Can This Intelligent Efficiency Startup Succeed on Its Own?

Just in time for Valentine's Day, the budding intelligent efficiency sector has witnessed one of its first breakups.

5twenty, a software startup that built the platform for monitoring energy consumption at the Veteran's Administration (VA) headquarters, has decided to split from its parent company, SPARC. 

The company's small team of developers say they're ready to become a more serious energy efficiency firm, and their relationship with SPARC -- a pure software company -- was not allowing them to execute on that vision.

"We weren't able to focus on our own strategy and brand," said Jeff Beck, a product manager at 5twenty, who will help lead the team's transition. "We went to SPARC and told them we were dying on the vine. We needed to pivot the business model."

Charleston, South Carolina-based SPARC builds software products for corporate clients that help supervisors manage their employees, make job interviewing easier, and streamline the project collaboration process. The software firm originally hired the 5twenty team to design an energy monitoring tool for commercial office buildings and compete for a pilot efficiency program at the VA. SPARC eventually won a bigger contract for the VA, and completed the project in the summer of last year. After that successful rollout, the six-person team at 5twenty started developing a strategy to move deeper into the market and help streamline the auditing process for efficiency professionals.

But building a successful energy efficiency company is a lot harder than building an app.

"SPARC is really good at developing software, but it didn't provide the tools for running a new business," said Beck. "In the end, we weren't able to translate our work into a business model."

As of today, 5twenty is officially a separate company -- and it has a lot of work to do if it wants to succeed in the competitive and crowded world of building energy management. 

The firm is starting out with some angel money and state grants that will give it a year-long lifeline. Instead of immediately focusing on an institutional funding raise, which the team worries will water 5twenty down, Beck thinks that selling subscriptions to the service will allow it to build needed revenue.

But a team of engineers isn't going to be able to execute that strategy on its own: "We are all software developers; we don't have a business development side," said Beck.

5twenty is currently in the process of hiring an executive team, which includes one of the former leaders of Washington, D.C.'s PACE program. Beck wouldn't disclose any names yet, however, citing the company's need to "transition out of existing relationships."

The next twelve months will be critical for 5twenty as it heads out on its own into a sea of competitors with just a small amount of money. A recent industry survey from Groom Energy identified more than 200 companies that are now offering intelligent energy management software products -- some with deep corporate ties and others with limited amounts of money. This presents challenges for nearly every company, as customers have a hard time distinguishing brands and product offerings.

If one were to pinpoint 5twenty's place within a taxonomy of the industry, it would likely be next to notable startups FirstFuel and Retroficiency, which are developing software tools to streamline the auditing process. But Beck insists that the company is not necessarily a direct competitor to those firms. 

"We get lumped into the world of virtual audits, but we don't compete in the exact same place," he said. "We're even looking to partner with some of the companies on the virtual auditing side."

5twenty is focused on turning a virtual audit into an actual project. The firm has created a collaboration tool using remote or on-site auditing data that can help energy service professionals, building managers or company executives evaluate efficiency measures dynamically. Even with all the innovation in information technology, the final result of many audits are static PDF documents that don't encourage action, said Beck.

That aim may pit the company against Noesis Energy, which has built a platform via which engineers can access building information and compete to design projects. Noesis already has tens of thousands of buildings integrated into its matchmaking service, although it's unclear how many have resulted in completed projects.

Wherever 5twenty fits in, its most fierce competition isn't one single firm -- it's the hundreds of software developers looking to stand out and convince skeptical customers they have a product that really helps save energy.

Although success is far from certain for a small startup in this sector, breaking loose from a pure software company may be a good start for 5twenty as it looks to better understand the needs of building professionals.

"We know that analytics won't stand up without action. Companies often provide a widget with some analytics and say 'Good luck.' We need to prove we have a scalable solution to auditors and engineers," said Beck.