San Francisco-based startup Leap has raised $8.2 million in equity and debt, aimed at expanding its business of linking megawatts of flexible behind-the-meter load to grid market opportunities in California.
Thursday’s equity investment was led by Union Square Partners, the first energy investment for the Boston-based venture firm; it was joined by existing investors including Congruent Ventures, National Grid Partners, FJ Labs and Powerhouse. The new round brings Leap’s total capital raised to about $11 million.
An undisclosed portion of the $8.2 million round comes in the form of debt from Silicon Valley Bank and is aimed primarily at providing the collateral required to participate in the grid services contracts that Leap has signed with its partners, CEO Thomas Folker said in an interview. “That’s something that is not fun to do with equity,” but as a startup with no track record, it was necessary in Leap’s early days, he said.
But now that Leap has proven its bona fides through performing well through two rounds of California’s Demand Response Auction Mechanism, and signing up partners including Google’s Nest, thermal battery startup Axiom Exergy and its customer Whole Foods, and demand response provider Enersponse, “we thought it was the right time to add debt,” Folker said, and to “use equity to actually invest in the company.”
Leap has grown quickly in the two years since it first launched its Distributed Energy eXchange, a cloud-based platform that collects reams of pricing data from California grid operator CAISO and analyzes it to discover the value of reducing electricity consumption for demand response or price-arbitrage opportunities.
Leap then works with its partners to link those opportunities to the inherent flexibility of on-site HVAC systems, EV chargers, building management systems, DER controllers and other flexible loads. It sets up “bidding curves” that will automatically trigger these devices to turn off and on in response, tracks the load reductions that result, and measures and verifies them for participation in CAISO programs.
While demand response providers typically go after large and easily controllable loads, Leap allows them to more cheaply and reliably include lots of smaller devices they might not have gone after before, Folker explained.
Meanwhile, its analytics suite can often provide more accurate and timely metrics that determine demand response payments, such as calculating the baselines against which reductions are measured, he said. “Our analytics suite has already increased the revenue of many of our partners by multiple percentages.”
Leap’s ability to discover, automate and verify load reductions from hundreds or thousands of disparate devices also allows the company to aggregate lots of customers that might not be large enough on their own to attract attention from traditional demand response vendors, he said. “Our goal is to allow participants that would not have enough capacity on their own to go into the market.”