In 2001, MIT spinout and software firm Ember received $3 million in seed funding from Polaris Venture Partners with DFJ New England, Stata Venture Partners, and Bob Metcalfe, the Ethernet guru.

Ten years and about $89 million later, Ember, now a hardware company, has found a growing market for their ZigBee wireless protocol chips: the smart grid.

Earlier this month, Ember became the first -- and only -- company to ship more than 10 million ZigBee wireless chips, with expectations of almost 300% annual revenue growth in 2010.  I interviewed Ember's VP of Engineering, Skip Ashton, and Ravi Sharma, director of Marketing at ConnectivityWeek in Santa Clara, Calif.  In Sharma's words, "It took ten years to ship the first ten million chips; it will take just one year for the next ten million."

And get this -- Ember is profitable. Not too many smart grid startups can make that claim.  More than 50 percent of ZigBee chip shipments are from Ember.  ZigBee is based on open IEEE 802.15.4 standard and Ember is the leader, followed by TI, Freescale, Atmel and others.

Venture investors get a little impatient when their portfolio company is ten years old.  But life is bearable for a VC when their investment is profitably shipping product in growing volumes.

Ember's ZigBee chips were devised with consumer and home electronics in mind but were slow to take off in the marketplace.   A decade later, the rise of the smart grid and the need to wire appliances in the home gave the protocol -- and with it, Ember -- a new lease on life.

Ember’s products let energy technology firms make buildings and homes smarter and able to operate more efficiently. The firm’s low-power wireless chips and software can be embedded into a wide variety of devices to form a self-organizing mesh network.

Ashton said, "If you are a thermostat company, you don't want to know the details of RF networks or wireless mesh networks or application protocols."  Basically, you just want your thermostat to work.  Ember writes the application protocol for these products, which helps get smart, wirelessly meshed thermostats, appliances and sensors to market faster.  Ember's product offerings consist of systems-on-chip, co-processors and software development kits.

One of Ember's many customers is Tendril Networks, a proponent of ZigBee for controlling energy consumption in the home.  Tendril has won trials and/or development deals with dozens of utilities and expects to be shipping thousands of units per month soon.

ZigBee chips have also been deployed in thousands of smart meters from Itron and others, although the chip has not yet been switched on in the meter.

Since Ember's technology is entirely based on the ZigBee standard, Ember is one of the staunchest backers of the ZigBee Alliance.  ZigBee has emerged as the leading networking standard for home and building networks, and Ember has followed suit as the current market leader.  The downside is that these TSMC-manufactured chips could rapidly become a commodity product.  Still, Ember's domain expertise, software skills and development kits could help them maintain their market lead and slow the slide into commoditization.

There are other wireless protocols, but none have become as pervasive as ZigBee. For example, Zensys is the primary driver behind Z-Wave, a wireless, energy-efficient protocol that allows lights, appliances, thermostats and other devices to communicate with each other.  While Z-Wave is a single chip solution and potentially cheaper than rival technologies like ZigBee and WiFi, it's not an open protocol.

Compare that to the ZigBee Alliance, which includes all the major smart meter makers, as well as many major utilities and energy services companies.