Startup Series: Sense
Today’s guest is Mike Phillips, Co-founder and CEO of Sense.
Using machine learning and artificial intelligence, Sense provides homeowners with real-time insights that illustrate their home energy use. Users of Sense’s Home Energy Monitor are able to not only understand energy use on an appliance level, but also identify opportunities to both save money and consume energy when it's cheapest and cleanest. Sense users can view a range of energy-use insights. Sense is actively pursuing a broader and more ambitious vision. By deploying its technology as a software application and embedded intelligence for the growing landscape of smart meters, the company is positioning itself to expand its energy monitoring and management capabilities considerably.
As investors in Sense via our MCJ collective venture capital fund, we were excited to talk with Mike in more detail about his climate journey and the company’s origin story and progress so far. We have a great discussion about the future of the home, electric panels, smart meters, the role utilities play in hardware deployment, and in what ways consumers want to be involved in home energy management.
Enjoy the show!
You can find me on Twitter @codysimms, @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded June 14, 2022.
In today's episode, we cover:
Mike’s entrepreneurial background in speech recognition software and AI
How he transitioned into making impactful products that address climate
How Sense determined its focus and how its engaging consumers around their home energy use
Challenges of collecting home system data and engaging customers around it, plus how Mike his team are overcoming them
An overview of load disaggregation
The consumer incentives of real time, smart home data
An overview of Sense’s energy monitor technology, its consumer savings, and insight offerings
Sense’s next product iteration and energy partnerships
The company’s solution to improve meters by running Sense software
How Sense plans to work with utilities and the role of panels and meters in widespread adoption
How location influences clean energy grids
The future of smart meters and connected applications
How Sense provides value for its customers, including improving home safety and health
How the company has grown to date and how they’ve raised capital
Lessons Mike learned early in his journey when starting Sense
Open positions at Sense
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Jason Jacobs: Hey everyone, Jason here. I am the, My Climate Journey, show host. Before we get going, I wanted to take a minute and tell you about the, My Climate Journey, or MCJ as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but they were longing for a peer group as well. So we set up a slack om for those people that's now mushroomed into more than 1300 members. There is an application to become a member. It's not an exclusive thing. There's four criteria we screen for. Determination to tackle the problem of climate change, ambition to work on the most impactful solution areas, optimism that we can make a dent and we're not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity the better.
There's a bunch of great things that have come out of the community. A number of founding teams that have met in there, a number of nonprofits that have been established, a bunch of hiring that's been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there. As well as a bunch of events and programming by members and for members. And some open source projects that are getting actively worked on that hatched in there as well. At any rate, if you want to learn more, you can go to myclimatejourney.co, the website, and click the become a member tab at the top. Enjoy the show.
Hello everyone, this is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change, and try to figure out how people like you and I can help.
Cody Simms: Today's guest is Mike Phillips, CEO and co founder at Sense, a consumer focused home energy monitor that lets homeowners know what devices are on and how much energy they are using via hardware and a smartphone app. Also, you might notice that I'm not Jason. This is Cody Simms, Jason's partner at MCJ. I did today's interview with Mike and Sense, and you'll hear me take on episodes here and there going forward.
I was excited for today's episode because Sense is tackling a huge challenge, getting consumers to engage around their home energy usage. And they are solving a hard technology problem on top of it, with hardware that listens to the electrical signals your home generates as different devices consume electricity. They've taken a lean startup approach to market, working to test assumptions and marketing minimal viable product to de-risk key areas of the business while becoming experts in how consumers want to engage around energy usage. Also, we're investors in Sense via our MCJ collective venture capital fund. So it was especially fun to get to know Mike better and hear more about his back story. We have a great discussion about the future of the home, electric panels, smart meters, the role utilities play in hardware deployment, and in what ways consumers want to be involved in home energy management. Mike, welcome to the show.
Mike Phillips: Hey, it's great to be here.
Cody Simms: Well I'm really excited to have you here to learn more about Sense and what you're building, and also learn more about your journey. Because Sense itself has had quite a journey, I think you founded it nine years ago maybe at this point. And you've been involved in the tech space for- for quite some time. So I'm eager to dive in and hear a bit about, first of all, how you got started going from a- a, I believe a speech recognition background into building a- a home energy efficiency and monitoring company is certainly a journey that I'm- I'm interested to hear about.
Mike Phillips: Yeah so it- it has been quite a journey. So a long time ago I was a researcher at MIT doing research on speech recognition. So really early days of machine learning and AI. Everyone talks about that now but they did not back then. Or- or not in kind words, anyway. Uh, I left, uh- uh, MIT back in the 1990s and started a company called Speech Works. We sort of licensed advanced speech recognition technology from MIT and applied to the call center world. So when you call those 800 numbers and you're talking to them, we ended up doing about half of those worldwide. So sorry about that, that was out, uh... But it was the only place that you could get that kind of technology live in a real way. So again, that was back in the early days.
Cody Simms: We- we all thank you, we all thank you so much for that, Mike.[laughs]
Mike Phillips: Hey well, you know, Sense is our redemption for that. So just keep that in mind.
Cody Simms: [laughs]
Mike Phillips: Company was successful. We went public in the year 2000 back in the tail end of the dot com era. Then we survived the tech downturn, then got bought by another company, a company that ended up becoming Nuance that just got bought by Microsoft for, a couple months ago. So long journey for that company, but I didn't stick around there too long. I left in 2005 'cause I wanted to do something more consumer centric. I saw mobile phones were getting connected, as lots of people did. We knew that mobile phones were gonna transform.
So I left, I left Nuance back then and I started a company in 2006 called Lingo. We were out a couple years before Siri. Siri actually started a couple years after us. They were just a little startup out of SRI. Some people may not know this, but the very first version of Siri you had to type to it. In ours you could talk to it. We connected the two up. Steve Jobs saw it and bought Siri and they- they became, uh, the Siri that you know as Apple. And we were the voice interface for Nokia, Rem and Samsung back when Rem and Nokia were the big companies and Samsung stay- stayed so. So saw that transition that mobile phones went through and- and scaled up.
Company later, after lots of drama, was bought in 2012 so myself and a few others, uh, Ryan [inaudible 00:05:46] and Chris McCauly from Lingo, we- we left. We decided we did not wanna do another speech recognition startup but still had to do another startup, of course. And decided we wanted to do something more meaningful. Got very plugged into the energy and climate space, as I know many of your listeners have. And decided that's where we should spend our time.
Cody Simms: Super interesting. I mean it sounds like really a journey of falling in love with cutting edge technology and figuring out how to turn it into product, whether that's on the speech recognition side or now moving into energy as it decentralizes. And I'm curious how you, uh, how you got into climate. You said you wanted to do something more impactful. Like how- how did you land on home energy utilization as the path?
Mike Phillips: Yeah so like everything you just said, taking technology and turning into product, absolutely I'm passionate about that. But more important, products are actually useful. And, look, talking to your phone is useful but it's not climate change kind of useful. So, uh, and- and like just personally I've always been interested in the environment and also I had been paying attention to what was going on with climate since then. But back in 2013 it was still very politicized but it was clear the direction things were going and that we have to be better.
Cody Simms: I'm afraid it's still politicized.
Mike Phillips: [laughs] It's not as bad as it was in 2013. At least you can talk about it now. You couldn't talk about it back then.
Cody Simms: That's right, that's true.
Mike Phillips: So, look, we- we decided that that's where we wanted to spend our time, you know, do our part and take the stuff we know. So what do we know? We know about machine learning, we know about data, and we like consumer facing application. And it's that consumer facing part that led us to, well, we should focus on residential. And- and when we talk about this later on you'll see that what we do is certainly applicable to other types of buildings and systems, but because of the consumer focus that's why we decided to settle on residential.
But look, residential is a good place to- to spend the time on if you care about energy and the climate. I mean buildings in general are, what, about 40% of all energy use worldwide. Homes are a bit more than half of that, but growing because of increased, uh, air conditioner demand. The fundamental challenge, and again we'll probably talk more, but like how do we make homes smart in a deep way? I mean there's so much smart home stuff happening with, you know, entertainment systems that know your music and so on. That's all fine. We're not trying to compete with that. What we think of the core systems of your homes, so the pipes, and the wires, and the HVAC systems, these sort of things, they're kind of dumb systems today. And they don't need to be. We can make these things smart and therefore much better users of resources like energy and water. It's kind of our- our big picture. And, again, tell you a little bit more about how we think about that [inaudible 00:08:20].
Cody Simms: And you'd worked with Christoper, and you'd worked with Ryan, who were your co founders at Sense. Did you, how- how did you land on this problem? Did you experiment around with a few different things? What were those early genesis moments like of realizing, and we'll get into what Sense is in just a minute, but realizing this is, this is the problem to focus on.
Mike Phillips: As- as you'll see as we talk about it, we ended up doing something very technically focused. It's called load disaggregation, which has something similar to speech recognition. But we didn't start there. I mean we started from this notion of we read Amory Lovins’ book about reinventing fire that basically said, look, we can take half the energy that goes into homes. So like why don't we do that? It's some combination of knowledge, you know, motivation, someone to remind people to do things, and then access the product service and so on. So if you just start with a problem, saying like how do we help people save half the energy in their homes, our simplistic notion back then was if we could know in detail what's happening in the home, and if we could engage consumers around that, we should be able to then figure out how to make homes more efficient. Right? By interacting with consumers.
So I- I'm giving you the historical view. I'll give you our more updated view in a minute. Which is but in conflict with that, we have a- a bigger, broader view now. But- but that notion of, you know, starting from really two things. How do you know in detail what's happening in the home. You could either wait until everything gets instrumented, so wait until the internet of things is done. Or we wondered, well, is there some other way to now wait and know what's going on with the energy in the home. Wondered the question of, if we measured the energy in a detailed enough way, could we just tell just from the energy signatures? Sure enough, it's not a new idea. It's called load disaggregation, as I mentioned.
And actually when we started with company we thought it was a solved problem, or shouldn't be too hard from what we were reading up on it. And, uh, first clocking some signals I think in Brian's house we like rigged something up and collected some data. And quickly went, oh, wait a minute, this is way harder than people thought it was. It really reminded us of what speech recognition was 30 years ago where there's been thousands of people working for 40 years to make speech recognition work and it's still not perfect. And this problem is as hard, if not harder. So we were like, oh, this again. Really, really, hard technical problem. That's okay, we're not scared of hard technical problems. But we don't like impossible problems, and frankly, we were not sure for a little while whether it was even possible to do what we were doing. And took a couple years to get down in the weeds enough and detailed enough to know, yeah, we can do this but- but it's a really, really tough problem. Which, by the way, is a great space to be in now.
Cody Simms: Forgive me for asking the journey questions, but hey, this is My Climate Journey. We're- we're all about the journey. It sounds like you started with a problem space, which is you've got homes that are a- a huge source of carbon emissions and there's very little data coming out of them, they're very analog. Then a potential technology approach of can we actually understand the electrical signals that are passing through the home? And decided, I guess, if you can solve that technology challenge there should be a business there. Is that, am- am I kind of articulating that correctly?
Mike Phillips: Yeah. That's right. However, let me throw in the next part of the mix, which is we've always recognized that, I can give you [inaudible 00:11:34] too, that we've got to engage the consumers around it. As much as we will over time be automating more and more things in the home, there's just no getting around the fact that things that the- the people living in the home or taking care of the home has a big impact of how homes work. And therefore a big impact on how efficient they are. And as you know in this energy world is becoming less important about how much energy you use and becoming increasingly important about when you use it. So- so having the people living in and taking care of their homes involved in that, there's just no getting around that.
So we came at this from a notion of we have to engage the consumers. And that also then led to a technical bit which is, you know, when we started the company we were talking to people that had tried to do this kind of thing before. And they all said, you know, you can't engage consumers around energy. It's too boring, Google tried it, they gave up. You shouldn't even try. And, by the way, in the VC world when the VCs are telling you don't even try, you know you're onto something. So that's where we said, no, we got it, we- we think we can.
So we- we spent a lot of time looking at this and playing with these things. And realized a couple things. One is to engage consumers, you gotta make it a real time experience. People are trying to do things from existing meter data and we'll talk more about that, but the current infrastructure that gives you 15 minute interval data a day later, it's just not good enough. I mean people don't care what happened yesterday. but if you can give people a real time view of what's going on in your home. And the other insight we had is, yeah, you gotta make it broader than just energy.
So even though we came at this from an energy perspective, what we learned and now our view is we have to take this broader view of making homes intelligent for- for not just energy. For energy, for awareness. So you can see like, I left the house for the weekend. Did I leave the oven on? Most people, they have to drive back home and look at it to see if they left the oven on. That's ridiculous. The house should know that the oven's on, and you should just be able to open the app and see that, right? Or, gee, is my, uh, sump pump running all the time? Do I have to go in the basement and look? That's ridiculous. The house should know that and just let you know.
So- so our notion now of these core systems of the home being smart and intelligent are way broader than just energy. And the reason that's so important, even if all you cared about is energy, is that's the only way you can gauge it. So think of this broader thing as the hook and then once you have the hook, then people are like it's front and center going, I'm, oh, why is my dehumidifier using 30% of my energy? I should do something about that.
Cody Simms: I mean what I love about the climate tech space in general is so much of problems that we're solving are real world problems that we all face every day. You know, gotta live somewhere. You gotta eat, you know, you gotta get around. Founders like you are- are helping solve problems that are fixing the inefficiencies of how we have done it to date in what I will call the MVP of humanity 1.0. [laughs] Technology enabled humanity 1.0. So with all that, uh, maybe help us understand, with all that background, like what is Sense? How do you define it today?
Mike Phillips: The broad thing that we're going after is making the- the systems of your home, your home itself, smart in this way. Product that we have on the market today is this fancy energy monitor. But we are extending past that. Let me describe the fancy energy monitor first. Our current version of this, or the one that's been in the market, remember I told you about those meters that send, uh, 15 minute interval data up? And, you know, we came from the smartphone world. So we thought, oh, the smart meter world. We heard about smart meters, I was like, oh, it'll be like smartphones. We can make software that goes on them and we'll be all set. Quickly learned that smart meters, currently, are not like smartphones. They instead have this very simplistic model of meter makes data, data goes to utility, you get it the next day. And then we realized that's not gonna work.
So that led us down a path, we had to build our own little piece of hardware. So we have this, uh, little orange box. You can look at our website and see it, this little orange box goes inside the electrical panel, little, it's easy to install. These little clamps just clamp around the main wires, plug in at your breaker. However, it's inside the panel so it should be installed by an electrician. So easy to install, but a lot of friction because of all the, um, electrician install. But that little orange box is basically being its own meter, measuring power, has some local processing, has networking. But we're measuring power at a million times a second. So crazy high resolution power meter and you, it turns out you need, you don't need a million. That's kind of a little overkill although there's some good things to do with it. But there's no way you can do this kind of real time view of what's going on in your home from even one second interval data or kind the- the other things that people have tried before.
So very ambitious piece of hardware measuring crazy high resolution data. And from that we can, with machine learning, we can see that the microwave we just turned on, the toaster just turned off. Or your air- air conditioner is trying to start but failing and it looks like the spark capacitor might be going wrong. So that's kind of the- the core product. And it's brought in as an application that's this fun, bubbly application that gives people this real time view of- of their home. We have very high engagement numbers among tech early adopters at least. And people are getting energy saving. I mean just by having that, active users get 15% savings. Not everyone's an active user, so across the population it's less than that. But we get real savings from people just from having this visibility.
And then we're using that as a launchpad for things like automatically controlling when your EV charges, or giving you alerts to that there might be a safety problem in your wall, or something like that. So- so think of that energy monitor as a starting point, but now using that as a data platform intelligence for all sorts of other things.
Cody Simms: So if I, if I understand on the product side today, you've been in market, technology development and market for a while now. You know, close to, close to coming up on a decade. And really what built so far is almost an early adopter MVP that is this after market device that you plug into your panel and allows consumers to do a few things, right? It allows you to see what's currently running in your home or not to understand sort of over time energy usage. To view trends of how their home changes over the course of a day, or a week, or a month. And then I think they even dive into individual devices and kind of the energy footprint that they're using. And this is doing all this by actually listening to the electrical signals that are passing through your- your panel.
I'm curious so I- I think I understand that's kind of the MVP that you have in market today. We're, we- we'll talk about where you're going with the product, which I think is the next evolution. But I'm curious, of those, which, like you said it is a decent amount of friction like you buy the product, you've gotta find an electrician to install it, et cetera. But for those, like, dedicated people who really wanna see their home footprint, what are the features that people are using the most today? Do you have a sense of that?
Mike Phillips: People have been buying it from a starting point of because they wanna understand energy use in their homes. Either because they're tech early adopter nerds, like ourselves, that really just wanna understand this stuff, or people that have high electric bills and are desperate to do something about it. We- we really do have some more mainstream-ish customers who are, who are using us 'cause they're having problems that they wanna solve.
Cody Simms: To save money, in this case, like help me actually, I can't get an electrician to figure out what in the world is going on.
Mike Phillips: Exactly. And- and we just see so many use cases like this. People, in fact, one of our employees just found the other day, using Sense, that in their condo the, uh, washer and dryer in the shared area is on their meter. Not supposed to be. So it's stuff like that, like most home have a couple like strange things going on. And once the user knows about them they can get them dealt with and fix them. But let me not get stuck there because that's the starting point in clear economic value, clear carbon reduction value we care about.
The things that keeps people coming back though and engaged, 'cause once you understand your home from an energy perspective, there's no reason to look at it three times a day. But what- what people typically find is by having this activity of what's going on in their home, they find at least a couple things in there that are interesting to them on a daily basis. And it varies by the person, right? You could either see how, like I said, is the well pump working? Is the sump pump working? Is the system stopped? Or I left the house, did I leave something on? What's going on? Or, I'm away and like did someone get home from- from work yet, or something? So-
Cody Simms: That's a peace of mind use case. Like it starts as a what's going on and moves into peace of mind.
Mike Phillips: But then we're starting to layer on, and- and this is where it's very exciting. Now we have that footprint, this kind of virtual center network. We see what's going on, we have a- a footprint in the home where we can talk to other devices. So we have integrations with some smart plugs, like [inaudible 00:20:11] lights and so on. We're starting to do integrations into EV chargers, we do things like hot water heaters and thermostats. You can see how this engaging app then becomes the central point for how you might better engage with variable rate plans, where you might be working with, uh, EVP programs and so on, virtual power point programs to provide more load flexibility.
'Cause, look, our overall big picture is we wanna support the energy transition. So that means more renewables on the grid, more electrification, so things like we can see that you have an inefficient AC that's breaking down and you have oil heat. You become a great candidate for ripping all that out and putting in a new efficient heat pump. So- so all those things that help in the electrification. And then the management of those so these loads don't all stack up, we think we can play a very big role in the- the residential part of the energy tradition.
Cody Simms: So let's move into where you're going. Let's start with product, and then let's go into market. Right? So product-wise, today you're this after market dongle. I know you have some exciting things you've announced recently about how you're ad, you know, what the next iteration of the Sense product looks like. Maybe- maybe share a bit more about where you see that going.
Mike Phillips: Ye- yeah. So we've always had the, like, focus at the company, this only matters if we can be in- in large scale. This just doesn't happen on this retrofit [inaudible 00:21:32]. We're not stopping to do that, I still like the- the right product for early adopters and retrofit across the market. But we wanna be on a path where this can be in all, really all. And that only happens once it gets built in. So passively built into homes. There's only two places, like this kind of centralized intelligence about the power in your home, only two places it can be practically speaking. Either built into the electrical panel. So realize we retrofit into the electrical panel. So either built into the electrical panel, or built into the utility meters. But those are the two places.
So for that, we've got these great partnerships. One of our partnerships we've had for years now is with Schneider Electric, they've been an investor in the company. We've been working with them quite a bit on the Schneider variance of the hardware and working with them across their product sets to have this intelligence built into Schneider electrical panels. And we're very well aligned with them about the overall goals around electrification and de-carbonization. So that's one.
The other one is on the utility side and the utility meter side. And, you know, back to those smart meters that I was insulting earlier that are not really smart meters, there's no reason they can't be. I mean utilities already spend something like 300 dollars of your money, including insulation and all this stuff, to put a meter on the outside of your house that already have digital sampling of power, already has computing, already has networking. So just the same stuff as our, in our little orange box they just weren't good enough. But no- no reason they can't be. In fact, the incremental cost of making those things higher resolution data, more processing, more networking, it doesn't cost that much to do that incremental thing. Once you're already making a meter. So- so we've been working with one of the meter makers, Landis and Gear, one of the major meter makers the last couple years. They now have a meter called Rebello that runs Sense software.
And I can't talk about all the- the deals, but there is one that's public which is National Grid has bought 1.7 million of those meters for New York State. So that meter is able to run Sense as software. So you can see that that then becomes this completely different equation for the consumers. Oh I have this new meter. Usually you would not care, right? We're hoping as these new meters roll out in New York, we don't know exactly the marketing plans around it, but we're hoping like this will be the first time ever we want consumers to look forward to their new meter coming because now it can run applications like Sense.
Cody Simms: And in this case you are, your sales channel becomes utilities. Are the consumers still subscribing to a sense app through you? Or is- is it moving to a more B to B, or B to B to C kind of engagement model at that point?
Mike Phillips: We are staying consumer facing from an application. Real- really think of it like smartphones. Think of us as- as like an application, think of us as Google Maps, or Waze on your iPhone. Obviously the meter maker, or the iPhone maker in the telephone case, and the utility or the telephone in the Verizon case, they have a role to play to make sure that these applications don't harm the networks and don't do bad things for consumers. But we think this future of this energy world is gonna support and should enable applications like Sense to be our consumer facing application, with benefits to the utility for sure and most especially with benefits to the consumer and then the policy. I mean we are very aligned on the consumer benefits, on the policy benefits, and doing it in ways that are beneficial to utilities. We think those all come together so that everyone's gonna be happy and that we can have this new meter where it's gonna count.
Cody Simms: The consumer wouldn't necessarily choose a- a meter or a panel that has Sense embedded. I guess with a panel they might, but with a meter they wouldn't. Is that, is that right? That they would then be activated to turn on the app if they wanted to. Is that- is that generally correct?
Mike Phillips: Yeah. It, so you're right. They- they don't have a choice, for the most part, of what meter they get. I think in some utilities they can opt out of the smart meter if they are scared of it for some reason, you know, once the meter's there... And by the way we do think consumer opt in is important for this kind of consumer facing application 'cause consumers should agree to the- the benefits and the data privacy issues. So, you know, our- our terms of service, our consumers own their data, we treat it very carefully and consumers should know that and be careful about that versus just being defaulted in from their utility. We think that's gonna change the dynamics really dramatically. You know, starting to think of meters not just as this thing that support a monthly bill, but as this part of the infrastructure in your home that can run an application, just like your phone became his new thing that can run consumer facing applications.
That's what we're gunning for. We think that really needs to happen. Not just for us, but things like getting your EV to charge at the right time, getting your hot water heater to [inaudible 00:26:15], you know, all the kinds of things we wanna do in the energy transition need consumers involved, needs a bunch of applications. And the role that utilities can play is by having this meter as a platform for these applications and we- we're seeing a really good sign.
Cody Simms: Yeah and I wanna acknowledge we're talking about both meters and panels separately. I'm curious, almost regardless of Sense, how do you see each of these devices in that house evolving and what should each of them separately be, what role do they each play over the next, you know, five, ten years as they change?
Mike Phillips: So look, I- I think, um, these are gonna coexist in good ways. So like as, certainly for like new construction and high end retrofits, these panels are gonna start to become smarter panels. Like I said, working closely with Schneider Electric on this and the dynamics there. You may know there's various players that are working on these kind of smarter panels, but we have a, Schneider has a very big role to play there and we're working very closely with them. So think about it kind of with the new construction builders, retrofit world.
But if you also think about how do we get this to be mass market adopted across, you know, the entire population that's the role that the- the utilities and the meters play. Because when they roll these things out and probably know, they get rolled out based on great cases they make to their regulatory bodies. So every- every now and then they roll out new meters. But they go to everybody then. So I think that's how we're gonna start to get this kind of hight tech, high technology stuff available to- to everybody including low and medium income consumers that really actually have a strong economic incentive to, yeah, give me some visibility and help me manage my bill there.
Cody Simms: Maybe don't- don't assume I know how they get rolled out. Um [laughs] or-
Mike Phillips: Oh I'm so sorry.
Cody Simms: Or that any of us listening to you. Like maybe- maybe talk a little bit about that. What does the upgrade cycle look like for, uh, electric meters in- in homes?
Mike Phillips: You did mention a little earlier that we've been- been at this for a long time and the reason is this is a slow moving industry. I mean this- this is kind of, and maybe some of your listeners who are trying to take tact and intersect it with these big industries, I mean the payoff is huge because this is where all- all the big scale happens. But they are slow moving industries. So with the caveat, and utilities absolutely are in this kind of, kind of world. And for good reason. I mean they- they make up supply of reliable power to- to large swathes of customers and they're highly regulated. But the utilities that we're mainly dealing with are the investor owned regulated utilities in North America and they- they are regulated by state by state regulators that are looking out for how the utilities spend basically your money that your paying for in your electrical grid case, to roll out infrastructure like new transformers, or new substations, or new meters. And they need to be doing it in ways that are beneficial to the customer and to the end users.
That's what happens and these, uh, smart meters have gotten rolled out based on those things. You know, the- the good news from a cost perspective, the, like our view is by making the homes smarter, you can actually avoid a lot of other costs. Uh, for example, as everyone's getting EVs and heat pumps there's a lot of worrying about whether the electrical grid is up to the task. Like are we gonna go replace all the transformers, all the substations, all the feeders?
Look, if you make these things smart so that it's not the case that... Well if it is the case and everyone gets home, plugs in their new EVs at 6:00 PM and the- the interfaces charge now, you know, the peak demand for that is gonna cause a lot of infrastructure disruption. Consumers don't care when their car gets charged, they just want to go far enough tomorrow. So if the interfaces plug your car in at 6:00 PM or whenever you get home, make sure it goes far enough tomorrow, but let us, let the computers take, uh, control of when these things happen and make smart decisions about when to charge your car.
Cody Simms: And it probably depends on location in the grid too, right? Like I'm assuming in California energy is clean during the day 'cause it's all solar. In Texas energy is clean at night 'cause it's wind, et cetera, right? So it's- it's, you know, it's quite variable I'm guessing.
Mike Phillips: We did a little study with a- a local company called Singularity where we- we studied what would happen from a carbon reduction if you let us automate when your car gets charged. And you're right, in California it was the big- biggest change we could save 43% of the carbon emissions of car charging by letting us automate it, it was exactly the effect you mentioned which is charge them during the day either at home or at work, found that you could save about 43% versus charge during the normal night.
Sorry, you were asking a question about like how- how long this takes to roll out. So these cases are being made for the upgrades to these infrastructures and steps including smart meters are big, difficult decisions that take a while. But as those happen, and this is where we're spending a long time, is to make sure that if utility is making a case for new meters, and a regulator is looking at that, they should take into account that there's a next generation meter available that can run applications. But we're not saying you have to run Sense, we're saying make sure your meters are capable of that. 'Cause they're gonna be there for the next so many years, the energy transition better happen over that time frame and you don't want to replace your meters so make sure you have the right infrastructure.
Cody Simms: Are there meter OS companies out there that any entrepreneurs listening to this should know about, if they're thinking about building applications for the future of smart meters?
Mike Phillips: They're starting off, a- a few of them, that have, they're calling it distributed intelligence, or distributed intelligence platforms. There are starting to be applications out for, you know, I- I think we're, we are just crossing this hump now where this is starting to be real and viable in the market. These meters I was telling you about were kind of the first that are able to run an application as intense as Sense is. And our view is if you can run Sense, you can run just about anything.
Cody Simms: Back to your mobile phone background, like we're in the- the brew days of- of technology and we're waiting for Android to come around, sounds like a little bit.
Mike Phillips: Yeah. We might just be. Remember when iPhone first came out it could only run Apple apps? I think we're- we're starting, we're starting to get past that phase, but we're right at that awkward phase.
Cody Simms: Yeah. Interesting. So once this is deployed, and you've got this footprint out there installed across the United States, what does it unlock for you? Like what does that, what does that future look like, you know, as- as, both as a business for Sense as well as how the world is different?
Mike Phillips: So we- we are gunning for wide adoption of this. So- so one decision we've made is as these meters roll out, we're making this capability available to the consumers without charging the consumers. We think it's an important decision because we really do want broad adoption. And our, we're confident enough in the value that we can unlock around energy efficiency, load flexibility, even things like grid analytics. Something I didn't mention is we have this high resolution data at the end, we can see what's happening in the home. Turns out we can see the, look the other direction and see what the grid's doing, see [inaudible 00:33:12].
My point is, we think there's enough value in this energy efficiency grid optimization, load flexibility, and even things outside the energy world like data for insurance companies, appliance referrals, and so on that we are fully linking ourselves to let's get paid for that value. All- all with consumer opt ins. We're not, we're not gonna go to an advertising model where we, you know, sneak the data behind the consumer's backs. So a consumer could opt in to a demand response program, or an efficiency program, or even share data with an insurance company and get a cut off of their insurance. So all with consumer opt in. Create that kind of value and then get our- our revenue drive from that is the model we're taking.
And so this allow- allows us to align completely with how do we provide value? And absolutely in the energy space, not just efficiency, this load shifting, helping with more, uh, electrification, and helping to drive people to get better systems in their home. I mean one other clear example, you probably heard this on some other story, that everyone's realizing this. It's like 80% of HVAC system replacements are done as an emergency. If it breaks in the middle of the summer in Texas, you gotta move out of your house until you get a new AC. So it's an emergency to fix it. If you could turn that into a considered purchase 'cause you know it's about to break down and less efficient, let people worry about their utility programs and then you could make a much better decision and say, you know, I really should take a look at this new heat pump program versus just whatever the guy has in the truck.
So all those things we think we can add value to make homes better users of energy. But also go beyond that. So things like safety, we're looking at, we can see faults in the wall that might cause the house to catch on fire, we're doing work on that stuff. So how do you make your home not only a better user of resources, but also healthier, safer, better place to live.
Cody Simms: And from the technology footprint, does this still rely on some of the original technology insights around listening to signals? Or have you evolved the technology to be directly plugged into per circuit level utilization?
Mike Phillips: So still the basis is, yeah, we can do more and more just from these signals. It, as I mentioned earlier on, it's this insanely hard technical problem. So we- we're not done yet. We have a lot of headroom to go yet. But we're also not trying to rely only on that. So- so keep in mind, we- we're not trying to be an electrical load disaggregation company. We- we really are trying to provide this kind of broader experience for consumers and the load disaggregation single process type thing is just our- our way to do that as kind of a baseline. But, look, if- if a smart device gets plugged into your house and we can talk to it, we are super happy to talk to the smart device. And there's a nice synergy between these.
Like let me give you another example. We all know about the smart thermostat. You think, oh, they got thermostat or HVAC covered. They don't. But they know the indoor and outdoor temperature, they know what they're asking HVAC to do. They don't know how much energy or AC it's using. They don't have a view of that. And they don't even know if it's working correctly. We're kind of the opposite. We can see what the HVAC is, or AC system is doing, but we don't know what it's being asked to do. You know, imagine connecting those two things, we have a full view of how the heating and cooling of your house is working which is 50% of all energies and homes.
So we really, to fully optimize how your- your heating and cooling is working in the home, and providing load flexibility about that is such the right thing to do it just drives me crazy if we don't do it. So we gotta, we gotta do that. So...
Cody Simms: Well and- and maybe share a little bit about how the company's been, has grown to date. You all have, I look at who's been involved in this company. You have some of the biggest name climate and clean tech energy investors in the planet, you've to some incredible strategics, maybe walk us back from when you were originally raising your seed round a year or two into the business to where you are today. And talk us through how you've capitalized.
Mike Phillips: Yeah so I can tell you, even from the early days, so since I had already been in the Bos- Boston-based tech scene and had some good exits for it, local, Boston-based VCs. Even with that, raising money from the Boston VCs was, the thing I learned was the- the mix of energy, consumer, and Boston were not compatible with each other, frankly, in the general VC world. Sorry to all my Boston-based VC friends out there. But then we got connected with some great investors in climate. So this is Prelude and Capricorn. They've just been great supporters, totally plugged into this world, got the vision, um, and been working with them since the beginning of the company.
Then our A round was done by EIP, Energy Impact Partners, and Shell. Uh, Shell was getting into the, uh, the residential electricity world, haven't done a lot there yet. But Energy Impact Partners has been awesome for us. You probably know that their LPs are the big investor in utilities. So even though we weren't really ready for working with utilities five years ago, whenever that is, having the connectivity there has been super helpful to us, uh, throughout the [inaudible 00:37:53].
Schneider led out B round, a great relationship there. And then we just closed another big round with, uh, Blue Earth Capital, who actually got introduced to us through an MCJ, so thank you very much. I forgot to mention that at the beginning, uh, the connected to us through MCJ, it was an awesome thing. And, uh- uh, led our C round and we are, um, cranking and hiring.
Cody Simms: Super happy to hear that and obviously we're proud investors that came into your C round as well. So excited to be part of the journey that you're on. And I'm curious when you raise those original rounds, again, Prelude, Capricorn, and then even your A round with EIP, were they investing at the time in an after market consumer dongle? Or was, did they always, even back then, view that as an MVP that was gonna lead to this more integrated approach?
Mike Phillips: We were clear e- even from the beginning that this only scales once it's- it gets built. And we were mainly thinking about the meters. Like we- we hadn't considered the built into the panel. So we were super happy when Schneider got involved and opened that up for us. It does get to the story a little but, because even back when we were early days, we would say this. This is an MVP, this is how we get going, yeah we know there's problems and here's how it's gonna scale. And the people we were just talking about got it and understood that was required. The- the Boston-based VCs would say, yeah, yeah, but this electrician install I really don't get it. No, no, no, no, it's not... We- we're gonna move past that one day.
By the way I- I don't mean to be, um, inappropriate about this. Like the reality is, and I think it is an important thing, and- and they were right but the time horizons for getting regulatory, getting infrastructure, getting utilities. This was beyond the horizon. We knew it was gonna take a long time. You know, I actually had the chart that showed how all this, uh, worked, but I carefully did not label the X axis because I knew it was gonna take a long time and I was very upfront with people like, Gabriel Kra at Prelude. It's gonna take a long time. And he was, uh, he said, okay let's do it.
Cody Simms: And what did you feel like you needed to de risk in those early days? Like as your rolling out this minimal viable product which is the acronym for MVP I've been throwing around for those of you who don't know what that means, uh, what- what were the, what were the biggest things you wanted to de risk? It probably wasn't like, what's the attachment rate for people who buy the product and get it installed by an electrician. Or maybe it was, I don't know. You had to have, had to prove you could do that, I guess, to have an early business. Um, but I'm curious, what are the big things you wanted to learn early on?
Mike Phillips: So it really was two things. One is get over some technology risk 'cause there was a lot of technology risk. And the other was to, can we make an engaging consumer product, even for the early adopters? Because, look, if we couldn't get people using the product, you know, even if we did some cool tech for it, it wouldn't have happened. But we were also quite deliberate that we didn't try to go talk to the meter makers or the utilities about this back then. We- we just know it would not have happened. I mean, yeah, little discussions. But we- we didn't push them back then. We- we just were very clear we had to prove out the consumer value case first.
And another part for the machine learning folks in the, listening here, there's also a huge problem here about how do you get data and how do you get ground truth? You know, on the previous problems we worked in, you know, speech recognition, vision process, you get the data from any- anywhere. You can get ground truth, meaning what is the reality. You get people to listen to things and type them in. Here you couldn't even get the data and you can't get ground truth. Like the only way to get the data, high resolution data, what's going on in homes is to deploy these kinds of systems, it just doesn't exist otherwise. And of course to do that, you have to have something that works. So there's a, there- there's kind a big chicken and egg problem for how you got these first systems out, was a sort of big hurdle for us to get over. But now we're in the virtual second part of that, we have a huge amount of data.
Cody Simms: I think it's such a good lesson for entrepreneurs, Mike. I mean if you would've, in 2014, started talking to some of these big manufacturers about this idea, they probably would have said, oh we'll do that ourselves, we'll get there. Of course they haven't. And instead, you went out, did it yourself, and now you can come to them having all the insights about how consumers actually wanna interact around this stuff. Which is data that they don't have and it puts you in a, in a very valuable seat because you went out and collected the data yourself, and built a proprietary understanding of how consumers interact with their home around electricity that doesn't otherwise really exist in most people's minds.
Mike Phillips: You're- you're absolutely right about that. That's also based on lessons we had learned from the voice assistant world back in the mid-2000s. If we had, back then, gone to the AT&Ts and Verizon and said, hey, check this out. But it just wouldn't have happened. Us and Siri, and a few others, had to really prove the case for that to take off. And that's why that happened.
Cody Simms: I really appreciate you taking the time to come on here and share your story with us, and paint a picture of where you're headed with Sense and the impact it can have. I guess the last question I'll have for you, is for anyone listening who's intrigued, how can they help?
Mike Phillips: We are hiring. Take a look at our website. Uh, we're- we're growing nicely and a- also, uh, love to be connected to others especially in the space that are working on residential energy systems. Uh, happy to be in touch.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note, that is .co not .com. Someday we'll get the .com, but right now, .co. You can also find me on Twitter @JJacobs22, where I would encourage you to share your feedback on the episode, or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
