As AI data centers drive up electricity prices, London-based startup Tem believes AI can help solve that, too.
Tem has built an energy transaction engine that relies on AI to lower prices compared to other energy traders. The company has signed up more than 2,600 business customers across the UK with the promise that buying energy from its utility division can save them up to 30% on their energy bills.
The startup recently closed an oversubscribed $75 million Series B led by Lightspeed Venture Partners with participation from AlbionVC, Allianz, Atomico, Hitachi Ventures, Revent, Schroders Capital and Voyager Ventures, TechCrunch has learned exclusively.
The round values Tem at more than $300 million, a source familiar with the deal told TechCrunch. The startup plans to use the funds to help expand into Australia and the US, starting with Texas.
“We’re in a nice position where we’re kind of in control of our own profitability. So I could have chosen not to raise at all and had a nice, nice bootstrap business in some ways,” Joe McDonald, co-founder and CEO of Tem, told TechCrunch. “Well, we’re not that kind of business. We know what we want to achieve as someone who wants to go public over the years.”
Tem is a classic marketplace that matches electricity generators with consumers. The company intentionally started out focusing almost exclusively on renewable energy generators and small businesses to fill both sides of the ledger. “The more decentralized and the more distributed, the better it is for the algorithms,” McDonald said. “But this works all the way up to the company.”
The company’s clients include fast fashion retailer Boohoo Group, soft drinks company Fever-Tree and Newcastle United FC.
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Currently, Tem runs what amounts to two different companies. One, called Rosso, is the transaction engine that matches suppliers with buyers. Here, machine learning algorithms and LLMs help predict supply and demand.
The goal of Rosso, McDonald said, is to reduce costs by eliminating multiple layers present in current energy markets. “In each of them you have different teams doing different jobs, taking different levels of profit from back office to trading, trading desks to other trading desks and probably five to six intermediaries in total that enable the flow of money to move from one side to the other,” he said.
With artificial intelligence, he said, “you now have the ability to replace the people, the labor costs and the different systems in a single transactional infrastructure.” The aim is to get the price customers pay for electricity closer to the wholesale price.
The second part of Tem, called RED, is a “neo-utility” built to prove the value of Rosso.
“When we first started, we tried to sell our infrastructure to the energy companies and we got nowhere,” he said. RED is currently the only tool using Rosso, and McDonald said its growth has pushed the company to prioritize it over opening up Rosso to others.
At some point, however, Tem plans to bring in other utilities.
“In reality, it doesn’t matter how good [RED] is; it’s not going to get over a 40% market share. And it doesn’t have to, because it becomes a monopoly in itself. So me, I’d much rather go to access the whole transaction flow,” McDonald said.
“Long term, we really don’t care who owns the customer, who owns the generation, as long as our infrastructure is being used,” he said. “This is just an infrastructure play in the same way that AWS was or Stripe was.”