Tem raises $75M to reinvent energy markets using AI

Ace AI data centers raise electricity pricesestablishment of London Tem he thinks AI can help solve that too.

Tem has developed a power exchange engine that relies on AI to lower prices compared to other power brokers. The company has signed up more than 2,600 businesses in the UK with the promise that buying energy from its subsidiary can save them up to 30% on their electricity bills.

The startup recently closed a $75 million Series B round 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 valued Tem at more than $300 million, a source familiar with the deal told TechCrunch. The founders plan to use the funding to expand to Australia and the US, starting in Texas.

“We’re in a good position where we have control over our profits. So I would choose not to raise at all and have a pretty, good bootstrap business in some ways,” Joe McDonald, co-founder and CEO of Tem, told TechCrunch. “We are not that kind of business. We know what we want to achieve as someone who wants to go public for years.”

Tem is an advanced market match, comparing electricity generators and consumers. The company deliberately started out with a focus on renewable energy generators and small businesses to fill all areas of the book. “The more distributed and the more distributed, the better it is to use algorithms,” McDonald said. “But this applies to businesses.”

The company’s clients include fast-food retailer Boohoo Group, soft drinks company Fever-Tree, and Newcastle United FC.

Currently, Tem is running what resemble two separate businesses. One, called Rosso, is a shopping engine that connects sellers and buyers. Here, machine learning and LLMs help predict supply and demand.

Rosso’s goal, McDonald said, is to reduce costs by eliminating several components that are available in current markets. “In one of them, you have different groups that are working on different tasks, taking different parts of the profit from the office to the sales, sales desks to other sales desks, and maybe five to six intermediaries that facilitate the flow of money from one side to another,” he said.

With AI, he said, “now you have the opportunity to transform people, labor costs, and different systems into a single business unit.” The goal is to make the price that customers pay for electricity closer to the cost price.

Another part of Tem, called RED, is a “neo-utility” that was built to justify Rosso’s demand.

“When we started, we tried to sell our equipment to power companies, and we didn’t get anywhere,” he said. RED is currently the only device using Rosso, and McDonald said its size has made the company a priority in opening up Rosso to others.

However, at some point, Tem plans to allow other devices to enter.

“Of course, it doesn’t matter how good (RED) is; it will not reach above the market share of 40%. And it should not, because it is self-regulating. So, I, I really like to go and get access to all the channels,” said McDonald.

“In the long run, we don’t care who the customer is, the owner of the generation as long as our equipment is being used,” he said. “This is just a game like AWS was, or Stripe.”