Ace AI Data centers drive up electricity pricesLondon-based startup Tem thought that AI could also help solve this.

Tem has built an energy transaction engine that relies on AI to cut prices relative to other energy traders. The company has signed up more than 2,600 business customers across the UK to the promise that buying energy from its utility division will save them up to 30% on their energy bills.

The startup recently closed an oversubscribed $75 million Series B led by Lightspeed Venture Partners with participation from AlbionVC, Allianz, Atomico, Hitachi Ventures, Revent, Schroders Capital, and Voyager Ventures, TechCrunch has learned exclusively.

The round valued Tem at more than $300 million, a source familiar with the deal told TechCrunch. The startup plans to use the funding to help expand in Australia and the US, starting with Texas.

“We’re in a nice position where we have control over our own profits. So I can choose not to raise and have a nice, nice bootstrap business in some ways,” Joe McDonald, co-founder and CEO of Tem, told TechCrunch. “Well, we’re not that kind of business. We know what we want to achieve as a person who wants to go public for years.”

Tem is a classic market game, matching power generators with consumers. The company intentionally started by focusing almost exclusively on renewable energy generators and small businesses to fill both sides of the ledger. “The more decentralized and the more distributed, the better it is for algorithms,” McDonald said. “But it works as far as business.”

The company’s customers include fast fashion retailer Boohoo Group, soft drinks company Fever-Tree, and Newcastle United FC.

Currently, Tem runs what amounts to two different businesses. One, called Rosso, is a transaction engine that matches suppliers with buyers. Here, machine learning algorithms and LLMs help predict supply and demand.

Rosso’s goal, McDonald said, is to cut costs by eliminating the many layers that exist in current energy markets. “In each of them, you have different teams doing different jobs, getting different levels of profit from the back office to trading, trading desks to other trading desks, and maybe five to six intermediaries in total who can make the flow of money transfer from one side to another,” he said.

With AI, he said, “you now have an opportunity to replace people, labor costs, and disparate systems into a transaction infrastructure.” The goal is to make the price customers pay for electricity closer to wholesale cost.

The other part of Tem, called RED, is a “neo-utility” built to prove the value of Rosso.

“When we first started, we tried to sell our infrastructure to energy companies, and we got nowhere,” he said. RED is currently the only device using Rosso, and McDonald said its growth pushed the company to prioritize it over opening up Rosso to others.

At some point, however, Tem plans to allow other utilities.

“In fact, it does not matter how good (RED); it does not exceed 40% market share. And it is not necessary, because that has become a monopoly in itself. Therefore, I, I prefer to get access to all the flow of the transaction,” said McDonald.

“In the long term, we really don’t care who owns the customer, who owns the generation as long as our infrastructure is being used,” he said. “It’s just an infrastructure play in the same way that AWS, or Stripe used to be.”