Green energy provider bulb – a startup challenger to Britain’s ‘big six’ energy companies – has secured £60m in new investment. The equity investment is encouraging news for bulb and the wider tech-driven sustainable energy sector, says Henry Whorwood.
London-based green energy tech startup bulb has secured new equity funding of nearly £60m – offering a major boost not just for bulb’s growth ambitions, but for sustainable energy providers looking to disrupt a UK energy market dominated by its ‘big six’ providers.
Companies House filing confirms that bulb has issued 6.56m new shares worth £9.15, adding £60m in equity to the business. Total shares in the four-year-old business total just under 45m, giving the company a pre-money valuation of £315m.
Bulb declined to comment on the new funding – or to confirm its source. But it is understood that the £60m is “new and separate” funding from earlier rounds. More funding could follow.
JamJar – a backer of other impactful disrupters including Babylon, Kano, Sleepio and what3words – supports businesses with a fund created after the $500m sale by its founders of drinks business innocent to Coca-Cola.
Could bulb’s new equity funding put the startup on track for a billion-dollar ‘green unicorn’ valuation?
Comparing growth with that of Deliveroo – the UK’s best-known unicorn startup – it looks like bulb could be on course for that $1bn valuation within the next two years, perhaps even less. At present the company is making a loss.
The implications of such a powerful presence could be far-reaching in a market that the government itself described last year as broken. Given the downbeat assessment, more competition can surely only be a good thing.
British Gas, biggest of the big six providers, recently confirmed the loss of 340,000 accounts in the first half of this year alone, while its parent company Centrica saw its share price drop to the lowest value since the 1990s.
So just why is a young startup like bulb doing so well?
Tech has played an important role. Bulb’s service is completely digital and paperless, and a customer-focussed user experience is clearly top of its agenda (for examples see its recent blogs emphasising how the company produces product copy and the external reviews from UX designers).
Bulb has also designed an early-stage mobile app that, whilst without the full range of features available on its website, is functional and easy to use.
Through its web platform, bulb users can submit meter readings, alongside accessing month-by-month energy use, account information and statements. Where this differs from the digital interface of the big six is its adherence to good UX principles, and the removal of confusing industry jargon from its website and statement copy.
Bulb is without doubt tech-savvy, and has recognised that a strong digital infrastructure is key for companies that are looking to tap into the growing millennial market. But tech alone doesn’t usually make a business.
In a recent Times interview, co-founders Hayden Wood and Amit Gudka (pictured winning their Impact Award) revealed that they believe efficiency is key to challenging Britain’s energy incumbents.
Both founders are well-placed to judge on this matter – one used to work as an energy trader for Barclays, while the other worked on a consultancy project within one of the big six, where he’d “never seen companies so disorganised and inefficient. It was shocking to me how these companies weren’t really innovating or making things better for their customers.”
To reveal the key to bulb’s success, it’s probably wise to give some context to the UK’s retail energy industry. Under Margaret Thatcher’s premiership, the Electricity Act of 1989 privatised the formerly nationalised electricity supply board. Since then, the market has been dominated by the six large energy companies, who as of Q3 2017 together held an 80% share of the market.
Over the past decade, however, these companies have consistently performed badly in consumer surveys. For example, Npower has a rating of 0.6/10 on Trustpilot (bulb’s is 9.6/10), and consistently ends up in last place on energy league tables compiled by Which?
One clear difference between bulb and the big six is how they manage “tariffs” or payment plans. Whereas the big six have a wide range of tariffs on options, each with confusing administrative names and difficult to follow terms, bulb has just one, which goes up or down in tune with wholesale energy prices. Once the initial tariff contract is up, the big six tend to shift their customers on to more expensive pricing plans.
This may sound like a puff piece for bulb, but it’s more an indictment of the industry incumbents. A much-needed touch of transparency and a digital finesse has been brought to a sluggish market, suggesting privatisation is finally paying off. Why has it taken this long to happen?
The truth is, bulb isn’t the first challenger to cause waves in the UK’s energy industry. Bristol-based Ovo Energy has been going for around 10 years, and in its latest accounts has generated over £700m in turnover, £23.7m of which was profit.
Similar to bulb, Ovo has combined a tech-heavy approach with great customer service (8.8/10 on Trustpilot) to disrupt Britain’s energy market, where it now has over 830,000 customers. For an extra £5 a month, you can also go 100% green, as opposed to 33% for its normal tariff.
Octopus Energy, a subsidiary of Octopus Investments, offers a similar product, having started up in 2015.
Nor does it look like bulb will be the last. Another young energy provider, Pure Planet, recently launched its first product – 100% green energy accessed through an app-only business model (providing a UX-focussed service in much the same way as challenger banks such as Revolut or Monzo).
Since Ovo’s inception, Britain’s energy industry has undergone a digital shift, both in terms of the tech on offer and customer service. Predictably, this has not come from the top. Instead, and quite rightly so, it has fallen to disruptive young tech startups to create a better deal for Britain’s consumers.
None of this would have been possible were it not for the huge changes in information access the internet has brought about. Easy-to-use websites such as uSwitch and comparethemarket.com now place a huge amount of power in the hands of consumers.
In the energy sector at least, tech seems to be creating an efficient, increasingly sustainable market.
Henry Whorwood is a senior consultant at business database service Beauhurst.