One of Canada's emerging technology stars, ecobee Inc., has raised $80-million in a venture financing to continue growing its smart thermostat business – and expects to raise roughly $50-million more within the next two months to fund its goal of reaching $1-billion in sales by 2020.
The initial part of the financing for the Toronto company, which sells millions of home thermostats annually that can be controlled by smartphones and smartwatches as well as voice-activated services such as Amazon's Alexa, is being led by Energy Impact Ventures, a New York fund backed by some of the world's largest electrical utilities. Past investors Thomvest, Relay Ventures and the Amazon Alexa Fund were among eight other institutions in the deal.
"We see this as a really fast-growing market that's really taking off," said Lindsay Luger, a partner with the venture fund. "Our investors are looking to invest in things that could impact their utilities businesses." She said several Energy Impact backers already distribute ecobee products to their customers.
The company has grown in the nascent and fast-growing connected-thermostat business – with about a 30-per-cent market share in North America, although Google's Nest remains the category leader. The 11-year-old company – the first to introduce WiFi-enabled thermostats to the market – has seen sales double every year, and this month it will start selling light switches that can be activated through the Alexa platform.
Through a series of sensors around the home, ecobee products allow users to control temperature from room to room, which helps save consumers energy costs. Home builders including Toronto-based Mattamy and U.S.-based Clayton Homes are installing its thermostats by the thousands in new homes, while utilities such as Enbridge Inc. offer rebates to customers to install its products. The thermostats are sold in big-box electronics stores as well as through heating- and cooling-system contractors.
But a big factor for its success was also a decision the company made four years ago to make its products compatible with the emerging voice-activated platforms from Amazon, Google, Apple and others, CEO and co-founder Stuart Lombard said. Last year the company began offering the latest version of its product with Alexa voice control built in.
"We believed consumers are already invested in an ecosystem" offered by the consumer-software-platform giants, said Mr. Lombard. So the company has focused on becoming the top smart-thermostat provider for each of those ecosystems. "That has been a very important strategic move for us," he said. "We see people are using voice more and more often to do things in their home and effectively [displace] mobile in those transactions."
Mr. Lombard, who previously worked as a venture capitalist for the forerunner of Relay, said he always believed smart thermostats represented a big market opportunity, but with the advent of voice-activated home systems "I think more opportunity has come along as we continued down the path. Entrepreneurs often worry there won't be enough opportunity. The reverse is true" for ecobee.
He said the 330-person company, whose revenues now exceed US$100-million a year, plans to hire another 150 people this year. Asked about its interest in going public, Mr. Lombard said the company, which has raised $190-million to date from private investors, had "no timetable" to do so but said "if you want to build a globally meaningful company then I think an IPO is likely. A lot depends on how we execute and market timing. We don't want to be held to an artificial deadline."