Investing With the End Goal in Mind
By Patrick Walsh, Director, Pathfinding & Incubation
Stephen Covey’s second habit from his book “The 7 Habits of Highly Effective People” urges us to “begin with the end in mind.” This principle is particularly important when investing in startups.
It is easy for investors to be drawn to the allure of groundbreaking technology. But not all innovations address issues faced by actual customers. True innovation offers a strong value proposition in the market and solves real-world problems.
To assess innovative startups, it is helpful to consider the end goal of their go-to-market strategy: Who will pay for this product or service? What problem does it aim to solve? How effectively will the startup’s solution tackle the issue?
At National Grid Partners, we concentrate on a specific set of real-world customers and problems. Our primary customers are National Grid and other utility companies. These businesses face significant challenges as they work to reduce carbon emissions while meeting increasing energy demands.
Our industry focus ensures portfolio companies have a clear, achievable go-to-market strategy with a viable end goal. We know the target market well and understand the problems buyers in this market need to solve.
Utility companies may need to be convinced that our portfolio companies offer the best solutions to their specific problems. But they do not need to be persuaded about the existence of the problem or the need to solve it, as is often the case with startups that do not consider their end customers from the outset.
Briefly, our approach can be described as: “Identifying high-priority problems in the energy sector and seeking startups with the highest potential to solve them effectively.”
Here are a few examples illustrating our focus on addressing high-value challenges through our investments:
Innovation: Copper Labs wirelessly collects near-real-time data from electric and gas meters without extensive infrastructure overhauls, providing utilities and customers with timely, actionable insights.
Market context: Utilities need to help customers manage consumption and intelligently address dynamic demand trends to mitigate peak loads.
High-value challenge: “What factors drive demand, and what can we and our customers do to address them?”
Innovation: Exodigo’s groundbreaking, non-intrusive subsurface imaging creates highly precise, geolocated 3D maps of buried assets, such as pipes, cables, rocks, minerals, and groundwater.
Market context: Renewable energy sources like solar and wind often need to be located far from cities, requiring extensive transmission infrastructure. Exodigo’s technology is vital for subsurface utility engineering during transmission system upgrades, as unexpected underground infrastructure is a leading cause of construction delays.
High-value challenge: “How can we efficiently install new underground transmission lines with minimal cost and maximum certainty?”
Innovation: LineVision enables utilities to actively monitor and manage their overhead transmission lines, maximizing capacity, ensuring resilience, and maintaining high safety standards.
Market context: Utilities face increased physical risks to their infrastructure due to climate change and extreme weather. LineVision’s Dynamic Line Rating solution uses sensors to provide real-time data on power line health, helping transmission system operators manage capacity and support renewable energy integration.
High-value challenge: “How can we maintain optimal grid capacity and prevent renewable energy curtailment?”
Innovation: Omnidian guarantees the annual energy output of solar generation systems through proactive monitoring, smart diagnostics, and remediation expertise. Their performance guarantee, similar to insurance, reduces risk and cost for solar owners and operators.
Market context: Solar generation investors need to minimize risk and ensure predictable energy output and maintenance costs.
High-value challenge: “How can I remove output- and cost-related risks from my solar generation investments?”
Innovation: Tomorrow.io’s Weather Intelligence™ platform predicts weather impacts and proactively automates operational decisions to enhance company resilience against climate change.
Market context: Weather affects every aspect of utility operations, making agile responsiveness crucial. Tomorrow.io provides advanced weather predictions for a wide range of customers across various industries, including energy.
High-value challenge: “How can we ensure our entire organization is prepared for any incoming weather?”
Innovation: Urbint’s advanced operational safety platform uses AI (artificial intelligence) and detailed environmental mapping to help utilities implement more effective risk-reduction programs.
Market context: Utilities face growing risks as they expand their infrastructure, with climate change, domestic terrorism, and urban density among contributing factors. Urbint’s AI system leverages diverse data sources to quantify and minimize risks, thereby improving safety and reducing costs.
High-value challenge: “How can we best prevent and mitigate potential catastrophes?”
The National Grid Partners' portfolio includes these and dozens of other startups offering comprehensive solutions to significant economic challenges facing utilities. Our focus allows these innovators to quickly gain traction in their target markets and win attention from the press and industry analysts.
Although I’ve distilled my investment philosophy into a single guiding principle, executing it successfully involves considerable complexity, nuance, and challenging work.
Take, for instance, the role of AI in supplying solutions to high-value challenges. While a startup may use advancements in data science as part of its overall value proposition, fulfilling the potential of AI requires the right data. And acquiring the right data from the real world necessitates using the right sensors, so evaluating a startup requires more than assessing their data science capabilities: We also need to consider the feasibility of scaling the required sensors. Factors such as cost, performance, reliability, connectivity, computing requirements, ease of deployment, and applicability across industries all come into play.
As the creation of digital replicas for essential infrastructure advances, it is also crucial to assess whether a startup can consistently address the high-value challenges faced by their utility clients even during sensor downtime. For example, when adverse weather conditions disrupt utility infrastructure, the corresponding sensors may also be affected. This is where companies like LineVision excel by establishing a virtuous cycle in which their software’s predictive abilities continue to deliver value even when sensors are offline.
Integrating modeling and simulation software permits data from extensive sensor networks to inform planning scenarios, disaster simulations, forensic post-mortem analyses, and other applications. These innovative solutions, which may have been unattainable without large-scale sensor arrays and contemporary data analytics and modeling tools, hold immense value.
It is important to mention that while we at National Grid Partners concentrate on the worldwide energy transition, the stakeholders who can propel our portfolio companies to success extend beyond utility executives. Professionals from related industries – including telecommunications, transportation, construction, logistics, and insurance – are all interested in the advanced AI solutions offered by our portfolio companies for business decision support and risk mitigation.
The journey toward decarbonization encompasses more than adopting renewable energy sources. It demands the development of an expanded, intelligent, and robust grid system. The challenge lies not in the possibility of achieving this goal but in the timeframe and the selection of partners who will facilitate its realization.
By maintaining a steadfast commitment to addressing high-value problems and identifying startups with the greatest potential to provide solutions, we at National Grid Partners can make prudent investments that benefit not only National Grid but also its customers.
Patrick Walsh is a Director of Pathfinding & Incubation Investments at National Grid Partners. He focuses on investments in emerging technology that will shape the future of energy for utilities and their customers. Before joining NGP in 2018, he spent 11 years at Intel Capital investing in software and related technology companies. He holds an undergraduate degree in Computer Science from Oregon State University and an MBA/Finance from Boston University.
