January 2020 Newsletter

Letter from the Editor

HAPPY NEW YEAR! We hope you have had a nice start to 2020. We've been busy with travel, presenting at conferences, and project work. But there's lots of news and insight to share.

On the travel/conference front, Joe Aamidor served as the Chairperson at Australia's Smart Building Summit last November, This event continues to be a great mix of international thought leaders, leading Australian property owners/developers, and innovative vendors. There were a number of insightful presentations on adopting technology and how data will change the real estate industry, among other topics. Later this month, Joe will moderate a panel at the Cleantech Forum. Please say hello if you are attending CTF!!



A few observations and predictions for 2020:

• While there continue to be a lot of leading organizations adopting smart building technologies, we also see a widening gulf between the early adopters and the late majority. We're routinely asked by some real estate professionals questions like: "How do we get started?" and "What are the best technologies for us to get started with?". Those questions can be difficult to unpack, but they do indicate hesitancy on the part of some buyers. We're writing an article to provide some recommendations to real estate owners and operators looking for guidance, and will share this in the next newsletter (in addition to LinkedIn, etc). 
• It's not only a new year, but a new decade. We don't think this alone makes much of a difference, but it's undeniable that smart building technology is approaching ~10+ years in commercial availability. Big trends that we predict to continue in 2020 include an unbundling of the technology stack across multiple vendors (not a single "full stack" provider); continued activity in technology-enabled services; and a focus on outcomes, not just data and analytics. We also think that, like the broader economy, startups and innovators may grow slower and seek to become profitable more quickly. We will share our 2020 predictions more completely in an upcoming article. 

Other items worth noting:

• Are you attending AHR? If so, let us know! We are not yet confirmed to attend -- but would love to meet should we make the trip. 
• Are you looking for talent? Are you searching for a new role? We've found that in some discussions with contacts and clients, we've been asked if we have any leads or ideas for new roles or know of talented individuals looking for a new challenge. In fact, we've been able to informally make some valuable connections on this front. If you are seeking talent or looking for a new role, feel free to reach out! (Note: we are not launching a recruiting agency or service, but are happy to make connections when/if we are able. It's a win-win-win from our point of view.)
• Cleantech Forum. Our session on smart buildings is on Wednesday, January 29th at 11:15 am. There will be plenty of time to ask questions and contribute to the discussion. Please join if you are attending this event.

As always, we look forward to hearing from you about how we might help with your product and market strategy needs. 

In this issue of Smart Building Insight:

• New funding rounds, partnerships, and acquisitions
• A number of interesting articles and reports, including some interviews and point of view pieces from the controls/HVAC OEMs. 

Investment News

• New funding rounds:
  • Augury, which makes a machine health solution which is used by HVAC OEMs, among other industrial firms, raised $8M from Qualcomm Ventures. 
  • Hatch Data, which was spun out from EnerNOC and Enel X, launched and announced an investment from WindSail Capital. 
  • HqO, a tenant amenity platform for offices, raised $34.25M in its Series B, lead by Insight Partners (who was joined by previous investors Navitas and Accomplice). 
  • mCloud, an IoT asset management provider with operations in a variety of commercial building types, announced that it raised C$11.5M. The company notes that it plans to be listed on NASDAQ in the coming months. 
  • Eden, which provides office services via a marketplace, raised  a $25M Series B from Reshape Ventures. 
  • German startup Thing-it, which makes smart building solutions, raised 4.2M Euros in its Series A. 
  • Software Motor Company raised $25M, bringing its total funding to $70M. 
• SparkFund, which provides energy efficiency as a service, raised $25M from Hannon Armstrong for project financing. Gridpoint announced a similar partnership last fall.
• Fifth Wall announced that it is prepping a $200M sustainability-focused fund. The rise in sustainability-focused investments and policies is vital, though we remember in the mid-2000s when money was flowing to carbon management software, among other offerings, only to see many of those firms pivot to more "hard numbers"-focused energy management plays.
• Acquisitions:
  • Osram is being acquired by Austrian sensor company ams, which beat out Bain and Carlyle's joint bid of $3.8B. 
  • We reported in our last newsletter that WeWork planned to sell some of its non-core software businesses. Recently iOffice, backed by Waud Capital, announced that it was buying Teem. 
  • Johnson Controls acquired EasyIO, which is a building automation system that fits within a portfolio that already includes Metasys (sold by JCI branches) and Facility Explorer (sold in the indirect channel). EasyIO helps to advance JCI's capabilities with emerging IT based and open protocol systems. 
  • Albireo Energy, backed by Huron Capital, recently made a few acquisitions. Albireo has made over a dozen acquisitions in the energy and mechanical services industry, and notes that it has a "strategic vision of becoming the number one independent provider of smart building solutions and services throughout the U.S."
    • Bridge Power Consulting, which provides energy procurement services. 
    • Quality Building Controls, which is an independent building automation system provider in Central Florida. 
    • Advanced Automated Systems, which is a BAS and energy service provider in the Los Angeles area. 
  • Insight Mobile Data, which makes software for fleet and mobile workers (like building services providers) was acquired by Accel-KKR. 
  • Acuity Brands announced the acquisition of LocusLabs, which makes indoor navigation solutions (indoor mapping). This acquisition likely will fit into Acuity's Atrius product, which is used by Target, Walgreens and other retailers. 

Noteworthy Articles, Reports and News

• Stacks and Joules announced a grant and partnership with NYSERDA to develop training to help attract more talent to the facility management industry. Given the impact that staff have on building energy efficiency, and the talent shortage, it makes sense that NYSERDA would invest in training. We typically point people to this study from Slipstream, funded by Chicago's Commonwealth Edison, which found that facility staff turnover is very detrimental to energy performance.
• Related, Our friend Lauren Long wrote a great piece in PropModo about how IoT helps HVAC and facilities staff. 
• We enjoyed Michael Beckerman's recent article about a "reckoning of startup valuations".  The article notes that investment capital is vastly outpacing adoption, which may bring valuations back to earth. Related, this article in Commercial Property Executive is a bit more optimistic, but highlights a similar scenario (the impact of a recession on RE tech investments). 
• If you haven't read Larry Fink's letter about BlackRock's increasing focus on climate change as investment risk. Perhaps we've undersold the significant of the letter, which is entitled "A Fundamental Reshaping of Finance." Since residential and commercial buildings consume about 40 percent of all energy in the US, this will impact real estate markets. And Mr. Fink's letter does highlight one specific example: "What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas?" It's probably coincidental, but this is an interesting announcement in light of Fifth Wall's new fund. (see above.)
• Related, Ingersoll-Rand announced in December that its HVAC and refrigeration business would be called Trane Technologies. This business will include Trane and ThermoKing, the majority of the current I-R business, and is taking a very strong climate/sustainability position. 
• Other HVAC/controls OEMs are in the news, with an interview with Honeywell about its IoT platform Forge, and an article from Johnson Controls about smart building technology and the facility management talent gap. 
• Our friends at Eden were covered in a Globe St. article that highlighted the marketplace aspects of their platform. The platform marketplace approach is not unlike what we described in our article last year, "Uber for HVAC".  (And, we recorded a video of a white board chat about this article while traveling to New York in the fall.) 
• There was a lot of indirectly relevant news out of CES, but the smart home awards in particular caught our eye. Logical Buildings, which we have covered in past issues, won for "Integrator of the Year". as did Vantage (part of Legrand) for its human-centric lighting systems (health, wellness, and human-centricity are becoming huge issues in lighting/HVAC, in residential/multifamily and commercial spaces). 
• Harris Williams published its Q1 2020 market update on the energy management industry, covering a wide range of transactions and financial performance, which does include some smart buildings-related news. 
• The Cleantech Group published a great piece on the occupancy analytics space, and highlighted other insights and past research about the smart buildings industry. These themes will be covered at our session on Wednesday, January 29th, at the Cleantech Forum.
• The Urban Land Institute published an insightful article about implementing smart building technology. 
• Verdantix published its Green Quadrant report for IoT platforms for smart buildings, which highlighted about a dozen firms. We agree with Verdantix's key takeaways, such as "This market is clearly at an early stage, with high levels of customer interest, but there are an equal number of questions on how to drive value from these solutions in practice." That said, we think many more firms could have been included in this report - the smart buildings platform market is just that vast. 
• Product launches:
  • ABB announced a new IoT dashboard for small and medium sized commercial buildings. The small and medium commercial building is ripe for innovation and market growth, given the relatively simple HVAC systems and lack of advanced IoT offerings. This follows its recent news of a partnership with Verdigris, which launched its own automation project late last year. 
  • Axiom Exergy, which makes thermal energy storage hardware and software for refrigeration systems, announced significant growth in its "Cloud" software offering. GTM covered this development. 
• New partnerships:
  • Stratis IOT, which makes an IoT platform for multifamily buildings, announced that is has partnered with Hello Alfred (home services) and Zen Ecosystems (thermostat/HVAC management), in addition to hitting 350,000 residential units total install base.  
• CBRE published its 2020 FM Trends report, which highlights a variety of insightful points. We specifically agree with the "relationship foundations" category, and these points:
  • "Suppliers of the future will need to be more collaborative, forward-thinking and tech-savvy than ever before."
  • "Conversations with supply partners are moving from how they can reduce cost to how they can add value."
• Within multifamily specifically, this article in Multi-Housing News caught our eye for providing a good summary of key smart building trends. 
• We haven't been able to access the Grainger report, but this article about it does highlight a few key trends, such as aging buildings in need of retrofits. We suspect that the report also highlights the aging of many facility managers and professionals in the buildings. 
• Not exclusive to smart buildings or commercial buildings, this TechCrunch piece has a nice wrap up of the real estate technology landscape over the past 10 years. 
• First Round's State of Startups 2019 includes a variety of interesting details about the broader startup landscape (not smart buildings specifically).