Tem Secures $75M to Transform Energy Markets With AI

While the rapid expansion of artificial intelligence data centers is often cited as a key driver behind rising electricity costs, a London-based startup named Tem is betting that AI can also be the solution. The company has developed a sophisticated energy transaction engine that uses AI to secure lower prices than traditional energy traders, attracting over 2,600 business customers in the U.K. with the promise of slashing energy bills by up to 30%.

Tem has just secured a substantial $75 million in a Series B funding round. The investment was led by Lightspeed Venture Partners and saw participation from a notable group of backers including AlbionVC, Allianz, Atomico, Hitachi Ventures, Revent, Schroders Capital, and Voyager Ventures. This new capital injection values the company at over $300 million. The funds are earmarked for ambitious international expansion, with initial targets set for Australia and the U.S., beginning with the energy-intensive market of Texas.

Co-founder and CEO Joe McDonald explained the strategic decision to raise capital, noting that while the company could have remained a profitable, bootstrapped operation, its ambitions are far greater. “We know what we want to achieve as someone who wants to go public over the years,” McDonald stated, signaling a clear long-term vision for the business.

At its core, Tem operates as a marketplace, connecting electricity generators directly with consumers. The company deliberately launched by focusing on renewable energy producers and small businesses, a strategy designed to populate both sides of its platform effectively. McDonald emphasized that decentralized and distributed energy sources are ideal for their algorithms, though the system is scalable all the way up to large enterprise clients. Its current customer roster includes major names like the Boohoo Group, Fever-Tree, and Newcastle United FC.

Tem currently manages two interconnected business units. The first is its transaction engine, named Rosso, which uses machine learning and large language models to match suppliers with buyers by predicting supply and demand patterns. The objective of Rosso is to dramatically reduce costs by consolidating the numerous intermediaries typically involved in energy trading. McDonald pointed out that traditional markets involve multiple teams and systems, each taking a profit, resulting in several layers between wholesale cost and the final price paid by the customer. “With AI, you now have an opportunity to replace the humans, the labor costs, and the disparate systems into one single transaction infrastructure,” he said.

The second business unit is a “neo-utility” called RED, which was essentially built as a proof-of-concept for the Rosso platform. Initially, Tem attempted to sell its infrastructure directly to established energy companies but found little traction. Consequently, RED became the primary vehicle to demonstrate the system’s value. Its success has been so pronounced that Tem has prioritized growing RED over licensing Rosso to other utilities, for now.

Looking ahead, the company plans to eventually open its transaction infrastructure to other utility providers. McDonald acknowledges the natural limits of a single utility’s market share and expresses a broader ambition. “Long term, we really don’t mind who owns the customer, who owns the generation as long as our infrastructure is being used,” he remarked. He frames the company’s mission as a fundamental infrastructure play, drawing a parallel to foundational platforms like AWS or Stripe, where the value lies in enabling transactions across the entire market ecosystem.

(Source: TechCrunch)