Smart building vendor lawsuit, more early stage rounds, and deep dives into genAI readiness and data-driven lifecycle services
Smart Building Insight - April 2024 from Aamidor Consulting
Letter from the Editor
As April begins, we have a rather large update for you on a number of fronts. Given all the news to report, let’s get right to it!
First, we are just back from RETCON, which is one of the key events of the spring. It was a good event - if we missed you, apologies! Also, our project calendar is full for the coming months, but reach out if you think you will need support in Q2/Q3.
After AHR in January and Retcon earlier in the week, the rest of our conference schedule is starting to come together for 2024, too.
NREL’s Industry Growth Forum is in Denver again this year, from May 1 - 3. Let us know if you are attending and want to meet in our neck of the woods.
Realcomm / IBCon will be held in Tampa June 19-21. Joe will be speaking and around for the whole event.
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 ($1,300 off the onsite price) by clicking here.
If you are trying to get through this post quickly, here are a few key takeaways:
In our M+A section, we highlight a lawsuit between Infogrid and investors in Aquicore, which was acquired in 2022. We have a few quotes from stakeholders and also analyze some of the metrics on each firm’s performance, which were included in the Forbes article.
In our new section, “Public firms”, we cover what Accenture is saying about AI and data readiness, how the HVAC OEMs are looking at lifecycle services, and View’s move to go private.
Continued strength at the early stage of investing: A number of seed rounds for firms in the heat pump value chain (from hardware innovation to go-to-market platforms/apps).
Amazon shuts down its ‘just walk out’ tech in Go locations, which may be a cautionary tale for smart building vendors.
Leaders from Australian innovator Setmetrics are featured in our monthly Q&A. A good look into another firm focused on energy modeling.
About Aamidor Consulting
Aamidor Consulting works with software and technology vendors, investors, and building owners/operators to help them understand the smart building landscape and formulate product and market strategy. 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 smart building software and solution vendors. Example 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 the components of and analysis required to create a market requirements document (MRD).
Strategic advisory relationships with small and large real estate firms focused on vendor selection/technology scouting for sustainability, energy, and facilities leaders. These projects may include workshops, reviewing current smart building strategy, and/or supporting a technology procurement process.
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:
Axiom Cloud, focused on refrigerant leak detection software, closed $5M in funding from Toshiba Tec and Windsail Capital Group.
Heat Geek, focused on solutions to drive heat pump installations in Europe, raised 4.3M euro from Transition, Triple Point Ventures, and other investors.
Residential heat pump innovator Evari raised a $7.5M seed round led by Clean Energy Ventures.
And, funding to heat pump innovation continues, as France-based Airthium raised a $3.2m seed round from Daphni, EREN Groupe, and Polytechnique Ventures. The firm focuses on high-temperature heat pumps.
Skedda, a space management and scheduling platform, raised growth capital from CIBC Innovation Banking.
Greenly, an ESG and sustainabilty data reporting platform focused on carbon management, raised $52M in its Series B from Fidelity International Strategic Ventures.
Monaire, an AI-based energy and waste management platform focused on small commercial buildings, raised $3.5M seed funding led by Construct Capital with participation from Workshop Ventures and other individuals.
Aeria, a tenant experience platform, raised $1.8M in pre-seed funding led by Kalaari Capital and Foundamental, with AC Ventures, AL Trust and others participating.
Out of Brazil, Nextron, which helps to connect customers with renewable energy, raised $5.3M from Vox Capital and Copel Ventures.
News on VCs and funds:
After raising funds focused on proptech and climate tech, now Fifth Wall is looking at a debt fund focused on decarbonization.
Morgan Stanley is targeting a $1B fund for energy transition bets.
Acquisitions:
Tango, which recently acquired WatchWire, just bought Locatee for workplace analytics.
In Europe, two facility management technology / service providers, Caverion and Assemblin merged to create a significant technical service and installation firm across the northern part of the continent. Both are Triton portfolio companies.
Carrier is selling its industrial fire business to Sentinel Capital Partners for $1.425B. Carrier continues to shed its non-HVAC/refrigeration/controls assets.
As a bit more of a deep dive on past M+A: The Infogrid-Aquicore transaction appears to have hit a few bumps, with some Aquicore investors suing Infogrid over inflated revenues. Forbes broke the story. We asked our network for any feedback on this breaking news, which came out just before we published this issue. A few thoughts:
One leader in the analytics space was not surprised. Tom Arnold, CEO of Gridium stated to Aamidor Consulting that he "never understood Aquicore-Infogrid or the ridiculous numbers behind the deal." In addition, he noted: “This company chased unrealistic growth and the lawsuit is part of a pattern of leaders more obsessed with their cap table than with customers. Gridium just kept our heads down and did our very best for customers, and we are now seeing large owner groups avoid the drama and transition away from degraded service from Aquicore.”
And, one significant investor commented that “We’ve taken multiple looks at the company over the last two years and passed each time. While the upgrade in leadership recently was a positive, we continued to see multiple red flags and a hairy situation that would inevitably be extremely challenging to clean up. The lawsuit is not a surprise given the tumultuous last few years.”
Beyond the lawsuit, which we will continue to track, there is some interesting data that can be used for market comparables. According to the article:
Aquicore was at $7M in revenue at the time of the acquisition, and had announced 700 customers total. More notably, the firm’s website claims it has 1000 buildings and 300M sq ft on the platform. That translates into an average cost of $0.02 / sq ft / year, and an average cost of $7000 per building, per year. This annualized cost is higher than the market average of $0.01 / sq ft / year for energy management software, but some of Aquicore’s revenue likely includes implementation fees. In fact, the company’s own web site cites 1,000 buildings under management, but 2,000 successful deployments - a potential sign of customer churn and a higher share of one-time implementation revenue (rather than ongoing SaaS licenses).
Aquicore sold for $43M, which is a 6x multiple on revenue. Harris Williams’ Energy Management/Building Technology public comp category, which includes firms like Johnson Controls, Trane, Honeywell and Ameresco, has an average enterprise value/revenue multiple of 2.5x (note, these are not primarily software firms, while Aquicore is). And, Houlihan Lokey, which has a RE data/RE software category of public comps, cites a 5.2x multiple (these are not energy/smart building firms, but instead a broader category of software). That said, based on Energy Star Portfolio Manager data from the past few years (a public source of data that is an analog for vendor scale and penetration), Aquicore has not grown much in the past few years. But, this isn’t necessarily proof that the overall business has not grown, as buildings need at least a year of data, and other key metrics, to be benchmarked.
On the growth trajectory point: Infogrid’s revenue, according to the article, was $15M in 2022 before the transaction, but remains about $15M in early 2024, after the transaction. Despite the article referencing Infogrid’s claims of significant growth, that does not appear to be materializing.
New partnerships:
Siemens and its Enlighted subsidiary are partnering with Zumbotel. Zumbotel is embedding the Enlighted sensors into its offering.
Schneider Electric is working with NVDIA on AI data center design and energy/power management. The focus appears to be on upgrading existing data centers.
It’s a bit outside the scope of smart buildings, but Rockwell Automation also is working with NVDIA on AI in industrial manufacturing.
IBM and EY are partnering on ESG solutions. The partnership combines IBM technology offerings with EY’s consulting capabilities.
UL Solutions and SINAI Technologies are partnering on ESG reporting and performance.
Similarly, KPMG and Sweep are partnering.
KODE Labs announced a new set of integrations - primarily IOT sensor and data firms.
Ecosense and HAVEN are partnering on IAQ solutions.
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!
First up, organizational readiness for AI based on data normalization and cloud migrations. Accenture is not a firm we will typically cover in this section, but they made a notable announcement in their quarterly earnings about how prepared firms are to deploy generative AI. In general, firms are NOT ready. And. note that Accenture is talking about all companies - not just real estate companies, or real estate/facility/workplace teams within the F500. Accenture calls genAI “experimental” for many firms, and their CEO noted that it is “not plug and play“. More specifically, Accenture noted that many companies still are focused on migrating data to the cloud and also organizing those data streams in a way that makes them useable for genAI. Specifically, Accenture’s CEO noted: “Data readiness along with foundation model choices and customization are some of the most important steps and decisions that companies will make in the next year as they pursue value.” (emphasis added)
We believe that if most enterprises are not yet ready to scale genAI solutions across their businesses, then it is unlikely that the facility, workplace and real estate teams are, either. That may mean that the vendors focused on enabling AI and analytics (e.g., middleware!) are going to see more growth than those going for the most cutting edge use cases.
This past week at RETCON, there were many conversations about data quality as a key part of delivering true AI solutions in real estate. Data quality and centralization all fit together. We see these themes becoming more and more mainstream - even a JP Morgan note about opportunities in residential real estate tech is saying the same things.
Next, we want to highlight what some of the major HVAC OEMs are saying about data-driven lifecycle services. In general, these firms all are highlighting how much growth they can realize from the ongoing maintenance of their equipment, and the role that sensors and data can play. Here are Aamidor Consulting, we are a bit skeptical of this thesis, simply because these firms always have had a robust set of lifecycle services. But, we also recognize that more data/sensors combined with traditional, existing services could be a a nice tailwind that provides more recurring revenue (with a heavy dose of software-based augmentation to increase margins). Looking at some of the interesting comments from the firms themselves:
First, Carrier has been highlighting its deep installed base, and expectations about lifecycle revenue for a few years (see this slide from the firm’s 2022 investor day presentation). Carrier’s breakdown of services vs equipment sales is about 25 / 75.
Trane is a bit less concentrated in equipment sales (partially because they are stronger in chillers/applied, which require more service to maintain than a standard residential split system) and also sees this “high aftermarket mix” as a differentiator. (See Carrier’s “potential lifecycle value” metrics above - much higher value for “commercial HVAC” than resi/light commercial).
JCI’s recent comments during a discussion at Citi's 2024 Global Industrial Tech and Mobility Conference included very similar points:
The firm is very bullish on data to drive predictive maintenance and avoidance of equipment failures. Specifically, the firm sees an opportunity to deliver 30-50 percent energy savings in the building (which we believe is the max opportunity, for the worst performing buildings, not a building stock-wide achievable metric).
Similarly, JCI’s service business historically grows even with GDP. Now, the “connected assets” offerings are growing “faster than GDP”.
JCI cited $150-200M in SaaS revenue today, and “growing fast”. The FM Systems acquisition absolutely helps with this story, and there may be more software M+A to come across all of these firms.
Continuing with the bullish comments, JCI wants to make all services digital (or, digitally enabled), but has only gotten about 10 percent of the way there, so far. In the future, they see data driven energy optimization, equipment optimization, space optimization, among others as key areas of opportunity.
So, these HVAC OEM firms have more room to grow in how they monetize their installed bases of heavy equipment, and that also happens to fit very nicely with other key initiatives that investors want to see: more recurring revenue, more digitization of legacy and traditional businesses, and augmentation of staff/labor using technology. For example, Carrier cites 330K chillers installed, and also claimed to have 30K connected chillers - pretty good initial deployment scale, but a lot of room to grow. This is pretty close to JCI’s point of services being only “10 percent digitized”, today.
As we reported last month, View Glass, which was under pressure from Cantor Fitzgerald to sell assets, announced that it is being taken private by Cantor and RXR Realty.
Other news
Houlihan Lokey published its 2023 Proptech in Review market report.
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 Sam Marks and Adam Muiznieks of Setmetrics. We speak with them about their product, go to market, and general views on smart building technology.
Q: First, can you introduce yourself and give a bit of background on Setmetrics:
Setmetrics: Thanks Joe, you have both myself, Sam Marks and one of the co-founders, Adam Muiznieks with you today. Adam is our COO and has been in charge of the product and build since day one. I am the CEO and I’ve come on board in the past few years to help commercialize the platform.
Setmetrics is an engineering grade energy optimization SaaS tool for the commercial building market; be it offices, hotels, hospitals, or higher education, to name a few. The Setmetrics energy optimization and sustainability platform is uniquely positioned across the retrofit and building lifecycle to help model, optimize and then track all energy-related capital spend and decarbonisation upgrade initiatives.
Q: And, tell us more about Setmetrics – the focus of the solution, what is unique about your approach, etc?
Setmetrics allows you to manage your capital spend, whilst optimising your journey to hitting your energy goals, whether it be achieving Net Zero (or positive!) emissions, reducing energy cost, or improving building energy ratings.
Setmetrics does this by harnessing an engineering-grade energy model, built on the EnergyPlus simulation engine developed by the US Department of Energy. Setmetrics then streamlines and simplifies the model building process, and provides the decision making and tracking capabilities needed to take action and improve your building’s energy use.
Using an engineering-grade model ensures higher levels of accuracy and the ability to iterate constantly over the lifecycle of the building – something that alternatives such as spreadsheets can’t get close to. For those interested, you can view a short product demo video here.
Q: Given the fragmented market for solutions, how have you focused on building the business and carving out a differentiated niche? And, have you experienced the same level of vendor fragmentation in Australia?
Setmetrics is a medium to long term capital planning and sustainability tool. We sit in an interesting cross over with Proptech, Climatetech and Energytech… however our customers have very few (if any) tools, outside of humans and spreadsheets that assist them or their customers with their capital planning, sustainability management and building efficiency.
Our platform lets owners and operators look at how to make a commercial building the best version of itself, with the current technology that exists in the market. Our users can review and model new ideas and technologies for that specific building, as and when they come onto the market (now and into the future).
There are some great tools for the Commercial Real Estate sector in the North American, European, and Asia-Pacific markets that deliver real-time building analytics and building management, fault detection diagnostics, plant optimization and predictive repairs and maintenance, but that is not our focus. Our speciality lies in the medium to long term energy optimization.
Q: In our newsletter we talk about the importance of partnerships with established firms; it seems that Setmetrics has been particularly good at building these relationships. Can you tell us more?
Thanks Joe. Our go-to-market strategy has been via partnerships. Setmetrics is a software provider, so we look to offer this tool to the industry players and ecosystem participants to service the end users. Over the past few years, we have focused on delivering a product to market via channel partners and more recently via strategic partners. We see channel partners as users of the Setmetrics platform, however the end beneficiary are the building owners and managers (who are therefore customers of our customers). We see strategic partners being other software developers or hardware manufacturers in the market who operate in parallel with Setmetrics – selling to the same customers as us, with aligned but tangential products, and we already have many of these solution providers signed up to and using the Setmetrics platform.
Q: Do you have any bold predictions to share about the market for 2024?
Sam: I have learned over the years that there is a lot I don’t know in this fast-evolving sector Joe… so I am conscious of putting my foot in my mouth here. I think we need to be aware of the continued focus on limited capital spend, and the need to do more with less, with a heightened focus on spending on energy efficiency. I think 2024 will focus on trying to spend carefully and make the same dollar deliver as many outcomes as possible…funnily enough we can help with that…!
Adam: Yes, and that ‘doing more with less’ theme works for internal productivity too. Adopting technology that enables transparent, timely and decisive capital expenditure can increase the productivity of engineering and asset management teams within owner-operator organisations and increase the value building owners can receive from their advisor and contractor ecosystem. I think 2024 will see an increase in the adoption of technology solutions to drive internal productivity as well as smarter capital investment decisions.
Aamidor Consulting works across the smart building industry, supporting startups, capital allocators, and industry incumbents throughout their journey, from the early stages of customer discovery to being on a rapid growth trajectory. Specifically, our firm supports startups on product and market strategy, investors as an independent advisor during diligence, and real estate owners/operators as they develop plans to deploy technology. See a summary of our past projects and also a description of our consulting services for more details on how we can help.
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:
Every ~6 months, Bloomberg’s Odd Lots podcast covers the state of CRE. This time they focus on the urban doom loop.
MetaProp’s confidence index showed some optimism among investors and founders.
A $1 real estate sale as part of a profile of the US office market.
Overheard at Retcon last week: “The ‘flight to quality’ is becoming a ‘flight to experience’”.
Goldman Sachs wrote a research note about converting offices to residential real estate.
Capital markets update: (across the market and in proptech specifically)
CRETI published its Q1 2024 wrap up proptech VC investing: Funding is significantly down from 2021 and 2022, and generally flat when compared to 2023.
Sustainability in focus, as it relates to real estate:
A good Pitchbook article and report on climate tech investing, showing the decline in the built environment (which included smart buildings). This category includes smart buildings. Related, the firm published a research note on the topic.
Widely expected over the past few months, the SEC released its climate disclosure guidelines. The Guardian published its own analysis. And, here is the announcement directly from the SEC. ULI also published its own analysis.
And, the White House released its national definition for a building with zero operating emissions.
On a related note, geothermal energy has been in the news recently. Pitchbook covered the space in a research note.
Smart building product launches:
Our friends at WattCarbon launched the OpenEAC Alliance. EAC = Energy Attribute Certificate.
Brainbox AI launched ARIA, its AI-powered building assistant. This follows similar announcements from 75F and Carrier’s Cortex.
For the African market, Schneider Electric launched a lower-cost building management solution.
Density launched an app focused on real-time visibility of open desks and spaces, Density Live.
GRESB launched a new data offering, called REAL Solutions.
Phoenix Energy Technologies launched a data mapping/acquisition offering focused on multi-site commercial. This follows a range of other developments in the middleware category of a typical smart building tech stack.
Bueno Analytics announced a rebrand.
Amazon announced that it is pulling the plug on the cashierless checkout system at its Go locations. When first launched in 2016, we covered this as a learning opportunity for smart building tech. But, the ‘just walk out’ technology was actually heavily augmented by low-cost labor, which is a good example of how hard it is to digitize the built environment. We saw the Amazon effort as a way to use technology to enable a better shopping experience, and more in-store profit - but, in reality, it had a challenging ROI (partially because the tech was augmenting human labor, not replacing it). Sound familiar?
Other news that caught our eyes this month:
NextEra forecasts an 81 percent increase in US power demand heavily driven by AI and data centers. They also see significant growth in renewables.
JE Dunn Construction, which has a technology offering called Aptitude, wrote an informative blog post on master systems integration (MSI).
Wired on the growth and opportunity around heat pumps.
Pitchbook released a report on Infrastructure SaaS. It also released its H2 2023 global real estate report.
Our friend Moses Sternstein looking at the power needs from data centers.
McKinsey on various generative AI use cases in real estate.
And, data centers have been in focus recently (more in focus, that is, due to generative AI developments and the energy required to power them). Sidewalk Infrastructure Partners published a short white paper on the topic.
Our firm in the news
No additional articles this month!
But, follow us on LinkedIn for more content.
If you are interested, here are all the articles we've published.
Incredible value in this newsletter. Thanks, Joe!!