James McGinnis has been obsessed with decarbonization and the energy grid since he was in high school over a decade ago. Now his startup, David Energy, has the ambitious goal of running the energy grid entirely on clean energy within the next decade.
Brooklyn-based David Energy is a software-enabled retail energy provider. The company sells electricity to small businesses and residential customers in select states, including New Jersey and Massachusetts, similar to Southern Company and Pacific Gas & Electric. But unlike those incumbents, the company is entirely focused on clean energy and helping customers optimize their energy usage and reap financial rewards for saving energy.
The startup currently has two business lines: the first, and bigger focus, is the SME strategy, launched in 2022. This approach will supply these businesses with clean energy as well as provide them with a dashboard to track their energy usage and audit their energy bills to avoid overconsumption.
David Energy co-founder and CEO McGinnis told TechCrunch that the company is just launching its residential business in 2023, and is currently available to consumers in Texas who own electric vehicles or have smart home systems like Nest. David Energy leverages smart home devices and electric vehicle chargers to help optimize power and notify users when it's time to charge their cars.
“Software is particularly well-suited to automatically solve these problems for our customers,” McGinnis said of both commercial and residential customers. “If we can find a way to get cheaper power, our customers will buy it through us. What our customers are asking us to do is essentially become their energy manager through our software platform.”
McGinnis founded David Energy in 2019. He originally wanted to join a company focused on decarbonizing the power grid, but couldn't find one that was tackling the problem the way he wanted to. Today, David Energy serves thousands of customers and is raising more funding to scale.
The startup just raised $23 million in a Series A-1 round led by Cathay Innovation with participation from existing investors including USV, Keyframe Capital, Equal Ventures and BoxGroup. McGinnis said the company plans to use the funding to continue expanding into more geographies and prove repeatable product-market fit before seeking its next round of funding.
“The investment community is getting smarter and smarter with every round about anything related to the power grid,” McGinnis said. “Back in 2019, no one was even aware of this opportunity. The next time we raised money, people were talking about climate tech and starting to understand that there was this huge opportunity in the power sector.”
Simon Wu, a partner at Cathay Innovation, told TechCrunch he was interested in David Energy because it perfectly aligns with the French startup's climate thesis: The company has big ambitions, but already has a product line on the market that's profitable.
“David Energy is [companies] “They're saying, 'Let's not create new energy assets and see what we can do, what we can do with what we have,'” Wu says. “If we can optimize what's not digitalized, we can structurally lower our energy costs in a more software-oriented way.”
David Energy could face strong headwinds when it comes to scaling up: states have different approaches to their energy grids, and switching to clean energy or managing the details of energy consumption isn't always a top priority for residents and commercial businesses.
Residential customers also have to end their contracts with their traditional power companies to join David Energy, so the company needs to maintain a strong foundation of trust. On the commercial side, many of David Energy's customers have come from outbound outreach so far because there is an education component to encourage them to sign up, McGinniss said. He added that many businesses aren't thinking about switching to clean energy and don't realize that tracking their energy consumption can help them reduce it and save money.
Other startups are also trying to tackle the grid's problems: Octopus Energy, which provides clean energy to residents in the UK and Texas, has raised more than $2.9 billion in venture capital, and Arcadia, a late-stage startup that aims to decarbonize the power grid, has raised more than $575 million in venture capital.
McGinnis acknowledged that David Energy's strategy is just one approach to solving the energy crisis, but added that the company is beginning to attract new users through a flywheel effect from existing customers and he is optimistic about the company's incentives and software approach.
“We want to build new incumbents on the grid that can adapt to this new environment that incumbents are not prepared to adapt to,” he said.