Dow Jones /
Wall Street Journal

May 17, 2020
By Yuliya Chernova

Hara Raises $25M To Manage Energy Use With Software As Service

SAN MATEO, Calif. (Dow Jones)--Large corporations often turn to software-as-a-service providers to help with managing sales and the supply chain, but Hara Software Inc. believes the next frontier is deploying the business model to help monitor and manage energy use.

The San Mateo start-up recently raised $25 million in new funding from several big-name investors, VentureWire has learned, including General Electric Co. (GE) via Energy Technology Ventures, a joint effort with NRG Energy Inc. (NRG) and ConocoPhillips (COP). Focus Ventures led the Series C round, with new contributions also coming from Navitas Capital and Itochu Technology Ventures. Returning backers Jafco Ventures, Kleiner Perkins Caufield & Byers, and Nth Power LLC also participated.

"It was getting priced up. It was beyond our expectations in terms of our valuation," said Ray Lane, a managing partner at Kleiner Perkins and Hara's new chairman. He declined to comment further on the valuation.

Hara has raised a total of $45 million from investors.

Software as a service makes more sense for a company like Hara than selling software on a license basis, said Lane, nonexecutive chairman of Hewlett-Packard Co. (HPQ) and former president of Oracle Corp. (ORCL).

"Oracle, SAP, PeopleSoft, Siebel were built as software companies, which means you're ... competing on functionality, and once it's sold, it's a license. Nobody wants to admit this, but the requirement to service the customer goes down," Lane said. But software as a service, pioneered by Inc. (CRM), has numerous advantages, Lane said.

"We drop the bar [for a customer] on getting started," Lane said. In addition, it results in steady, predictable revenue craved by public-market investors, he added. Also, once the time comes for Hara to test an initial public offering, "that's an easy story to sell," he said, because of the success of companies such as Salesforce.

Ricardo Angel of GE Energy Financial Services said that GE, NRG and ConocoPhillips are in discussions with Hara about becoming customers, as well as partners in selling Hara's software as a service.

Even as its market grows, indicated by several strong customer wins--H-P included, according to Lane--Hara faces some challenges.

Its sector is crowded with scores of competitors, including some of the biggest IT companies such as SAP AG (SAP, SAP.XE). It also has to overcome the tendency of potential customers to have individual building managers keep an eye on energy use and track it via simple Excel spreadsheets.

Hara's software analyzes its customers' energy use; creates energy-reduction plans using return on capital, payback time and other criteria set by customers; and measures the effect of changes as they're being implemented.

The company's software, for example, is analyzing energy use in 200,000 buildings in Abu Dhabi, a city that is planning to spend about $1 billion on energy reduction, with an expectation to save $3 billion on energy over the next 10 years.

Overall sales of software for energy management and monitoring doubled in 2010 over 2009 and are likely to double again this year, according to an April report from Constellation Research Group. The analysis was based on revenue figures seen by the author, Adrian J. Bowles, but not meant for public disclosure.

In an interview, Bowles declined to specify a size for the energy management and monitoring market. It is difficult to estimate market size, he said, because most of the providers are small and private, and those such as SAP offer the software in conjunction with other products, making it hard to extrapolate the cost of this particular component.

Hara's chief executive, Amit Chatterjee, declined to disclose his company's revenue. The company has more than 60 customers, up from 12 in 2009.

Just as with other new software services, there's a period of education, Lane said.

"Customers were not banging on the table to have companies like SAP and Oracle provide a better journal ledger," Lane said. For Hara, it is vital to partner with the likes of International Business Machines Corp. (IBM), H-P, Dell Inc. (DELL) and Accenture PLC (ACN) to bring its offering to customers as part of other products, Lane said.

Both H-P and IBM are creating new products in this area, said Bowles. "They are putting money behind this," said Bowles, who is consulting with IBM on a project related to this sector. IBM agreed in March to acquire privately held energy-management software company Tririga. H-P, meanwhile, has partnered with Hara and its competitor C3 LLC on some initiatives, according to Bowles. The analyst said he doesn't have a business relationship with C3 or Hara.

Large corporations are interested in energy management because saving on electricity goes straight to the bottom line, Bowles said. As energy prices rise and the availability of power becomes constrained in certain markets, the imperative to manage energy use rises.

Hara's average customers spend between $250 million and $1 billion on energy a year, Chatterjee said, and the world's heaviest consumers might have an energy spend of $25 billion. "A 20% reduction on those significant numbers leads you to profitability," he said.

In the U.S., Hara's biggest competitors are SAP and EnerNOC Inc. (ENOC), a demand-response company, according to research by Bowles.