Verv, the smart energy company founded by Peter Davies at University of Bath six years ago, is on the verge of international success. The spinout has developed machine learning technology to produce devices that can monitor domestic energy consumption while also detecting and predicting faults on appliances such as air conditioning units.
But its early progress – featuring pre-seed investment of around £750,000 from utility British Gas, a subsidiary of energy group Centrica, as well as involvement in internet technology producer Google’s Launchpad mentoring programme – was almost derailed by problems around its series A round.
Verv attracted more than £6.5m ($8.9m) from backers including Centrica and the EU-supported sustainability accelerator InnoEnergy in 2019. But the involvement of another major investor in the day-to-day running of the company following the series A round did not turn out as planned, Davies explained.
“I had quite a negative experience because an investor came in and they changed the dynamic of the board,” he noted. “I chose to leave the company after I completed my year’s lock-in – and instead of allowing a simplified handover they waded in and overcomplicated it on the promise they would provide further funding, which never materialised.”
With Verv struggling in his absence, Davies was persuaded to return to the company at the start of 2021 to resume control. “I removed the incumbent shareholder, reduced the size of the board, and I got a new investor in. Then I got the business back up to speed, keeping the tech team and the intellectual property with the help of Centrica and my chairman.
“After I had left, the company seemed to slow down and changed direction so it was my priority to get back into a startup mentality, with a focus on the customer and making sure we had the product they wanted to buy.”
The current surge in energy prices around the world is creating a major business opportunity for Verv, which is based in London and manufactures in Wales. Davies added: “People are going to want to know about the bottom line: they want to know where the wastage is happening and we can point that out for them.”
With a focus on air-conditioning units and heat pumps, Verv’s biggest markets are likely to be in the United States and the Middle East. The firm is selling its devices via manufacturers and in partnership with maintenance companies and installers, although the pandemic has affected its ability to enter new markets.
“Covid-19 has massively slowed down the ability to make easy quick sales, but on the other hand it has allowed us to get our heads down and get the tech working,” Davies elaborated.
Davies began life as an entrepreneur while studying at Bath, setting up an engineering consultancy focused on aerospace and Formula One and then an energy consultancy providing reports for businesses.
“At that time, however, consumers cared more about energy consumption than businesses so we ended up setting up a product company,” he recalled. Verv created a smart home product following investment from British Gas: this enabled household energy consumption to be broken down into individual appliances.
“We sold a lot of units in Britain but subsequently we found that this did not scale very well outside the UK,” Davies conceded. “In the Middle East, the US and various other places, the biggest energy consumer in the home is the air-conditioning unit, and that is what people really cared about.
“So, we did a bit of a pivot and put all our technology into what is called a smart isolator. That does two things: it shows any excess energy usage or wastage by the appliance. It can also do predictive maintenance, for example it can tell you if your air conditioning filter is blocked, or if your capacitor or compressor has gone.
“It uses machine learning to analyse factors like changes in harmonics and consumption patterns, and from that the device can work out what the fault is.”
SETsquared, the incubator partnership between the universities of Bath, Bristol, Cardiff, Exeter, Southampton and Surrey, had played a vital role in Verv’s success, Davies acknowledged. “I had already set my first company up into SETsquared, and they put me on their investor-readiness course with Verv.
“The programme just helped us set things up to make it a super simple investment for anyone who wanted to come on board.”
Startups often fall into the trap of not thinking about their business from an investor’s point of view, Davies declared. “You do not want to overwhelm them with technology. I used to spend way too long in my presentations talking to investors about tech and now it is about half a slide. Ultimately, they just want to know what you can do, are you selling it and what is your business model.”
He continued: “SETsquared have been amazing since the day I left university. Public relations-wise, they are brilliant – they are always including us in the right events. Anything that is happening in London, they always bang on our door. We would never be anywhere near where we are without them.”
Davies’ initial involvement with the organisation was as an undergraduate: “I told one of my lecturers I wanted to start an engineering consultancy business and he put me in touch.
“It massively helps that SETsquared have been separate from the university because that has allowed them to grow. And they have some brilliant people at the top, which is always helpful.”
Davies noted that while some academics took a back seat once a spinout had been formed, he had always been keen to drive the business forward while also taking a hands-on approach to technology development.
“If you look at some of the best entrepreneurs – the likes of Elon Musk or Bill Gates – they are engineers that ended up taking on the business side. I think if you understand everything that is going on – the finances, the technology and the operations – you can run things a bit better.”
The plan now was to have a fresh series A round and then achieve an exit for Verv, Davies said. “It is all about proving traction and proving we can take the step to the next stage.”
