The last big story we wrote about SCIenergy was in May of 2012, when the building efficiency software startup was undergoing a major leadership transition, layoffs and legal battles over trade secrets.
A few months later, SCIenergy won some contracts with a few large property management firms. Since then, however, the company has remained silent as it underwent an internal transition to refine its software product and better figure out where it fits into the intelligent efficiency sector.
SCIenergy is finally reemerging from that quiet period and is ready to be more public with its new strategy. And according to CEO Steve Gossett Jr., the company is markedly different than it was eighteen months ago.
"We sought to pull back a little bit. I thought our restructuring would take six to eight months. It ended up taking eighteen months," said Gossett in an interview.
Gossett, who came on board as CEO after SCIenergy bought his efficiency financing firm Transcend Equity in 2012, is attempting to find a very specific application for the company's building efficiency software: financing.
Today, SCIenergy is focused on using its continuous commissioning software to leverage managed energy service agreement (MESA) contracts -- making efficiency projects easier to pay for and setting the company up as a conduit for financing. The strategy brings SCIenergy further from its original mission of becoming a "do-everything" software company for buildings and closer to Gossett's roots as a provider of efficiency financing options.
"We're now moving the product to help de-risk finance activity," said Gossett. "There's a huge market need to create instrumentation around de-risking investment. We need building products that link investment in efficiency with the ability to manage that risk."
The new plan is a version of what SCIenergy imagined when it bought Transcend Equity -- except now Gossett says he has a much better software product to work with.
SCIenergy will partner with project developers to install the software as part of a larger efficiency retrofit. The platform offers predictive analytics on how the building is performing, and allows the service company to better measure and verify savings.
Under a MESA structure set up by SCIenergy, the building owner simply pays for energy use based on a historical baseline. The companies involved in the project pay the utility bills themselves and reap the benefits of the energy saved. At the end of the contract, the customer ends up owning the equipment and takes over the original (and presumably far less expensive) utility bill. SCIenergy claims it can achieve up to 30 percent savings in buildings.
"We're trying to combine all these products to create a full tool set. The marketplace hasn’t approached the projects that way. We need something that allows us to crack the code on deploying capital," said Gossett.
Yesterday, SCIenergy announced that Drexel University is its latest customer. Under a twenty-year MESA contract, SCIenergy will develop the financial structure and provide M&V to pay for a $6.6 million efficiency retrofit.
That approach may put it more closely in competition with an efficiency services provider like Metrus Energy, rather than the range of software providers for commercial buildings. However, the market is still so small that these companies won't likely be bumping shoulders anytime soon -- the current competition is mostly for brand recognition.
Developing a MESA-like structure was always part of the plan after Transcend Equity was acquired by SCIenergy. But the main barrier wasn't the financing plan -- it was the fact that the software wasn't fully ready for primetime. Gossett admitted to that in 2012, and he reiterated the challenge when talking about the company's eighteen-month restructuring plan.
"Much of the work was done too early, when the software was still being proven. That's not, from my perspective, a real product. That's a special application to demonstrate a solution," he said.
The early product was extremely data-intensive, and each site required custom application and lots of manual support from the team. Earlier big-name customers such as Apple, Boeing, Google and GE were reportedly dissatisfied with the product. Gossett wouldn't say which customers it had retained and which had ended their relationships, but he said a "steady stream" of new customer announcements is on the way.
"We now have a product that I can plug into a Google campus building or a hotel in Connecticut and have it run in the same way and create value. That's a dramatic change," said Gossett.
A large portion of the $50 million in venture capital raised by SCIEnergy over the years went toward fixing the software and restructuring the company. Gossett said the company is working on another raise to fully execute on the new plan.
The end goal, he said, is to procure a massive portfolio of buildings using the MESA structure and achieve the "holy grail" of securitization. By creating something that's repeatable and scalable, Gossett thinks the company could become "the rails to make that market exist in efficiency."
That's a bold claim for a company that eighteen months ago was facing internal turmoil and was plagued by software too complicated and labor-intensive to actually scale.
But with a refined product, a laser-like focus on financing, and a range of new customers in the works, SCIenergy's public return is a chance for it to prove that it can remain a force in intelligent efficiency, and not just another software firm good at raising money.