Significant smart building fundraising activity and product launches, a deep dive into data centers and the energy/HVAC impact
Smart Building Insight - May 2024 from Aamidor Consulting
Letter from the Editor
May is upon us, and we have a rather large update for you on a number of fronts: continued strength among early stage firms raising rounds (and a larger number of big rounds with more mature firms), some larger OEMs/publics making acquisitions, and a review of valuations and multiples for energy management and smart building firms. Additionally, we have a write up on data centers (power AND cooling demands) and all the other typical updates - partnerships, product launches, etc.
We also have an interview with the organizers of IMN’s upcoming real estate tech events: both an event in June focused on AI in New York, and then an ESG-focused event in July in Southern California.
A housekeeping item - our project calendar is fairly full for the coming months, but reach out if you think you will need support in Q3. We’d be happy to talk, but please get in touch soon!
The rest of our conference schedule is starting to come together for 2024, too.
IMN’s AI in Real Estate event will be held in New York on June 11
For those who wish to attend, we can offer a 15% discount using code: AC24 And, see below for a short Q and A with some background on the event.
Realcomm / IBCon will be held in Tampa June 19-21
IMN’s 3rd Annual ESG & Decarbonizing Real Estate Forum (Summer) in Dana Point, California.
For those who wish to attend, we can offer a 10% discount using code: AC24
Blueprint, the largest, most global gathering of industry leaders and innovators leading the charge in changing the built world - from construction to transaction will be September 17-19 in Las Vegas. Friends of Aamidor Consulting save an extra $300 off the current registration price by clicking here.
If you are trying to get through this post quickly, here are a few key takeaways:
Last month we covered a lawsuit between Infogrid and investors in Aquicore. Since then, Infogrid raised a new round and appointed a new CEO, which headlines our wrap up of new investment activity. We also dig into multiples and valuations of firms in this cohort.
Larger firms such as Schneider, CoStar and Yardi have announced larger M+A.
While there still is a lot of strength in early stage VC, Arcadia, Redaptive and GRESB all have news on the investment front.
(limited M+A, lots of early stage investment rounds)
Continued focus on product launches - both from larger and smaller firms.
Don’t miss our data center write up, focused on what various public firms are saying about the opportunity.
Last month we did a poll about popularity of different sections of our newsletter. Since M+A coverage was selected as the most popular section, by far, we’re reposting this poll with all the other sections. What else do you like most about the newsletter? Thank you in advance for participating in the poll, it will help us improve the newsletter for future issues!
About Aamidor Consulting
Aamidor Consulting works exclusively in the smart building landscape with all key stakeholders. See these project summaries and detailed testimonials from some of our clients that exemplify the strategic value we provide.
Our work usually falls into one of these categories:
Fractional product management for vendors. Projects include competitive analysis, market sizing, voice of customer interviews, pricing / packaging / positioning, and go-to-market strategy.
Initial product/market strategy for early stage companies or small teams within large organizations: we develop or review your market requirements document (MRD).
Strategic advisory relationships with small and large real estate owners/operators focused on vendor selection/technology scouting for sustainability, energy, and facilities leaders.
Working with investors to identify opportunities in the market and conduct commercial due diligence of potential deals and acquisitions. We have worked with leading VC and PE firms, in addition to firms acquiring startups.
Please reach out if you want to learn more. You can work with us in a variety of ways:
Send us details on a product/market strategy need - or schedule a time to chat about it.
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Investment News
New funding rounds and investments:
Last month we covered some news about the Infogrid-Aquicore transaction. This month, Infogrid announced $13M in new funding, with A/O Proptech and Keyframe leading the round, including participation from existing investors Northzone and The Venture Collective. Also, Infogrid appointed a new CEO to the firm, joining from Arcadia.
KODE Labs raised $30M led by Maverix Private Equity, with participation from I Squared Capital and Telus Ventures.
Arcadia announced a $50M round led by Macquarie Asset Management. Existing investors Energy Impact Partners, J.P. Morgan Asset Management, BoxGroup, G2 Venture Partners, Camber Creek, Triangle Peak Partners, and Broadscale Group participated in the new round.
Bayou Energy, focused on utility data acquisition, raised $1.2M in a pre-seed round from Surface Ventures, CoFound Partners, Leap Forward Ventures, Stepchange Ventures and Very Serious Ventures.
Ivy Energy, which helps scale solar and renewables in multifamily buildings, raised $18M in its series A from GreenSoil PropTech Ventures, American Family Insurance Institute for Corporate and Social Impact (AmFam Institute), Legacy Capital Ventures, Enki Solar Investments, and Unit Leader.
Swtch Energy, focused on EV charging in apartments, raised $27M, led by Blue Earth Capital.
Kontakt.io, which focuses on indoor location tracking, primarily in hospitals, raised $47.5M from Goldman Sachs Asset Management.
Carrier Ventures made an investment in Strategic Thermal Labs, which focuses on liquid cooling solutions for data centers. See below for a longer write up of data centers (power demands, cooling system growth, and what it means for smart building innovators.
Early heat pump OEM innovator Quilt raised $33M in its series A, led by Energy Impact Partners and Galvanize Climate Solutions, with participation from Garage Capital, Gradient Ventures, Incite Ventures, MCJ Collective, and Lowercarbon Capital.
Ecotrak, focused on facility management solutions, raised $30M, led by Respida Capital with participation form existing investor Gala Capital Partners and Carver Road Capital.
Redpative secured $225M in warehouse financing from ATLAS SP Partners and launched an equipment financing offering.
Texture, focused on data integration and exchange for distributed energy and utilities, raised $7.5M from Abstract Ventures, Day One Ventures, Equal Ventures and Lerer Hippeau.
Accacia, a real estate decarbonization platform, raised $6.5M pre-A round led by Illuminate Financial.
GRESB announced a majority investment from General Atlantic’s BeyondNetZero fund. Summit Partners, an existing shareholder, maintains a minority share.
News on VCs and funds:
Decarbonization Partners, a JV between BlackRock and Temasek, announced the final close of its $1.4B inaugural fund.
GEF Capital raised a new buyout fund at $325M.
Toyota Ventures raised $300M across two funds, with half of it focused on hydrogen and renewable energy.
Acquisitions:
In the HVAC integrator roll-up playbook, Building Controls and Solutions acquired Canada’s Yorkland Controls.
CoStar is acquiring Matterport for $1.6B.
Schneider Electric is in talks to acquire Bentley Systems, which would be a significant expansion of the firm’s software capabilities and revenue.
Yardi is buying a majority share of WeWork, for $450M.
Sign In Solutions acquired SmartSpace Software.
Building on the data from last month’s coverage of the Infogrid-Aquicore lawsuit, and the general opacity about financial performance of the smaller and more innovative smart building players (like Aquicore), we’re including some insights on multiples across the market:
Aquicore, a software firm focused on energy management in commercial buildings, traded at just over a 6x multiple on revenue ($7M in revenue, acquired for $43M).
There aren’t a lot of public comps for this kind of business, since many of the energy management software businesses are within hardware/services firms. As we noted last month, firms like Johnson Controls, Trane, Honeywell and Ameresco, have an average enterprise value/revenue multiple of 2.5x (according to Harris Williams’ quarterly market review). The differences across firms are not due to more or less revenue from software, instead, the multiples appear to be based on other market dynamics (e.g., Eaton is doing well due to data center growth, Trane has a strong message around decarbonization, etc.)
Also, last month we cited Houlihan Lokey’s similar data for public proptech firms. Its RE data/RE software category of public comps (see page 37) cites a 5.2x multiple (these are not energy/smart building firms, but instead a broader category of real estate / proptech software). The EBITDA mutiple also is a good comp, though we believe that many smart buidling innovators still have limited to no EBITDA.
More broadly, Tomasz Tunguz wrote a good piece on how the markets are valuing software companies in 2023… (this is showing forward multiples, and for software firms, not particularly for energy/building/proptech firms)
And, Pitchbook just published its Global M+A report, which again focuses on general M+A (not software-specific) across the world, for smaller EV deals.
Bottom line: With the market ripe for consolidation, and an expected pickup in transaction activity, understanding how smart building software and solution providers are valued is mission critical. More specifically, the Forbes article indicates that Aquicore was not growing much, and our analysis of various public data indicates that there still was a heavy services component to the offering (managed services, implementation and integration, and included hardware to monitor energy use). All this is to say, the 6x multiple is a good comp for other firms looking to sell, but is also looks a bit overvalued compared to other publicly available data.
New partnerships:
Avuity and Normal are working together to integrate occupancy sensors with HVAC control.
On the multifamily front, Logical Buildings’ GridRewards program has partnered with Moved, a resident onboarding solution.
Persefoni and AuditBoard are partnering to bridge the gap between carbon accounting and ESG data management.
Similarly, Novisto and Sinai are partnering on ESG data management.
Public firms: financial results and technology news/plans
Building on this new section, we have a few more useful data points and comps. And, as this is a new section of the newsletter, please let us know if you have more feedback on how to make it better!
Carrier was profiled by CNBC, which has been making a variety of innovative bets since spinning out from United Technologies (now RTX).
We also want to spend some time looking at the growing data center market, driven recently by the growth in generative AI and overall cloud computing needs. There are two big areas of interest to us: (1) power demands from additional computing capacity, and (2) the cooling needs for the data centers (which drive HVAC/controls sales and also contribute significantly to overall power demands). Below we are including some public data on both of these, plus
On the power demand side of data centers, the International Energy Agency published its Electricity 2024 report, which provides estimates and forecasts for all electricity use, including from data centers (see page 31 and beyond).
From the report - where is the electricity being used? “Electricity demand in data centres is mainly from two processes, with computing accounting for 40% of electricity demand of a data centre. Cooling requirements to achieve stable processing efficiency similarly makes up about another 40%. The remaining 20% comes from other associated IT equipment.”
As for the scale and location of data centers: “There are currently more than 8.000 data centres globally, with about 33% of these located in the United States, 16% in Europe and close to 10% in China.”
IAE forecasts notably strong data center electricity growth in all major regions (total share grows less in China due to the overall economy-wide growth in energy demand).
And, IAE breaks down the demand by types of data centers - including those for AI and cryptocurrencies specifically. Significant growth in all three categories, but most notably for dedicated AI data centers.
Additionally, Reuters has a good summary of feedback and forecasts from various utilities, and we pull out some of the more specific a notable estimates and data points:
McKinsey estimates data center demand will jump from 21GW in 2023 to 50GW in 2030. This is a significant rise over the firm’s early 2023 estimates of 35GW in 2023.
Our friend Moses Sternstein, who writes Random Walk, also covered this in March, writing “over the next ~5 years, data centers might need an additional energy boost that would be enough to power every light in every business and factory in the country. Sounds like quite the boost.”
Southern Company estimates 6 percent electricity growth every year from 2025-2028.
AEP noted that it saw retail electricity demand grow 2.5 percent in 2023, much higher than their projected 0.7 percent, primarily from data center use.
In a separate article which we included in last month’s issue, NextEra Energy was quoted as seeing a “81% increase” in demand growth over the next 5 years, which is due to data centers along with electrification and chip factories. Bloomberg also covered NExtEra’s estimates, which we cited last month. Specifically, AI is driving electricity growth 81 percent.
Eaton is very focused on serving the power needs within the data centers - which is among their strongest forecasted growth verticals. The firm noted that equipment demand for data centers is strong. Moreover, it is the fastest growing vertical within the largest business unit. Eaton also has invested in its own cloud-based data platform, focused on electrical equipment - a topic for a future post in our newsletter.
On the cooling and HVAC side, there also is a lot of growth.
During a discussion at Citi's 2024 Global Industrial Tech and Mobility Conference and during their Q4 earnings call, JCI made a few bullish comments about data center cooling demand, citing the following numbers:
5M tons of cooling will be needed to support new data centers (to put that in perspective, a single chiller can provide 50 to a few hundred tons of cooling. There are some chillers that individuals provide low-thousands of tons (e.g., the JCI Titan series)
JCI estimates there is 15-20GW of data center power being installed this year (2024).
JCI is strong on air cooled chillers, which they claim is the “preferred configuration today”.
JCI also noted that they are “Getting more than our fair share” and that it is the highest growth vertical, at “15 percent of the whole business when you net it all out.”
In a separate interview, JCI’s CEO noted that "(data centers) is probably worth well over two billion dollars in demand.”
Separately, Vertiv has been a strong performer due to its strong focus on data centers (it was spun out from Emerson, with a focus on mission critical infrastructure like data centers. And, Vertiv was not always a growing enterprise, as this article notes. This article notes the contraction in the business from 2011 to 2014, too.) But, times are good for Vertiv today, citing a $33.5B worldwide data center market.
Carrier continues to make investments in data centers, citing “300 data center owners and operators with over one million racks, spanning enterprise, colocation and edge benefit from Carrier’s optimization solutions across their portfolios.” (But, 300 out of 8,000 total data centers indicates room for growth, too.) Carrier acquired Nlyte in 2021 to get more involved in data centers. And, as noted above, Carrier Ventures invested in Strategic Thermal Labs, focused on liquid cooling technologies.
Trane is also actively focused here, with a 2023 investment in LiquidStack, which focuses on liquid immersion cooling. Trane also has been providing technical support to the firm on its designs. Moreover, the firm announced a significant expansion of air cooled chiller manufacturing in Michigan, specifically to support data centers. An article about this early 2024 announcement notes that demand for air cooled chillers is forecast to grow 20 percent by 2027.
Swedish specialty HVAC OEM Munters continues to publish articles about tens- and hundreds-of-million dollar contracts for data center cooling (here and here).
This is just a high-level overview of some recent news - we expect data centers to continue to be a key growth opportunity for large and small HVAC, controls and smart buildings firms.
Blackstone is building a $25B data center business, and has 10x’ed its investments here.
Finally, what does this mean for innovators in the smart buildings and HVAC markets?
Data centers are a large and fast growing part of the building HVAC market, and cooling optimization will continue to be a big opportunity - and very software/analytics-focused.
Startups also may look to these larger entities, which have corporate venture arms and innovation teams, for funding, technical support and go-to-market partnerships.
Separately, renewables may present an opportunity to leap ahead of the capacity constraints on the grid.
Other news
Moderne Ventures announced it Spring 2023 passport class.
BuiltWorlds on climate tech founders focusing on efficiency.
Industry Resources
Aamidor Consulting offers a few up-to-date resources to help smart building stakeholders monitor the market:
M&A Tracker: A list of relevant transactions.
Partnership Tracker: A summary of all the partnerships and alliances announced.
See our homepage to learn more about our the full breadth of our offerings.
Industry Q and A
Aamidor Consulting continues to provide insight to smart building innovators in this section. This month, we've included an interview with the organizers of two events in the coming months. Specifically, we speak with Steve Glener, Director of Research, Information Management Network (IMN). We speak with Steve about what attendees can expect at the June AI event in New York. And, for those who wish to attend, we can offer a 15% discount using code: AC24
Q: First, why is the AI event being hosted? How did you decide to launch it?
Steve: IMN has launched our AI in Real Estate Forum because many of our customers from other conferences were interested in how they can use AI to minimize expenses, streamline operations and make better decisions.
Q: What types of real estate organizations and asset classes are represented?
We have a large cross section of different types of organizations represented. Large and small owners and operators. REITS, funds, partnerships and venture capital providers are attending. Functions at the real estate firms including technology, property, asset management and finance areas as well as “C-Suite” participants.
Q: Why is this event different compared to other real estate events?
The brand new element of this area and IMN’s approach constructs an methodology that all attendees can follow to learn how their peers are transforming their operations, from planning to pilot, to replacing redundant tasks and improving workflow automation to re-inventing their tenants’ experiences. There is just so many new applications and moving parts the interest in the room will be high.
Q: For those attending, what are some of the must-see panels?
Tough question. There are so many distinct discussions that all make up part of the equation. I think our pre-conference virtual discussion, Being Able To Talk To The Tech Guys… AI Real Estate For Non-Tech Professionals, will be key for those who are new to this area. Another one would be the Large Real Estate Owner Operator Panel with companies lIke Barings, BH Management; FCP, Invitation Homes and Starwood Capital Group speaking on how they are using AI.
Job Seeker Resources
We've heard from individuals who either have used these links to find job, or who seek a bit of advice on potential roles. While we aren't in the business of recruiting, we are happy to help informally connect talent and good jobs. Feel free to reach out if you are trying to find a job in this industry. And, here are a few great job boards that may be helpful, too:
and, New Energy Nexus has a slack group with a job board.
We are sure that there are more, but this is a good start. And, again, please reach out if you are a job seeker!
Noteworthy Articles, Reports and News
Future of office and commercial buildings / Impact on commercial real estate:
VTS published its April 2024 office demand index report, showing a “modest spring boost” and the “ninth straight month of positive year-over-year growth.”
We enjoyed a recent issue of The Appraisal from Nima Wedlake, which analyzed “control point software” as a key investment theme in property technology. Specifically, property management software, such as CMMS, was highlighted. We also think the significance of this type of solution is why firms like JCI, Trane, and Siemens have been buying these firms.
The Economist digs into the ‘death of the office’.
Capital markets update: (across the market and in proptech specifically)
Venture capitalists are feeling more optimistic in 2024, according to a report from Axios.
And, within proptech, Inman has an article on where there still is demand.
AGC Partners published its Spring 2024 SaaS market update.
Sustainability in focus, as it relates to real estate:
Friend of the firm Bob Hinkle, founder at Metrus Energy, was interviewed on the Climate Changers podcast about energy-as-a-service.
McKinsey has a good article on industrial heat pumps, including details on district heating applications and the importance of the compressor.
Pitchbook published a note on the state of private market ESG investing. And, a bit more focused on hard tech, the firm also published its emissions and carbon tech report.
Smart building product launches:
Occuspace, a space utilization solution, announced its growth into corporate real estate.
Siemens launched Electrification X, which aligns with their investments in Building X.
Johnson Controls expands its security features and capabilities within OpenBlue.
Facilio launched a refrigerant tracking and leak detection solution.
Basking has launched a new “mobility personas” feature. And, as for customer wins, the firm has deployed its occupancy sensing solution to Worldwide Express.
In Sweden, Haltian announced a partnership with Region Skane.
Lambent, focused on space utilization, launched an API.
Eptura, a roll-up of various facility and CMMS solutions, has launched an integrated platform of capabilities - a move towards product rationalization.
Other news that caught our eyes this month:
Pitchbook published its Q1 2024 Global M+A report.
Follow us on LinkedIn for more content - and, if you are interested, here are all the articles we've published.