Tendril secures majority investor Rubicon

BOULDER — Tendril Networks Inc., a Boulder-based company, has secured a majority investment from private equity firm Rubicon Technology Partners with participation from Morgan Stanley Alternative Investments and Zoma Capital.

Tendril is a software company that analyzes energy-related data on 123 million U.S. homes and works with five of the top 10 U.S. utilities.

Financial terms of the deal were not disclosed, and Tendril CEO Adrian Tuck declined to provide details. But in broad terms, “this is a significant control investment, and it will be providing a good exit for our existing shareholders,” Tuck said. Current investors include VantagePoint Capital Partners, Good Energies, Appian Ventures, Access Venture Partners, Vista Ventures, RRE Ventures, TIAA-CREF, GDF Suez and SunPower.

Tuck said Rubicon specializes in taking ownership stakes in enterprise software-as-a-service companies serving particular industry verticals and providing them the financial support to expand organically or through acquiring other companies.

“Over the last few months, we have, as an executive team, had a whole set of conversations about, do we want to find a home for this business inside another big company, or do we want to continue to run the business,” Tuck said.

“With the right kind of equity partner — one that’s big enough — we could sort of clean up and give our existing investors an exciting exit.” At the same time, “we hope to support what will be an M&A strategy, with lots of opportunities to roll in other businesses in this space,” Tuck said.

Tendril was formed in 2004 in the field of home energy management devices to manage wirelessly connected in-home displays, smart thermostats and other hardware. But as the industry shifted, the company concentrated on the underlying software to support a broader set of home energy management imperatives for utilities.

“We’re having the best year in the company’s history for winning new deals,” Tuck said, with about 10 new contracts expected by year’s end.

Steve Carpenter, partner at Rubicon Technology Partners, described Tendril as the leader in a space that includes lots of would-be competitors, but relatively few with significant utility market share. In terms of the company’s long run as an independent startup, “it demonstrated staying power, which is highly important — but it has also demonstrated the ability to scale with the largest utilities in the country,” Carpenter said.

“Utilities like to play with startups and pilot neat things — but in terms of technology they deploy to solve critical problems, they like to go with proven players,” he said.

Carpenter declined to discuss the terms of the investment, beyond reiterating that Rubicon will be the majority shareholder. “We will be involved at a board level, and to a degree in an operational level. But Adrian and the team run strategy — we’re helping in mapping out the strategy, and how to invest in growth.”

As for the kinds of companies that Tendril and Rubicon may be eyeing as acquisition targets: “Certainly I would say this customer engagement space is still highly fragmented in utilities, and there are potentially some interesting M&A opportunities out there,” Carpenter said.

Tuck noted that Tendril would likely look for companies that “do things we don’t do today in our core residential energy management space,” such as billing management, outage management and online marketplaces, as well as companies that offer opportunities beyond that sector.

“Today, we only do residential. But our customers are constantly talking to us about small and medium[-sized] businesses, and commercial and industrial.”

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