CEO explains Tendril Network’s restructuring

BOULDER — Recent layoffs at Tendril Networks Inc. are the result of a yearlong strategic shift that has made Tendril modestly profitable and will result in the Boulder-based company finishing 2013 in the black, chief executive Adrian Tuck said in an interview.

Tendril develops energy-management software used by utilities to manage smart grids. It laid off 59 employees Dec. 31. It also had a round of layoffs earlier in the year.

The 2012 layoffs are a contrast to Tendril’s rapid growth in 2011, when it was averaging 10 new hires a month. Tendril expected to add 100 jobs in 2012, and its staff peaked at about 200. Now it is fewer than 100.

In the interview, Tuck described the company’s new direction, focus on a new type of customer, and some miscalculations Tendril, like other clean-tech companies, made in predicting the future of its rapidly changing industry.

Tuck said the staff cuts should not be viewed as a sign Tendril is struggling to survive. Tendril is “just profitable” on a day-to-day basis, has a “healthy cushion of growth capital” and has raised about $100 million from investors, including a recent $15 million investment, Tuck said.

Tendril also plans growth in overseas markets, is working on large projects with major utilities like Duke Energy and Reliant and plans to add some staff in 2013, he said. Across all its partnerships, Tendril serves about 4 million consumers, Tuck said.

“We’ve made huge progress, and we have massive opportunities still in front of us,” Tuck said.

“We’re reinvesting every dollar we earn in growth,” he said. “I’m spending every dollar I can, but not more than we’re earning.”

Tendril plans to start hiring new employees this month, and marketing director Ginger Juhl said between 10 and 20 new jobs are likely to be added in 2013.

During the interview and in postings on the Tendril company blog, Tuck acknowledged the company has made some missteps and miscalculations. In early 2012, Tendril management realized it had grown too quickly and had become involved in too many pilot projects that did not show signs of posting the returns Tendril wanted, Tuck said.

“We just took as many projects as we could, as did everybody,” Tuck said.

To keep up, Tendril rapidly added staff and launched a recruitment campaign that played on the popular “Honey Badger” YouTube video. Help wanted ads appeared on local buses and billboards.

The downsizing also affected company leadership. Departures included founder and chief information officer Tim Enwall, who is now the CEO of MobiPlug Networks Inc., a Boulder-based startup developing home-energy monitoring and control technology. Enwall continues to act as an adviser to Tendril.

Tendril now will focus on a smaller customer base that could lead to greater profits. Tuck said there are about 20 utilities committed to building out systems that will require the type of energy management and consumer engagement software Tendril specializes in.

The utilities are in states and countries with deregulated markets that allow greater customer choice, which forces utilities to differentiate their offerings. Tendril products will give utilities the ability to offer more options to consumers, Tuck said.

Revenue will be reinvested into the company as it weans itself off a reliance on venture capital as it develops its software-as-a-service platform, Tuck said.

Tendril’s growing pains are shared by many clean-tech companies that are facing what Tuck called “a fairly stark set of choices” about their future. Tuck said he and Tendril’s board went over options last year.

The least appealing was pursuing a strategy that would result in the company being sold before it could realize its potential. Speaking generally about clean tech startups, Tuck noted the trend of companies being sold “for cents on the dollar” as companies falter or consolidate. It’s a fate Tendril is determined and should be able to avoid, he said.

Attempting to pay for future growth through more venture capital did not look promising, either.

“It’s like a nuclear winter in the clean-tech funding space,” Tuck said. “That capital is just not out there. There’s been a huge slow down in venture capital investment — full stop — and that’s even more true in clean tech.”

That left Tendril with the option of narrowing its focus and financing its operations and potential expansion primarily with revenue, Tuck said.

It also means Tendril has to be more selective about what projects it takes on, he said. Tuck said the company needs to avoid putting resources in what he called “science experiments” that might not be scalable or realize the profits the company needs.

“We can’t afford to be the guy who waits around for that project to go somewhere or not.”

One factor in determining what projects to go after will be the commitment of potential partners. Tuck said the desire to beat other companies to the punch in a developing industry resulted in a “land grab” mentality. Both startups and established tech companies such as Google and Microsoft tried to become players in the home energy management market before leaving.

The availability of federal grants for pilot projects also distorted the industry, with some companies launching projects more for the sake of the grant than a commitment to innovation, he said.

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