Over the past five years or so, Encycle has been putting its “swarm logic” technology to use in optimizing one of the built environment’s dumbest pieces of equipment -- rooftop air conditioning units.

To date, it’s done this by adding networked sensors and controllers to these units, then managing them via the startup’s patented “adaptive duty cycle” algorithms, to get them to shift their on-off cycles to save energy, limit peak energy and take part in demand response programs.

But in the past year, the Toronto-based startup, formerly known as Regen, has expanded its swarm logic platform to Wi-Fi-equipped thermostats and building management systems (BMS). It’s also rolling up its combined technology offering in a software-as-a-service (SaaS) offering, dubbed “Energy as a Service by Encycle,” or EASE for short.

To fund this next stage of growth, Encycle announced this week that it has raised the first tranche of a planned $11.5 million venture capital round. The round was led by new investor Prelude Ventures and previous investor NGEN Partners. Previous investors BDC, Duke Ventures, Export Development Canada and EnerTech Capital also participated. The new funding comes on top of a $7 million Series B round in 2014, along with earlier investment of roughly $15 million.

The first tranche, of $7.5 million, will go toward supporting the rollout of Encycle’s new EASE platform to existing customers, which now account for about 35 million square feet of industrial and commercial space, as well as preparing for the commercial launch of its new thermostat and BMS integration offerings in mid-2017, CEO Robert Chiste said in an interview. 

With its SaaS offering, Encycle will be moving away from making money by selling its rooftop AC control devices directly to customers and charging them ongoing maintenance fees, and replacing it with a services model that will cost customers much less upfront, he said. 

“We’re charging on a very different basis,” he said. Customers “can get that device installed at little or no cost,” in exchange for paying Encycle a monthly subscription fee. Encycle will be working with financing partners and channel partners to cover the up-front costs, he said.

In return for signing up for the service, customers can reap the benefits of improved energy efficiency and demand charge management, he said. These have led to typical savings of 30 to 40 percent in AC-related energy costs, according to results from its existing customers that have been verified by the energy analytics software provider Nexant, he said.

Encycle's devices are networked via wireless mesh on rooftops, and communicate via cellular networks to the company’s cloud management platform. Some big existing customers include Sears department stores, Dave & Buster's restaurants, movie theater chains and distribution warehouses. The common trait among them is that they have buildings with big, flat roofs with lots of AC units, usually 10 or more, that provide a fallow field for energy savings, Chiste said. 

With its new funding, however, “we’re moving into two different devices" that will expand Encycle's addressable market, he said. The first is its “SwarmStat” offering for wireless thermostats. Encycle announced Honeywell as its first partner last month, and has since added the Carrier Connect thermostat, using an application programming interface (API) developed by its internet-of-things partner Ayla, he said.

These commercial and industrial thermostats typically control three to five rooftop AC units at fast-food restaurants, retail stores and other smaller buildings, usually by sending them signals to turn on and off en masse. Encycle’s software takes readings every 5 to 15 minutes, and then analyzes that data to fine-tune thermostat settings in ways that will smooth out the AC unit operation, avoiding the sudden spikes in electricity usage that can lead to excessive demand charges and wasted energy, he said.

Encycle has three buildings testing out the SmartStat technology right now. Initial data indicates that they can yield 15 to 30 percent savings in consumption and demand-related energy costs, said Chiste -- although he added that those results have not been put through the strict measurement and verification process that have proven out its direct rooftop AC control savings.

Even so, connecting to existing thermostats will be a lot cheaper than installing devices on each rooftop unit, he said. Encycle can also offer customers with lots of different buildings the ability to monitor and control them as a fleet -- “we can schedule 500 stores with the push of a button.” 

While SmartStat can address smaller buildings, Encycle’s third new offering can connect to larger, multi-story buildings by tapping directly into their building management systems, Chiste said. While the typical BMS can do simple scheduling and temperature setpoints, Encycle is working on tapping their data to enable them to synchronize the operation of their AC units, without adding sensors to each unit, he said.

Right now the startup is able to integrate with four different BMS vendors’ platforms, and expects to bring that technology to market in mid-2017, he said. It’s working with a few channel partners, including one that it’s publicly announced -- BCC Japan, Ltd. -- which is working with Asahi Shokuhin, one of Japan’s leading food and beverage producers, best known in the U.S. for its beer.

Beyond energy, Encycle’s platform can deliver valuable data on how well each AC unit is performing, and whether they need to be tuned up -- a service the startup has wrapped into what it calls “HVAC assessment reports.”

“There are pretty good figures out there on the maintenance costs on a per square foot basis” for keeping rooftop AC units running, he said. “We’ve heard back from customers that with the visibility we’re providing, we’re saving them 10 to 20 percent of that. […] It has turned into a very important part of our business.”

On the demand response side of things, Encycle inked a partnership with Enbala in August, helped along by Chiste’s role as board chairman for the Vancouver, Canada-based startup. Enbala has built out a roster of customers using its platform to turn industrial pumps, refrigerators and other large energy-consuming devices into grid assets, and could tap Encycle’s technology to reach smaller-scale assets, Chiste said.

Encycle is far from the only company offering technology to monitor, analyze and improve the energy efficiency of building HVAC systems, of course. Heating and cooling represent the largest energy consumption in the built environment, making them a target for technologies ranging from large-scale BMS optimization to wireless control systems for small commercial and residential sites.

Even so, Chiste sees a big market for Encycle’s low-cost, high-value approach to energy optimization. “We calculate there are about 2 million buildings that we can target” with the combination of direct rooftop AC controls, thermostats and BMS integration, he said.

The company is also not shy about protecting what it sees as its intellectual property rights over the core concepts behind its swarm logic approach, as its September 2015 patent infringement lawsuit against rival startup eCurv indicates.