want to increase their energy literacy.
X: The rollout of smart meter technology in California has been pretty slow and very controversial. There are concerns about overbilling by Pacific Gas & Electric, and lots of people demanding the right to opt out of the whole smart-meter system. What’s going on?
GB: There is a tremendous amount of data coming from this advanced metering infrastructure, but you need a platform to make sense out of that data. The meters are pretty fragile; like any technology, it’s going to take a while to mature and stabilize. PG&E may say that they have no meters not reporting. Then a month later they say they have 20,000 meters not reporting but there’s no overbilling. And then in a third announcement they say, ‘Well, we have some overbilling.’
The reason is that they don’t know which meters are reporting. They are not analyzing the data. They didn’t put it in a form where [customers] could do something with it. What you really want to know is, what am I consuming and when? How does it relate to the weather and my own living patterns? At eMeter we have gotten our customers past the issue of stability, and they are now leveraging that information for customer engagement.
CenterPoint Energy down in Texas is saving millions of dollars just on truck rolls by being able to remotely connect and disconnect and know that the meters are operating properly. When the customer calls, do you know why? Is the power out, or do they just have a bad meter? The difference between a CenterPoint and a PG&E is that [CenterPoint is] acting on the information.
X: Despite the name, eMeter doesn’t make actual smart meters, right? You just make the software that utilities can use to analyze e-meter data.
GB: We don’t do hardware, we don’t do meters. We have no hardware agenda at all. We have an architecture that lets us integrate with all meters and with anything you want to do with the data, any billing or customer system or ERP [enterprise resource planning software].
X: What were your main challenges when you came to eMeter?
GB: We were in a situation at the time I got here where we were delivering the best software solution in the space but we weren’t a mature enterprise software company. In my time here we have tried to create a two-headed monster and complement the utility people with enterprise software experience. The product was robust, but to be a successful enterprise software company you need to know how to 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.