As AI data centers drive up electricity costs, London-based startup Tem thinks AI might be able to help solve that, too.
Tem has built an energy exchange engine that relies on AI to lower prices compared to other energy brokers. The company signed up more than 2,600 business customers across the UK with the promise that buying energy from its utilities division could save them up to 30% on their energy bills.
The startup recently closed an oversubscribed $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 is worth Tem more than $300 million, a source familiar with the deal told TechCrunch. The startup plans to use the funding to help expand into Australia and the US, starting with Texas.
“We’re in a good position where we have control over our own profits. So I’d rather not raise at all and have a good, good bootstrap business in some way,” Joe McDonald, founder and CEO of Tem, told TechCrunch. “Well, we’re not that kind of business. We know what we want to achieve as a person who wants to go public years ago.”
Tem is a classic market game, matching electricity generators with consumers. The company deliberately started with a strong focus on renewable energy generators and small businesses to fill both sides of the ledger. “The wider and more distributed, the better the algorithms,” McDonald said. “But this works as far as business goes.”
The company’s clients include fast fashion retailer Boohoo Group, soft drinks company Fever-Tree, and Newcastle United FC.
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Currently, Tem operates the equivalent of two separate businesses. One, called Rosso, is a shopping engine that matches suppliers with buyers. Here, machine learning algorithms and LLMs help predict supply and demand.
The goal with Rosso, McDonald said, is to reduce costs by removing several layers that exist in current energy markets. “In each group, you have different groups doing different jobs, taking different levels of profit from the back office to trading, trading desks to other trading desks, and maybe five to six intermediaries in total that make the money go from one side to the other,” he said.
With AI, he said, “now you have the opportunity to transform people, labor costs, and disparate systems into a single transactional infrastructure.” The goal is to make the price paid by electricity customers closer to wholesale costs.
The other part of Tem, called RED, is a “neo-utility” built to prove Rosso’s worth.
“When we first started, we tried to sell our infrastructure to companies that produce electricity, but we got nowhere,” he said. RED is currently the only service using Rosso, and McDonald said its growth has forced the company to prioritize more than opening up Rosso to others.
Sometimes, however, Tem plans to let other resources in.
“Actually, it doesn’t matter how good it is [RED] is; it will not exceed 40% market share. And you shouldn’t, because that becomes a monopoly in itself. So, me, I’d better go to get access to the whole workflow,” said McDonald.
“For a long time, we don’t really care who owns the customer, the owner of the generation as long as our infrastructure is used,” he said. “This is an infrastructure play in the same way as AWS, or Stripe.”
