Sapient Industries: The Future of Energy ManagementBy Simmone Seymour
Sapient Industries is an enterprise SaaS energy management platform. The solution enables monitoring and understanding the use of energy within a building, and leverages this data to make insightful recommendations on space configuration, device usage, and safety to optimize energy usage and maximize cost savings. By curbing commercial building energy consumption, Sapient Industries’ platform helps customers reduce operating costs and their carbon footprint.
When the Lightbulb Goes Off: How Sapient Industries Was Born
Have you ever thought about how much energy the lamp in your room consumed and what the cost of the electricity was? This issue piqued the interest of Martin Koch and fellow UPenn student, Samuel Parks. A seemingly dissimilar pair – a scientist PhD and a finance-focused undergraduate student – they hit it off after meeting in the hallway of their dorm. What started as a fixation on how much energy their dorm room lamps and mini fridges consumed evolved into what eventually would become Sapient Industries. Koch comments that he and Park were struck that there was no visibility into the cost implications of their energy consumption. They saw an opportunity to create a solution that provided increased visibility into the granular costs of energy consumption.
Generating Waves: From Idea to a Product-Launch
After a year and a half of market research and meeting with advisers, Koch and Parks went on to raise a pre-seed round. They successfully raised $500K from Urban-X, in addition to angel investors. With this initial round of funding, they developed an MVP of their initial product: an energy management solution combining a powerful web-based platform with smart plugs that captured energy consumed. The system, known as a plug load management system, monitors a building’s plug load, or the energy consumed at each electrical outlet.
The solution works by leveraging smart power strips and plugs throughout a building to collect real-time power consumption data. Next, machine learning algorithms are used to identify, label, and locate the devices within the building. This enables the display of how energy is consumed in particular regions of the buildings – from the socket onward – creating a holistic picture of energy consumption and enabling insights into how a building can be more efficient. Insights inform users of their device utilization, how to improve the heating and cooling of a building, how to optimize space configuration, and even how to improve safety by alerting them of irregular electrical activity. Additional features of the product allow users to control plugged-in devices and automate when devices are turned on or off – to optimize energy usage and reduce waste. The suite all-in-all is expected to enable clients to reduce the cost of their annual electrical power consumption by up to 30%. Sapient’s hardware and software package is sold to customers for an initial setup fee and then a recurring subscription fee, for continued use of their software and hardware products.
The Current Pulse: The Market Landscape
The Global Energy Management Systems Market size is expected to reach $62.3 billion by 2023, growing at a CAGR of 13.5% during the forecast period (2017-2023). Driving trends of growth include: increasing government regulation on energy conservation, increasing prices of fossil fuels, growing awareness of sustainability and environmental impact, and the availability of enabling technologies that allow for the capture of energy consumption data. High costs of initial implementation, as well as integration into existing building management systems, remain barriers to purchase of such applications. The industry is consolidated around a few large players who hold substantial market share including: Honeywell Inc., Schneider Electric, and Siemens AG. These larger players spend a significant amount on R&D to continually enhance their solutions, and they could displace solutions from small to mid-sized companies. However, there is an opportunity for smaller players to differentiate and capture market share via innovative feature offerings and developing solutions with high ease of use.
The market is broken down into three primary categories: households, buildings, and industrials. Buildings Energy Management Systems (BEMS), which Sapient Industries focuses on, represent $4.3B of this market, and is projected to reach $7.24B by 2024. There is outsized opportunity for the market to expand and energy consumption waste to be further reduced in the U.S. Today, there are a total of 5.5 million commercial buildings in the U.S., which together account for 18% of all energy consumed. Currently, 36% of the energy consumed by buildings is plug load. This statistic is expected to increase to 45% over the next ten years to make up the single largest component of building energy consumption.
The Future of Sapient Industries
Today, Sapient Industries has evolved from a plug management system to a more holistic energy efficiency management suite – focused on insights and consultative services to help commercial buildings reduce energy consumption. Since their initial pre-seed round, they have raised an additional $2.2M in a seed round from Plug & Play, Engage Ventures, and Urban-X-BMW, in addition to angel investors. They have used this capital to develop additional features and increase the ability of the platform to handle more users and devices. From the MVP launch and working with pilot clients, Koch comments that they “ started to see patterns and really started to understand our true value proposition.” For instance, they discovered that larger commercial buildings had more of an advantage to capture greater benefits from both cost-savings and energy reduction. They subsequently pivoted to focus on commercial, rather than residential, as their core target market. This model reduces the barriers to entry of purchasing the product, as larger clients are able to take on the relatively high costs of initial implementation.
Sapient Industries is well-positioned in their focus on building energy management solutions targeting commercial properties, expansion to include consultative services, and the development of a distinctive niche: plug load management. Plug load is the greatest single source of waste in commercial buildings, and Sapient Industries offers one of the only solutions specifically addressing this. Key risks for Sapient include proving their technology value to their initial customers and differentiating their solution from the large incumbents in the industry. Sapient has an advantage in that they are currently the only solution targeting plug load. In addition, building energy management systems are often under-utilized because of lack of knowledge that such platforms exist to help building managers curb energy consumption. Overcoming this knowledge gap and educating prospective customers on the benefits of their solution will be the key to further customer penetration.
Regardless, Sapient Industries is an impressive display of perseverance and the creation of a comprehensive and impactful platform from scratch by young founders. Reflecting back, co-founder Martin Koch remarks that a valuable learning as a young founder was to “know what you don’t know and supplement that by surrounding yourself with the right people and drive forward,” and to “always get feedback.”