Peter Davies has a big ambition.
He wants to transform the energy industry, and how we use it, one house at a time.
Seems like a big task, right?
But his proposition is straightforward. And pretty cool, as you’ll see in a moment.
Burning your hard-earned cash
Think about the energy you use in your home.
All the gas or oil you burn to keep the place warm in these cold winter months.
And all the appliances around you, for cooking your meals, playing your music, reading this email.
Think about how much that all costs.
I don’t know about you, but I find it depressing how much my energy bills are.
It’s not surprising my Dad used to tell us to go and put another jumper on if we were cold as kids, rather than flick the heating on.
I’ve even found myself saying the same thing to my children (unless it’s really cold… say, in late December, early January!)
And don’t get me started on leaving lights on. Or games consoles left on pause all afternoon. It’s like burning money.
(Having said that, I was late leaving for the school run today. And in the rush to get out of the house, I left my music playing. Black mark for me!)
OK, so most of the annual energy bill goes on heating things up (water, radiators, food) and keeping food cold/frozen.
But plenty goes on all our other gadgets and gizmos.
Beware the vampires draining your energy
In fact, there’s a whole bunch of ‘vampire appliances’ that suck up electricity, even when you’re not using them.
Things like your TV, set-top box, microwave and computer.
When you leave them plugged in or on standby, they’re racking up your bills.
And it’s not just that this wastefulness is hitting your bank account.
There’s the cost to the environment too. Every time we leave a light on, or use the tumble dryer to warm a towel, we burn fossil fuels. It all adds to the threat of climate change.
OK, I know what you’re thinking…
Monkey Darts is about money and markets… why am I banging on about electricity and the environment?
Bear with me. We’ll get to the money point in a minute.
Let me just get back to Peter Davies and where he fits into all this…
Taking back control of your energy
Davies is the founder of a machine learning company called Green Running Ltd. which (like me) is obsessed with reducing energy bills.
The technology it’s developed allows it to sample data from an electricity meter at hundreds of thousands of times per second.
To be honest, I had no idea whether that’s impressive or not. Everything’s supposed to be lightening quick these days. So that sounded unextraordinary to me.
But then I discovered that so called smart meters (which automatically and wirelessly report energy consumption to the supplier) vary between once every 6 seconds to once per minute.
In other words, Green Running’s kit was pretty damn impressive after all.
Why’s this a good thing, you might ask. Here’s how Green Running puts it:
“Due to this high frequency sampling, we are able to magnify the data and identify the energy signature of individual electrical appliances. This enables us to detect the instant at which an appliance has turned on or off, display how much it costs to power it and identify trends in behaviour that help us advise the user on how they can make changes to become more efficient.”
So by running their equipment on an electricity meter, it could help the user figure out what its energy was being used on. And the consumer could then learn how to reduce his bill… and his carbon footprint.
Green Running started off doing this for hotels and restaurants. But pretty soon, Davies figured out that the concept would work well in the domestic market, too.
Here’s how he explains it:
“The most frustrating thing about electricity bills is not being able to see a breakdown of what is actually costing you money, and by the time you receive your bill, it’s too late to do anything about it.”
Fast forward a couple of years and Green Running has created a new brand called Verv that’s aimed at the home energy consumer.
Making your home appliances smarter
It’s developed a simple bit of kit (the Verv hub) that can be attached to the electricity meter in your home.
This monitors and measures energy consumption and tells users how much each appliance is using at any time.
But it’s more than that. Using Artificial Intelligence, the Verv hub can tell the consumer if an appliance (like a washing machine) is wearing out or needs servicing.
It can send a message to the user’s phone to alert them that they’ve left the iron on.
Or if you’re on holiday, it can notify you of any unexpected energy consumption (lights going on, for example).
In a way, it’s making your home appliances smarter.
And Verv even measures your energy usage in Co2, so you can understand and reduce your carbon footprint.
So it’s pretty clever technology Peter Davies and his team have created here.
In fact, Verv’s also developed another tool which uses Artificial Intelligence to allow customers with solar panels and battery storage to sell surplus power to their neighbours.
It’s a fascinating little company. And as I’ll show you in a moment, it’s been causing a bit of a buzz.
Before I do that, I’d like to tell you about another couple of guys. They both have something in common with Peter Davies.
This guy is revolutionising London coffee
The first is David Abrahamovitch.
Unlike Davies, his bugbear isn’t the cost of energy. It’s the quality of London’s coffee.
Abrahamovitch and his business partner, Kaz James, couldn’t find a decent espresso. So they decided to make their own… and sell it.
Now they run Grind, a chain of café-bars across London which serve their own coffee, food and signature cocktails to loud music.
And clearly, they’re doing something right.
Having started with one coffee shop in Shoreditch in 2011, they now have five café-bars, four restaurants, a recording studio, their own coffee roastery and serve more than a million coffees a year.
And yesterday, Grind announced it plans to launch more of its café-bars in airports and train stations in the UK and across Europe.
Like Davies, Abrahamovitch is a smart guy who’s hit on a clever idea.
And they’ve both had the grit and determination to grow the business and generate huge interest from both consumers and investors.
Paul Currie ranks alongside them.
But it’s not energy efficiency nor coffee that drives his ambition.
The man with whisky in his veins
Paul is all about whisky. As it says on his company website, he “has whisky in his veins”.
Lakes Distillery was founded by Paul Currie, from a family of distillers, and serial retail entrepreneur, Nigel Mills.
From what I’ve seen, Currie got planning permission to develop a derelict Victorian model farm near Bassenthwaite lake in the Lake District.
His plan was to simply turn it into a whisky distillery, and replicate the success of Isle of Arran Distillers that he’d started in 1995 with his father.
When Mills read about the plans in an architects’ newsletter, he liked the sound of it and got in touch. That was in 2012.
And after working together, the team expanded Currie’s original business plan to incorporate the distillery, a tourism aspect, food and beverage and an internet membership club.
Things seem to be going well.
Lakes Distillery has produced 600,000 bottles of single malt whisky, with an estimated retail value of £30m.
It’s also producing gin, vodka and blended whisky.
And it pulls in some 100,000 visitors a year to its tourist site, selling them food and goods in its luxury gift shop, as well as a tasting tour for £25 a go. For £295, you can even be a distiller for a day and be part of the production team.
And it’s been voted one of the top 5 best new distilleries in the world by Time Out USA.
Backing great entrepreneurs from the start
It’s a great story and one that has captured the imagination of a lot of investors. Just like the other two companies I mentioned earlier, Verv and Grind have too.
These companies all have ambitious, smart entrepreneurs behind them.
But they all have something else in common too.
They have been funded or part-funded at least by something called equity crowd funding.
In last week’s Monkey Darts, we looked at new issue shares or Initial Public Offerings (IPOs).
It’s a form of early stage investment where you buy a company’s shares when they first come to the market.
As we saw last week, this is a risky business. But if you get it right, you can make huge returns on your investment.
Well equity crowdfunding is a bit like that. Only it’s even earlier-stage investing. Start-up companies that need some help to get off the ground.
If you’re not familiar with crowdfunding, it’s a pretty simple concept.
A company needs investment cash to grow its business.
But rather than going the costly route of bank finance (which they might not even be accepted for) or venture capital, it invites small investors to put up the money in return for a stake in the business.
And there’s an internet-based ‘middleman’ that makes the process simple for both the company and the investors.
These are crowdfunding platforms such as www.crowdcube.com,www.seedrs.com, www.syndicateroom.com and www.crowdfunder.co.uk.
The power of ‘The Crowd’
There are quite a few benefits to the start-up business of raising cash this way.
For example, low costs. Also, it spreads the risk among a lot of investors who are putting in small amounts. It creates a network of willing investors for when further funding is required. The crowdfunding site creates a lot of publicity and marketing.
And on the other side, there are some attractions for the investor, too.
I mean, wouldn’t you like to be able to stick a little spare cash into a start-up company with an exciting story behind it?
It’s not for everyone. But crowdfunding lets you get into things like this for a very small investment. Even as little as £10 (although I’m not sure what the point of that would be, other than dipping your toe in…)
But the point is that until recently, if you wanted to get involved with a start-up, you had to have deep pockets. We’re talking a minimum of £10,000 to get involved as an Angel Investor.
And as well as having a decent chunk of money, you’d need to self-certify that you are either a high net worth or sophisticated investor in the eyes of the regulator (the Financial Conduct Authority).
With equity crowdfunding, you don’t need to do that. Anyone can invest in a crowdfunding round.
I don’t know whether any of the companies I mentioned earlier are going to make it big. But they’ve certainly attracted a lot of interest from The Crowd.
All three of these little start-ups have met their original funding targets.
Verv was overfunded by 246%, raising £1.23m via Crowdcube.
And Grind and The Lakes Distillery have raised 135% and 144% of their targets so far.
Now they just need to use that money wisely to grow profitable businesses. The journey is beginning.
Maybe they will succeed and make their investors some money. Maybe they’ll go bust. It will probably take a good few years to find out which.
These are long-term, high-risk, high potential reward plays.
And I’m not recommending you stick your cash into them. That’s not the reason for talking about this.
But here at Monkey Darts, we’re fascinated by the crowdfunding space.
It’s another sign of the power of the financial establishment being chipped away…
For so long, even basic investing and trading was only available to the rich or the City professionals.
But slowly, slowly, the little guy is finding it easier to get in to exciting and potentially very profitable opportunities.
Think about online share dealing and spread betting the forex markets. It’s only in the last 25 years or so with the invention of the world wide web that private investors have been able to make their own trades.
Before that, you had to call a broker and pay them a hefty fee to do the deal. The internet removes that need and slashes dealing costs.
At Monkey Darts, we talk a lot about bitcoin and cryptocurrencies (you can check out a useful free beginners guide from our publishers here: Beginners Guide to Bitcoin.
It’s the biggest investment story for years. And at its core is the idea of moving away from a centralised financial system to one that is controlled by the users for the users.
Crowdfunding is a similar idea. It’s about the shift in funding for start-up companies from centralised City-based banks to The Crowd.
It’s an exciting area full of opportunities and risks for the right kind of investor. And I’ve only really scratched the surface so far.
We’ll come back to this and dig a little deeper. There’s plenty more to cover on crowdfunding.
In the meantime, do let me know what you think. Is equity crowdfunding something you’re interested in?
Are you already investing this way?
I’d love to hear about your experiences.
So if you have a moment, email me and let me know.