Tem raises $75M to remake electricity markets using AI
Source: TechCrunch
As AI data centers drive up electricity prices, London‑based startup Tem thinks AI might be able to help solve it, too.
Funding round
Tem 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. The round values Tem at more than $300 million. The company plans to use the funding to expand to Australia and the United States, starting with Texas.
“We’re in a nice position where we kind of have control over our own profitability. So I could have chosen not to raise at all and had a lovely, nice bootstrap business in some ways,” said Joe McDonald, co‑founder and CEO. “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.”
Business model
Tem operates as a marketplace, matching electricity generators with consumers. It initially focused 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 explained, adding that the approach scales up to enterprise customers.
Current customers include fast‑fashion retailer Boohoo Group, soft‑drink company Fever‑Tree, and Newcastle United FC.
Rosso – the transaction engine
Tem runs two related businesses. The first, Rosso, is the AI‑powered transaction engine that matches suppliers with buyers. Machine‑learning algorithms and large language models predict supply and demand, aiming to cut costs by eliminating several intermediaries that traditionally exist in energy markets.
“In each of them, you’ve got 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,” McDonald said.
With AI, Tem seeks to replace human labor and disparate systems with a single transaction infrastructure, bringing the price customers pay for electricity closer to the wholesale cost.
RED – the “neo‑utility”
The second business, RED, is a “neo‑utility” built to demonstrate Rosso’s value. Initially, Tem tried to sell its infrastructure to existing energy companies without success, so RED became the sole utility using Rosso. Its growth has led Tem to prioritize RED over opening Rosso to other utilities—for now.
“In reality, it doesn’t matter how good RED is; it’s not going to get above a 40 % market share. And it shouldn’t, because that becomes a monopoly in itself. So, I’d much rather go to get access to all the transaction flow,” McDonald said.
Long‑term, Tem does not mind who owns the customer or the generation, as long as its infrastructure is used. “This is just an infrastructure play in the same way AWS was, or Stripe was,” he added.
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