Watch out Microsoft: Sequoia leads $32M round for eMeter

San Mateo, Calif.-based eMeter said today it raised $32 million in a Series C round led by first-time investor Sequoia Capital, and including existing backers Foundation Capital and the company’s CEO.

EMeter CEO Cree Edwards told the Cleantech Group that the money is expected to be the final round of outside funding needed to push the startup into profitability. EMeter plans to use the funds to expand its marketing and sales teams, after six years of perfecting its software to manage smart meters and the smart grid.

The round brings eMeter to $58.5 million raised, which also includes funds from DBL Investors and Siemens (see Two funds expand cleantech plans). The Series C investment represents Sequoia Capital’s first in the smart grid space, eMeter says.

Edwards said Sequoia’s reputation could give a boost beyond the capital raised: The venture capital firm is known for its extensive research into markets and competitors, so an investment provides validation that eMeter has a winning technology, he said.

“Getting Sequoia as a backer is a strong statement to a lot of people that we are a top player,” Edwards said.

That validation is especially important now that high-tech heavy-hitters such as Google, Cisco Systems and Microsoft have jumped into the smart meter market.

Earlier this year, Google launched its PowerMeter program (see Google admits VC rumors). In May, Cisco revealed its new offering of smart grid infrastructure based on Internet Protocol technology, inking a three-year deal involving 11 million meters with Charlotte, N.C.-based Duke Energy in June (see Duke Energy taps Cisco for 3-year smart grid project and Cisco chases billion-dollar smart grid dreams). Also in June, Microsoft unveiled its Hohm online energy management application that allows U.S. utility customers to better understand their electricity and gas usage (see Microsoft enters energy management with Hohm app).

EMeter has about 24 million smart meters under contract with utilities worldwide. Among its biggest deals, eMeter has signed on to provide software to 5.3 million Southern California Edison smart meters (see $1.6B smart meter program starts in California) and 4.5 million meters for Ontario's Independent Electricity System Operator. Houston, Texas-based CenterPoint Energy plans to go live next month with a 2 million-meter project using eMeter software (see CenterPoint rolls out $640M smart meter project in Texas).

The startup hopes to announce a few more deals in the next couple months that are even bigger, Edwards said.

“There are a few very large utilities in the UK and Europe making decisions in the next three to four months, in addition to small utilities in the U.S. moving ahead of the stimulus,” Edwards said. “Our expectation is that the marketplace is going to start moving again.”

EMeter's software can be used to provide detailed interval usage data, remote meter-reading and connecting capabilities, and outage reports. The technology is billed as being able to save utilities money on operating costs, as well as allowing them to react more quickly to problems in the grid. The data can be accessed through a home-area network so that customers can get real-time usage information over the Internet, giving them the opportunity to save money by reducing energy use.

The smart grid sector is finding support with governments in the U.S., Europe and China, which have boosted smart grid plays with stimulus funds or policies requiring utilities to reduce energy use (see Smart grid could be early winner in U.S. stimulus package and China's stimulus package boosts water desal, recycling).

However, adoption of cleantech in the U.S. has stalled as investors and utilities have waited to see how stimulus funds are distributed (see Is the cleantech market rally over for now?).

“The North American market came to a pregnant pause after the stimulus bill was announced,” Edwards said. “A lot of decisions expected in Q1 or Q2 shifted to late this year or early next year.”

The uncertainty prompted eMeter to raise a larger round than it needed so that it wouldn’t have to go back to investors to reach profitability, Edwards said. He predicted that there will be “enormous movement” in the pipeline over the next 12 months in North America and Europe.

“It’s not easy out there anymore,” he said. “We’re fortunate to be in a good space that has attracted a lot of top-tier venture capital firms.”

One thing that has made business easier is the wide market acceptance of smart meter and smart grid technology, Edwards said. Most utilities are now familiar with the technology’s benefits and expect to adopt it within several years, Edwards said.

“The shift began several years ago and has been accelerating lately because of the attention energy issues are getting at national level,” he said. “It has moved from ‘Are we going to do it?’ to ‘How are we going to do it?’ It’s totally changed the conversation.”

Another thing working in eMeter’s favor is that its software supports multiple standards and multiple technologies. That’s key in a sector that is still working to establish its standards, Edwards said (see IBM rides third wave of cleantech).

“It’s a significant selling point,” he said. “It protects the utility from functional obsolescence if the standards begin to emerge in the next few years.”

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