Startup helps office towers find big energy savings

The J. W. Marriott Hotel (R) and The Residences at the Ritz Carlton, a condominium project, and a Ritz Carlton hotel, all at the L.A. Live entertainment complex are shown under construction in downtown Los Angeles, California November 19, 2009.

SAN FRANCISCO (Private Equity Week) - Scientific Conservation Inc. (SCI), a provider of energy-efficiency and system-optimization software for the commercial building market, announced last week it raised its first round of funding.

The Berkeley, California-based company, which helps big building operators check their systems for malfunctions, raised $5 million from early stage venture firm Draper Fisher Jurvetson.

Building optimization may sound like an esoteric industry to go after, but there are some 1.7 million large buildings with computerized systems that maintain air conditioning, lighting and other building resources, according to SCI chief executive Russ McMeekin, who said many of those systems are not running the buildings as efficiently as they might. This is something SCI can help with, he said.

The startup downloads data from the control system, synchronizes it with building plans and then runs the data through software to determine where the system may be failing. It prepares a report for its customers, including an estimate of how much money they're losing each year from the problems.

Customers that have used SCI software to save money from powering their large business include Boeing, Hardees, Intel, NASA and Neiman Marcus, among others.

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One of the company's early customers was Santa Clara County, located in Silicon Valley. The county government plugged the SCI platform into its control system and used it to monitor power usage at one of its large office buildings for two weeks. SCI determined the county could save $126,000 per year in just the one office building by improving a part of the air-conditioning system that was malfunctioning.

"These (SCI's) complex set of monitoring capabilities enable us to achieve significant energy efficiency which translate into monetary savings," said Lin Ortega, county engineer.

The technology behind SCI's service was initially developed to work on extremely complex government projects, such as testing the o-rings on the space shuttle. Later, the same diagnostic methodology extended into the physics of multi-billion dollar power production facilities, McMeekin said.

"Ten years ago, when I was a president of Honeywell, it was inconceivable that a manager would care about the energy usage of his area," McMeekin said. "It's no longer the producers who care about the efficiency of energy production. It's also the consumers who care about consumption."

Part of the reason managers might not have considered such an energy efficiency analysis previously was the high cost. The process requires heavy computing. SCI uses a neural network based in Atlanta to run its computations, a system that would have been cost-prohibitive years ago. But thanks to cheaper computing power, SCI can make the analysis much more cost-effective for smaller operations, said McMeekin.

McMeekin joined SCI as part of the company's financing agreement. He has a long relationship with Draper Fisher Jurvetson and previously worked with the venture firm to evaluate potential investments. He described the process as "kissing a lot of frogs to find princes in the Cleantech space."

"We wanted to make sure it fit all the criteria of a 10-fold return before I stepped in to run it," McMeekin said of the startup.

Part of McMeekin's plan at the company is to expand SCI's offerings to improve data-center operations. Large data centers are notorious electrical power hogs and require carefully tuned cooling systems to keep them running at their optimum efficiency, he said.

As cutting edge as SCI is, the company faces competition from other venture-backed startups. Philadelphia-based RealWinWin is also working to optimize building operations. It has raised $3.6 million from Ben Franklin Technology Partners, Mid-Atlantic Venture Funds and SJF Ventures.

Costa Mesa, California-based Energy and Power Solutions Corp. (aka EPS Corp.), which filed for an IPO last week, has raised $50 million from Altria Group, NGEN Partners and Robeco Private Equity. The company can help optimize power usage at large buildings, but focuses on manufacturing facilities.