59 min read

🎧 #123: October 2022 M&A Roundup with J³

“There's definitely still venture capital money out there looking for great companies, especially in the smart building space. As long as you have a clear thesis and value proposition and your tech addresses a need of a building owner/operator, you're going to pass this deeper diligence with flying colors."


—Jeanne Casey

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Episode 123 is a conversation with Joe Aamidor of Aamidor Consulting and Jeanne Casey of Nuveen. If you add me in, you get three J’s or J³

Summary

This is the third installment of our M&A Roundup series, recorded in mid-October 2022. This time, we heard from Jeanne again about general trends in the market and in M&A, then unpacked a few of the most interesting recent acquisitions in the smart buildings industry and dove into why, our reaction to them, and other trends they’re related to.

Before we jump into the conversation, I wanted to make sure you all know about our new Thought Leader program. Once a month, I’ll be co-writing a piece with one of our sponsors. We’ll dive deep and make it non-salesy and educational and tell stories that are outside my core expertise. You can learn more here.

Without further ado, please enjoy this Nexus M&A Roundup.


A message from our partner, Butlr:

Occupancy data drives a variety of use cases across workplace experience, real estate planning and smart FM and is too valuable to be siloed in a walled garden. Every building and workplace would benefit from accurate, private, cost effective occupancy data accessible via API.

Listen to The Nexus Podcast with Rags Gupta, President of Butlr, on their approach to providing accurate API-first occupancy data at a fraction of the cost while not being physically able to collect personally identifiable information.


  1. Aamidor Consulting
  2. Nuveen
  3. Nuveen's top technology priorities
  4. Mid-2022 M&A Roundup with J³
  5. PassiveLogic (20:08)
  6. McKinsey interview of Bill Gurley (23:21)
  7. Smart Buildings M&A Tracker (37:38)
  8. ADT x IOTAS (37:58)
  9. HqO x Leesman Index (38:17)
  10. Schneider Electric x EV Connect (38:30)
  11. Johnson Controls x Tempered Networks (38:37)
  12. Siemens x Brightly (38:43)
  13. CLEAResult x EcoFitt (38:58)
  14. Deepki x Fabriq (39:03)
  15. KFI x Staggs & Fisher (39:16)
  16. ECP x Metrus Energy (39:32)
  17. Partners Group x Budderfly (39:40)
  18. ENGIE x EQUANS (39:47)
  19. HqO x Jet Product (JLL) (40:25)
  20. CPower x Centrica's U.S. DR (40:34)
  21. Evermore Industries x AVUITY (40:38)
  22. Carrier x Toshiba's HVAC (40:55)
  23. Envoy x OfficeTogether (41:30)
  24. OMERS x Pueblo (41:44)
  25. Sparkfund x EPX Group (41:55)
  26. EnergyCAP x Wattics (41:59)
  27. Measurabl x WegoWise (42:05)
  28. Robin x Flow and Form (42:10)
  29. GENERAC x Blue Pillar (42:25)
  30. Educated by Tara Westover (1:12:30)
  31. Rise of the Rest by Steve Case (1:13:14)
  32. The Power Law by Sebastian Mallaby (1:14:24)

You can find Joe and Jeanne on LinkedIn.

Enjoy!

Highlights

  • The economic environment that startups are in today (4:46)
  • To what extent are smart buildings insulated from market trends (15:42)
  • Why downturn is a good time to build (24:10)
  • M&A trends in smart buildings (37:38)
  • Measurabl x Hatch Data (43:28)
  • Deepki x Fabriq (51:25)
  • EnergyCAP x Wattics (1:01:28)
  • White space for startups from a technology standpoint (1:05:48)
  • Carveouts (1:12:08)

A message from our partner, Tietoa:

After participating in the Nexus Foundations course, Sam Kovar is hooked on smart buildings. As an outsider, he sees a future where this industry can move forward faster with better communications. He wants to be an independent creative resource (15+ years of experience in strategic communications, creative consulting, and technical execution for video, animation, and photography) for helping the Nexus community connect to their customers and grow their audiences.

Connect with Sam by filling out this contact form.


👋 That's all for this week. See you next Thursday!

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Music credit: Dream Big by Audiobinger—licensed under an Attribution-NonCommercial-ShareAlike License.

Full transcript

Note: transcript was created using an imperfect machine learning tool and lightly edited by a human (so you can get the gist). Please forgive errors!

[00:00:33] James Dice: Well, you've talked about the importance of occupancy data over and over on the show. And the team at Butler would like to reinforce it. Occupancy data drives a variety of use cases across workplace experience, real estate planning and facilities management, and is too valuable to be siloed in a walled garden. Every building and workspace would benefit from accurate private cost-effective occupancy data accessible via API.

So go to www.nexus [00:01:00] labs online slash 0 9 1. Or click the link in the show notes to listen to nexus podcast, episode 91, with my conversation with rags. president of Butler on their approach to provide accurate. API first occupancy data at a fraction of the cost while not being physically able to collect personally identifiable information.

[00:01:21] James Dice: This episode is a conversation with Joe Amador of Amador consulting and Jean Casey of Nevine. And if you add me in you get three JS or J cubed. This is the third installment of our M and a Roundup series with JQ recorded in mid October, 2022. This time we heard from Jean again about general trends in the market and in mergers and acquisitions.

Then unpacked a few of our most recent interesting acquisitions in the industry and dove into why they happened, our reaction to them and other trends they're related Before we jump into the conversation. I want to make sure you know, about our new thought leader program. Once a month from now on, I'll be, [00:02:00] co-writing a piece with one of our sponsors. We'll dive deep and make it non salesy and educational and tell stories that are outside my core expertise I'd love to partner with you on one of the pieces coming up. Check the link in the show notes to learn more. And without further ado, please enjoy this nexus M and a Roundup.

[00:02:17] James Dice: Hello, Joe and Jean, welcome back. This is our third M and a podcast. How are you guys? Hi Jean.

[00:02:26] Jeanne Casey: Hello. Very well. Excited to to be here for the third time for the three of us.

[00:02:32] James Dice: Jay Cubed. All right. Um, let's, for people that don't know this series, that haven't listened to the previous episodes, let's do a couple quick self intros starting with Eugene.

[00:02:45] Jeanne Casey: Sure. My name is Gene Casey and I am the head of PropTech and innovation for Nove Real Estate. We are a very large investment manager, um, one of the top five in the world. And my role is two part. So the first I [00:03:00] come from background in venture capital. I've been investing in startup. For over a decade in PropTech startups for going on five years now.

Um, so that's part of my mandate. We're investing in early and mid-stage PropTech companies. The other part is, um, I'm head of innovation, so I play a role with each of our sector teams, helping them to prioritize prop, different PropTech initiatives and tech initiatives, and work very cross-functionally with our IT teams, our sustainability teams.

Um, lots of folks internally, um, helping make better connections between the PropTech world and moving real estate.

[00:03:36] James Dice: And you and I did a podcast with just the two of us and we'll put that, uh, link in the show notes for people. It's a great episode. Joe, how about your intro?

[00:03:46] Joe Aamidor: Yeah, Joe Amador. Um, I work in the smart building space.

I background is very much in product and market strategy, product management. Um, I work for myself focused on product and market strategy for. Startups that are [00:04:00] looking for help within that. Uh, they might not have a fulltime product product leader. So I can help on specific things there. Do a lot of work with investors, usually commercial due diligence on a specific deal.

Sometimes it's a strategic buyer of a technology, uh, product. And then I also do a fair bit of work with owners and operators, usually somewhere in the vendor selection process, I guess if you think of it from identifying, uh, companies down to selecting a specific company or a couple to pilot. Um, and, uh, yeah, very much very go.

I go very deep on smart buildings, um, within, uh, my work.

[00:04:37] James Dice: Cool. And this series of which, this is the third episode, we unpack what's going on in the broader. Uh, PropTech and smart buildings, industries from an economic and VC perspective. But we're also gonna do a little deep dive on some of the interesting m and a deals from the last quarter.

So our intention is to keep up this quarterly cadence. So [00:05:00] let's, let's dive in. Let's start with a macro discussion. So gene, you, your little, uh, monologue last time, received a ton of, I got a bunch of emails from it, like the, the mic drop, the, the golden mic drop that jean dropped last time was, was heavily, heavily well reviewed.

Um, so no pressure. No pressure. I don't mean to build that up for you to do it again this time, but I thought we could just start with sort of a general, what's the economic environment in which startups are sort of playing today? And again, this will, Sorry, this will go live. Um, middle of October, 2022.

For those of you that are either listening in the future or, um, uh, for, for Eugene, just to know that that's when you're gonna be talking to people.

[00:05:49] Jeanne Casey: Thank you for that qualifier. So if this is all wrong in like three days, then that's, that's why. Um, alright, so a little bit of pressure here. Um, [00:06:00] versus lost time.

Um, I actually don't think there is as much really heady news to report. I think it's actually a lot of the same. And if I had to sum up like one word to describe the state of the world right now and, um, all the indicators that are relevant to our business, ultimately, uh, that word would be uncertain. And that's sometimes a lot harder to navigate if you're a founder.

If you're a venture investor, then you know, decisively bear market where we're staring down, you know, six to 12 months of a recession, most likely. Uh, I think the mixed signals we're getting from the economy, the stock market. Um, are, you know, reasons for, to expect good news in the future, but be cautious as well.

So a couple of just quick hits from a very like macro econ nerd kind of perspective. Um, interest rates were up quite a bit since we last [00:07:00] convene. Uh, that was not unexpected at all. But as a reminder to those who don't follow econ and didn't major in it in college like I did, VC valuations and startup valuations do not like high interest rates.

So this is reason to expect we have entered a new paradigm for startup valuations that's likely not going to change meaningfully and revert back to that frothy environment anytime soon. Um, the August jobs report that just came out was down quite a bit. We lost about a million jobs versus a couple hundred thousand in previous months and over the summer.

And so that is some indication that the Fed increasing interest rates may be starting to have an impact. So that might mean there will be fewer rate hikes in the future, which is a good thing for startup valuations, or at least like expectations into the future. Um, and so everyone's hyper focused on what's gonna happen or what these are going to have impacts on [00:08:00] inflation.

That's what the Fed and, you know, everyone is trying to, uh, as best they can control. Um, the stock market has been reacting to all of this news bouncing around a little bit, uh, in recent months. I think we. You know, with some medium confidence, they may be finding a floor, which is good and, you know, bleeds over into VC and, you know, prop tech startup, uh, sentiment because, you know, private markets follow the stock market.

The, the quick hits here are fairly similar to last discussion we all had, but I would say, um, the stark difference. In sentiment that we described last time. So everything is slowing down. We're down, you know, valuations are down anywhere from 20 to 40 to, you know, 80 plus percent. Sometimes when you're looking at prop text backs, that all still holds, but it's a [00:09:00] little less jarring because we're, you know, comparing to, you know, the last few months that were already off those lows.

So, PACE of funding remains slower. Sizes of rounds remain smaller. Valuations remain at that lower paradigm. That's, I think, unlikely to shift or change anytime soon. Um, sentiment has soured, I think, you know, for prop tech and smart buildings generally, but that's not, you know, I think that's, that's comparing with all time highs and not so dissimilar from the overall startup and tech environment.

And so I think that's, that's really important to keep in mind. And on many measures we're back to where we were in like 20 18, 20 19 when we're talking about rate of m and a announcements, VC funding. Um, and that was a fairly healthy, you know, environment we're talking about. So I think this is all a expected reset.

And the scariest thing for [00:10:00] founders is this, you know, prolonged likely, prolonged period of uncertainty where we're not really sure, you know, what's gonna happen headed into 2023. Um, it's not all doom and gloom, but there are what I would call a lot of low probability, but like potentially really high impact events that could happen, whether they're geopolitical, whether they're climate related, whether they're, you know, macroeconomic related.

And I think all of that is kind of hanging. Over our heads, um, as investors, as you know, founders, as folks in our industry, and is all important to, to keep in mind. So let me pause. You know, not as quite as Mike Droppy as last time , um, but hopefully gives a little color and, you know, curious what resonates with you guys, in your day to day?

And James, I know you just launched a syndicate, so I hope you're now tracking a lot of this stuff. Like I love to ,

[00:10:57] James Dice: I'm gonna start, you know, going to you [00:11:00] for, for these sorts of things. It's definitely not my expertise. I think one of the, I have two questions for you. One of them is if I'm a vc, which I sort of now am, which is the weirdest thing ever to talk about, and we'll talk about the syndicate in just a minute.

Um, if I'm a VC though, I'm looking. Um, at, you know, my broader portfolio and trying to hit, you know, the power law, which is I'm trying to hit big, huge winners. Do I really care? How much do I care as a vc? What is happening to, you know, valuations here and there? And then can you answer that same question from the founder's perspective?

Are, are they feeling it for some reason? And how do they feel it when, when valuations get a reset like this?

[00:11:45] Jeanne Casey: Yeah, no, that's, that's a really great question. Um, and not a straightforward answer. And also welcome to the VC club. , the fun one. Um, so I would say yes and no. The macro [00:12:00] environment matters long term.

It doesn't, short term, it does a. Um, I think from a funder perspective, for a VC perspective, we wanna see our portfolio companies in potential, you know, future portfolio companies really focus in this kind of market and not, you know, cut burn rates to an appropriate amount, raised an appropriate amount of money at appropriate valuations.

So when you hit a turbulent time and you're not able to grow at the PACE, you know, you were previously or raised at a round that indicated you had to kind of really outgrow the valuation hanging over your head. Um, we like to see folks buckle down, no extraneous spending, really focus on their core value proposition, because then I'll get to this in a little bit, but from, you know, putting on my new ven real estate hat, like my owner hat, um, and potential customer for a lot of these companies.

We're also feeling the [00:13:00] macro environment. And so you gotta know your customer and understand that they're also cutting costs, slimming the, the list of priorities and the new things that they're willing to experiment with in a really choppy macro environment. So I think it is really important to operate, but that doesn't necessarily mean completely change your vision.

Um, I think it means being a smarter, still having that crazy great vision to, you know, be one of those power law fund returning companies, um, while being a savvy, you know, operator. To weather the storm to get there because if you can't like build a boat that's gonna weather that storm and come out the other side sailing, I'm not a nautical person.

I don't know if that analogy quite landed , but if you can't build that boat and you just like take something, you know, small out on really choppy waters, that's not gonna end well. And so we're always looking for, or at least myself [00:14:00] as a, a vc, I'm always looking for that great combination of visionary, but also pragmatic person able to execute.

[00:14:11] Joe Aamidor: Makes a lot of sense. Yeah. And you know, it's, it's funny, I was, as you were talking, Jean actually, you and James, I mean, just a couple weeks ago was Blueprint, the conference, the second, second year of the conference and last year, any anyone who attended. There were a lot of startups there. There were a lot of, uh, investors there and everyone, it was very enthusiastic.

It was at the end of the year in 2021, and that was kind of a representative sample of the current state of the market. You know, I talked to people who said, Oh, we found our next lead investor. We're not raising for another year. And this year, I thought going into it, I thought, Well, I mean, one, I just knew who was attending, so I knew it would be a good event.

But I was also curious, what's the enthusiasm level we'll see around raising money and both on both sides, right? I have money I want to spend on startups or put into startups. I am a startup. I want to raise money. And I [00:15:00] actually think it was still pretty enthusiastic. I don't think it was as enthusiastic and I took away from that kind of the sign one.

I think everything you said about uncertainty is correct, but there's these two sides of. The market. And then there's well within buildings, not very data driven, not generally speaking, not very tech enabled yet. Lot of room to grow there. Then you add on the fact that, well, from a, uh, climate sustainability point of view, that's really where there's a big bang for your buck if you're trying to reduce emissions.

So you gonna have these two things. I don't know that they're colliding necessarily, but we're still at this point where there's a lot of reason to be putting money to work in this market. Well

[00:15:39] James Dice: that, that brings up my, that perfectly brings up my second point that I was gonna ask Gene in this sort of overall economic, you know, section of this conversation, which is building still need to decarbonize, right?

There's a ton of ways in which technology can help real estate organizations during a downturn, [00:16:00] right? Um, so to what extent are we sort of, are smart buildings sort of insulated from these broader sort of negative economic trends? Gene. I

[00:16:12] Jeanne Casey: think somewhat, but not entirely. Um, I think you can make that argument that, you know, insulated argument for any really great venture backed or backable company building relevant technology that has found product market fit or at least like market fit.

Um, and so there definitely is still venture capital money out there for those great companies building great products. And back to my, you know, my owner hat and Nuveen real estate hat, you know, there's still customers out there willing to pay for really great, smart building technology, especially technology that's going to help decarbonize.

Cut costs have a really clear value proposition. It's less about like, [00:17:00] oh, shiny new object. Lots of marketing words. Like this is an AI driven platform using, you know, all the, the latest and greatest words really about, you know, communicating a value proposition. What is this technology going to do for your building or portfolio of buildings and why should you buy it?

What is the roi? I mean, it doesn't have to be, you know, the cost of this, the cost savings you're going to get from this technology, minus the cost of the technology is your roi. It's really just crisply articulating what the business case is. Um, and so, you know, just quickly to feed that back into what I hear and feel as like the venture capital perspective and sentiment in the market right now.

There's definitely still VC money out there looking for those great companies. And so I think there's still, and especially in the spark building space, I think there's still, you know, I bet my career on this space PropTech more [00:18:00] broadly, um, you know, bunch of years ago and still have that conviction. It kind of, you know, has only grown over months and years that I've spent in the space because there's just so much lowering fruits still, Right, You know, up there ready to be addressed.

Um, but there is a slower PACE of deploying capital. There's deeper due diligence of all these companies. So I think as long as you're, you're building, you know, as long as you check the boxes, I just kinda laid out clear, clear thesis and value proposition. You're building tech to address something that's real, that's a need of real estate in a building owner or a building operator.

Um, you're gonna pass this deeper diligence with. You know, maybe it's not as quick flying colors as it was six to 12 months ago. Um, I think all of this is good for the market that maybe got a bit overheated. Um, and then anecdotally, if this is [00:19:00] interesting, I think we've reverted a little bit to more thesis driven investing.

So I'm with the slower PACE, I'm talking to more investors that are kind of digging up their old thesis that they've worked on and, and more proactively reach out to companies in a certain space they're really interested in. I think that's a really healthy and like great thing. I love to think and invest like that.

And so it's almost, you know, when there's not such a frenzy where, you know, you have to make a decision in less than two weeks if you're going to, you know, write a check to a company. Having that extra, I don't wanna say like extra time, like we're just centering around twiddling our thumbs, but being more thoughtful with, and like deeper in how we're thinking about a company or a space, I think is, is really great.

Especially for like where we are. Um, in the maturity of, of the whole space. And then finally, I'll just say it's kind of interesting even despite, you know, the slower PACE, little more reserved nature of VC funding in [00:20:00] the space. We've seen some like fairly sizable and interesting strategic activity printed in the last couple months.

And so I'll just call out, you know, CBRE's massive round in vts, um, and Invidia's 15 million investment in passive logic I think are worth noting because, I dunno if we mentioned on the last podcast, but there's definitely been some talk like, Oh, corporate VCs are gonna really pull back in this, you know, choppy macro environment.

We're not necessarily seeing that, which I think is kind of interesting. I mean, I don't wanna speak too soon. Obviously there's many months for lots of things to play out, but interesting to note.

[00:20:37] Joe Aamidor: Yeah. Um, It's, I agree. Um, and I would say there is, you know, anecdotally, I, I can share, I ha I've seen still a lot of very small companies, you know, people will reach out to me.

I, I a hundred percent welcome that anyone listening to the podcast just to talk for half an hour, talk for 45 minutes, seems like there are small companies out there with ideas that are still not [00:21:00] really, you know, they're pre-revenue, but maybe have line of sight to some near term revenue that seem to be raising not a lot of money.

I would say it isn't, uh, an unrealistic sum of money, but they're raising some money, they're able to get things going. Um, and uh, I think that's also a sign that it's not, we're not in, in a position where everything is stock. You know, some is listened to discussions of, oh, back in the, you know, dot com bust.

There was just nothing happening for months or a few years. I'm not seeing that. Um, you know, I do, I do see some startups that seem to be a little bit more careful on what are they spending or might be. They might refer to, Oh, well we want our CFO to sign off on more than normal, just to make sure everything checks out.

Or, um, so, you know, I'm seeing some signs, again, anecdotally of what's going on, but by no means a let's just, you know, let, let things are still moving, if you will.

[00:21:52] James Dice: the piece, the piece lie to that is just, you know, having launched the syndicate two weeks ago, almost two weeks ago, not even two weeks ago, [00:22:00] um, just seeing so much outreach from either rounds that have just been closed that, you know, the lead investors reaching out to Nexus saying, Can you participate as, as a strategic, um, you know, so I'm seeing deals that haven't been announced yet that are good for the market, good for the smart buildings ecosystem.

Um, I'm also seeing a ton of startups that have really, really good traction that are looking to raise their next round, uh, which is an amazing thing to see. So, I guess I'm not feeling like things are slowed down, but I have no context for how it was in the past either. So yeah, it is a bunch of, It just feels like there's a bunch of just mixed signals right now if we can summarize.

Yeah. That uncertainty

[00:22:45] Joe Aamidor: word. Well, and, and one quick point that, that we had talked about before we started recording. You know, you have meta prop for example, had their prop tech confidence index. I think that's a half or a semi-annual, not half annual, but semi-annual survey, survey data [00:23:00] from entrepreneurs, from investors and, and, and they showed it being very low.

To be totally frank though, and we were discussing this, it came from an all time high, right? So there's really nowhere to go but down. So you could argue, yes, things are not as confident, but that doesn't mean there's no confidence. Those are very different things. Um, and then there was another article, I think, you know, others have probably seen it as well.

Uh, Bill Girly was interviewed by McKinsey and he was talking about, you know, this is a great time to build. A lot of people have said that, not so much within PropTech, but. When there's a correction, uh, you know, all the points that, that were made. If there are layoffs that is unfortunate, but there's talent out there that is maybe now easier for you to, to you to get, because they can't just go work at the biggest company that has, you know, the most secure jobs.

That might cause some people to say, Oh, you know, maybe I will try my time at a startup. Maybe it'll be a great opportunity. Um, so there's that, there's less competition to actually participate in rounds more time. I mean, I think as you were speaking, Gene, the, the, the, the thought that popped into my head was, you know, there's nothing like, uh, economic contraction to focus the mind.

I mean, [00:24:00] I think, you know, that, that you could argue that's to some degree what's happening. Um, so there, there's, there's a number of positive, uh, positive things happening as well. Can you

[00:24:10] James Dice: guys expand either one of you on why now, why downturn is a good time to build a little bit more? Like what, what was Bill Gurley saying in that article?

[00:24:19] Joe Aamidor: Yeah, so he brought up a couple different points. Um, but you know, for one, you have less to worry about. Your competition, right? So it's, you know, if you have three core competitors, the likelihood that one of them is going out and raising a huge round that will fund sales and marketing. If you all have the same product or you all have, maybe not the same product, but you all have a product that is as viable in the market, you could argue that company that has more money to hit the street, more salespeople, more marketing dollars, they stand a better chance.

And I've even heard from some companies, not, I would say now, but over time, that have said, you know, our three competitors all have much bigger bank accounts right now than we do. [00:25:00] We're really not going to be able to beat them because we just haven't raised that much money. Um, that maybe is coming up now, uh, with other, other firms that are looking at m and a because, you know, we weren't able to raise last year when we would've been able to raise all of our, now, now we can't as much.

So we, we, we don't think our, our prospects of competing effectively are as great.

[00:25:20] James Dice: That's necessarily start a new. Company more like

[00:25:27] Joe Aamidor: survival. The fittest Girl's interview did kind of say more like, This is a great time to start a business. But I think it was access to talent, less competition, both for talent, for just hitting the market and trying to sell, uh, this kind of point of focusing the mind being more from a constraints mentality.

I can't spend money on everything. I don't have enough money to spend on everything that can really focus you on product market fit on really solving the core problem that your current customers or your future customers may be most interested in solving. Totally. So there's a number of dynamics that I think, uh, that [00:26:00] interview was a little more focused, at least my read of it was starting a new company from scratch.

Gotcha. May also, given that it was in McKenzie, he may also have been speaking to people who typically were at a big company, maybe were laid off or looking to leave because they're worried about getting laid off. And I think the, his enthusiasm was, Well, you, you should think about starting a company.

Also, and I don't have all the data. If you look at past downturns, there have been some very, very, very successful companies growing Airbnb and Uber, the last downturn. And those are only two of, you know, Yeah. Many, a few handfuls. Yeah.

[00:26:32] Jeanne Casey: Yeah. I think in general, resources are cheaper and that scarcity mindset, um, you know, forces that focus, like you said, Joe.

And so when the market does turn, you can really, if you're able to, you know, navigate, uh, to come out on the other side, you can really just double down, um, and, and really start scaling once you've refined that product market fit. Mm-hmm. have built relationships with early [00:27:00] customers, have hired some really great talent that you maybe didn't have access to when, you know, everyone was raising massive rounds and offering it crazy high pay packages.

Yeah, and also, I mean, again, this is not. Great, but there's been a lot of layoffs at tech companies and so there are more engineers, um, looking for jobs. Uh, and then also, you know, an interesting additional thing, and, and Girly mentioned this in the article, um, is the whole rise of hybrid work. And that's super relevant to all of us, right?

Um, and so being able to cast a wider net from a talent perspective, I think you both are really interesting examples of people who have really specific deep skill sets that don't necessarily live in, like the major, what people think of as the major tech, like metro hubs, um, but have incredible followings and have built, you know, brands for yourselves.

Um, I think that that carries over to startup world where, especially in the smart building space, if you're looking for someone with a specific skill set, they don't have to be like 20 [00:28:00] miles from your office. Um, And also office space is cheaper. . Yeah. Not for nothing.

[00:28:07] James Dice: Shout out to Smart Buildings Colorado.

Yeah, . Uh, we did that Nexus Happy Hour in Denver last week and it was, uh, so some great smart buildings leaders outside of the main metropolitan areas.

[00:28:21] Joe Aamidor: Definitely. Yeah. I will say I've been pleasantly surprised at how, how mu there is a very solid tech ecosystem. Not, not San Francisco, not New York, not Boston, but I mean I've been to multiple conferences and you know, there were two, I think last year where the first person I met also lived in Boulder, which was totally coincidental, obviously.

But there's private equity here, there's VCs here. But I think that that's what you're seeing broadly. I think if you went to Austin, if you went to Nashville, if you went to Miami, if you went to, Yeah. Those are not core kind of hubs. Um, totally. But hybrid work certainly fits in.

[00:28:55] James Dice: I did wanna circle back on the people that, if anyone's listening to this, that lost their job recently, [00:29:00] reach out to us.

We have scholarships for both our course and for the Nexus Pro community. It's honestly the best place to find a job. If you're already listening to this podcast, you're gonna feel to find somebody that's hiring within the community. So, yeah, reach out to us. Uh, yeah, like I said, scholarships are available.

Um, are we ready to switch gears? Any other points on, on macro

[00:29:25] Jeanne Casey: discussion? One really quick one that I think is a nice note to end on and it, it, it um, goes back to your point or your question, James, around how insulated is the smart buildings industry. Mm-hmm. , we are seeing already a pretty quick flight to quality.

For when I'm talking about real estate investors as well as tenants. And so again, putting on my new being real estate slash owner hat, um, investors are looking to put money behi if they're going to invest in the office sector. They're really looking at those top of the line class a [00:30:00] amenity rich tech enabled.

There's almost like an arms race to get there. Those kinds of buildings, which are, you know, have smart building and prop tech, you know, opportunities written all over them. And from a tenant perspective too, even with hybrid work on the rise and the reduction in sp like need for space, tenants can arguably pay a bit more per square foot for some of these really high quality, uh, buildings that are super tech enabled and, you know, low carbon as well.

And so they're starting to think of, you know, where they're spending money on space as being, you know, a perk or, you know, an amenity. Um, As gathering in person becomes more and more important. So I think that's unique to the smart public building space. Um, and is gonna set up, you know, the, the space to come out of this, you know, pro potentially prolonged uncertain period.

Quite strong because those are trends that are [00:31:00] definitely not going away. Right,

[00:31:01] Joe Aamidor: totally. I think the two kind of next step takeaways, That's absolutely right. I mean there, if you Google flight to quality, there's been articles in Bloomberg, Wall Street Journal. Uh, Brookfield had an interesting report where I think they actually were tracking some of the trends behind this.

So like the data indicates this is true, talking to people indicates this is true. Uh, the two thoughts I've had about that, the flight to quality one, I think it's, it's known that means a lot of class B office space is probably right for being converted maybe into multi-families is where you typically go.

But there's also, in my mind, I've thought. The buildings that would be buying smart building tech are the Class A buildings. Anyway, that's probably if we wanted to classify early adopters. But what happens if there's more stress on the Class B and C buildings where that would be your late majority five years from now?

Is that the late majority? And overall, does that compressed the size of the smart buildings opportunity? I don't know the answer to that. That's just one of the things I thought, uh, it might accelerate for the near term [00:32:00] but not get us to that same tam that we would've had, you know, five years ago when, you know, class A, B, and C were all occupied by office workers.

It was good food for thought, great food. Yeah. No, I was storing it out there. I we time will tell. Yeah, absolutely.

[00:32:18] James Dice: So sort of switching gears to m and a, I think one of the ways in which I'd like to sort of transition into m and a is the question to you guys is, given these market conditions, do you guys see.

Um, companies sort of failing to raise money that they need to continue their operations that are in, you know, the smart buildings world, and therefore they need to get acquired sooner rather than later. Do you think that's sort of a, and this is the last projection to the future? We'll, we'll give, we'll start to talk about what's happened last quarter in just a second.

[00:32:54] Jeanne Casey: Anecdotally, I'm seeing that selectively. I think it's for companies who maybe built [00:33:00] really cool technology that didn't quite find the right fit or target market. Or infamous product market fit, um, and weren't able to raise enough money to have a long enough runway to find it. I think that's the simplest explanation and like way to categorize, The companies I've seen recently can not be on necessarily fire sale, but you're more on fire sale the closer you are to a a zero bank account, obviously.

Um, and so I've seen, you know, anecdotally the whole range of folks starting to explore, Hey, I really wanted to, you know, go it alone sites on an IPO years from now, but maybe a nice, you know, high. Double digit, low triple digit, million dollar sale is a really nice exit. Um, but I've got 12 to 24 months of runway to see if, you know, the former outcome is still possible all the [00:34:00] way to, ooh, I've got, you know, less than six months in the bank to pay my people.

Like we've got a engineer, something mm-hmm. , um, that's gonna be painful for employees and, and previous investors, unfortunately. So I think it expands the gamut.

[00:34:15] Joe Aamidor: Yeah. I, I would to some degree agree with Eugene, but I don't think I've seen enough examples to, to really build a signal out of, out of the noise that the two things I will know more dynamics of our market.

One, you just have a probably too many companies in a lot of the common smart building categories. So when there is a downturn, you know, it's, it's the Warren Buffet quote. When the tide goes out, you see who's swimming naked. I don't think it's exactly that, but some of these companies have been able to continue.

To fund their operations through raising capital because they've been able to be successful enough. Now, I think the bar of how successful do you have to be to raise more money is, again, a little bit higher. And there are, I think just too many companies doing [00:35:00] the same thing, um, out there. And so that may be they merge together, that maybe somebody acquires a few of them to build, to really buying market share versus buying a lot of technology or, you know, product, product type acquisition.

Um, there's, there's that dynamic. But the other side, which is related, oftentimes the model, you, you build a product, you hit product market fit, and then you're, you're raising money to, to put money on the, the sales and marketing, um, fire, right? You're, you're trying to build that fire and trying to just talk to more people.

Um, what I have seen, generally, it's hard to bring long sales cycles in, in our market for a variety of reasons. We don't have to get into all of them, but I think there are companies out there that raise money, that have spent probably, in retrospect, too much money on sales and marketing. And where they expect to be.

You know, we're raising now, we think it'll get us two, three years, um, of runway. We expect our revenue to be at some level. Um, and that's, I think generally the math that, that a lot of investors and starters will be doing. I think you probably are not quite there. [00:36:00] There's not a consistent ability to get to those numbers because it's hard to bring those sales cycles in.

So I still talk to people who's just kind of, are almost resigned to the fact, Oh, I know it's gonna take me nine to 12 months to close a deal. And sometimes when I hear that, I think, Oh, they, they that, you know, if I was investing in that company that was, that, that's what I would look for. Right? Because they're a little more realistic.

The market. Is the market hard to bring those sales cycles in? But the flip side of that is you might have spent a lot of money on sales and marketing might not have gotten where you needed to go. Uh, and, and, and thus, you know, you're in a, in a bit of a, you're more trouble maybe than you would've been.

Yeah,

[00:36:36] James Dice: I'd say more, usually it's more like 18 months also,

[00:36:39] Joe Aamidor: right? It could be, yeah. It's more to the long side than the short side. Totally. Yeah.

[00:36:44] James Dice: All right, cool. That, that was great. Thank you for that.

[00:36:50] James Dice: I'd like to introduce all of you to Sam Covar and his company, Tia Totowa, Tito, as an acronym for taking everything, take on anything. And [00:37:00] after participating in the nexus foundations course, Sam got hooked on smart buildings and he wants to T a TOA, anything our industry can throw at them. As an outsider, he sees a future where this industry can move forward faster with better communications.

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[00:37:35] James Dice: Let's dive into m and a. Um, Joe, do you wanna start, You, you know, you do this in your newsletter every month and track this in your spreadsheet that everyone can access and we'll put in the show notes.

Can you just talk about all the m and a deals that have happened

[00:37:50] Joe Aamidor: recently? Yeah. I'll just quickly run through all of them and I forget exactly where we finished last time. So I'm just going to start at the beginning of June and just go through, um, so iOS, [00:38:00] which is a smart home platform, they were acquired by adt.

ADT is interestingly enough in the news, they just received another investment from Google and I think also from State Farm. Um, I think now if you are a ADT subscriber, the kit they give you is all, um, used to be Nest, I guess now they call it Google Home. Um, HQO bought Leeman Leeman. Is kind of a standards and consulting group for workplace experience.

There's a, a certifi, I think you can be a Leman AP accredited professor, Professional. Um, so they made that acquisition. Schneider bought EV Connect, ev charging. I usually cover it because it is related to smart buildings, but it, you could argue is a little bit different. Johnson Controls bought tempered networks, very much a cybersecurity deal.

Siemens bought a company called Brightly. Brightly was actually a very new name of an old business called Dude Solutions. They used to be school dudes. And then they changed to DUDE Solutions as they expanded beyond schools. They, uh, changed their name, I think late last year maybe to Brightly. Um, and they were required by Siemens.

Um, Clear Result. Bought a company [00:39:00] Eco Fit. It's more residential energy efficiency services. Deep key. This is one I think we'll talk about later. Bought Fabric, which was more deep key. ESG generally, uh, fabric, more of a smart building platform. Uh, a couple getting a little technical and kind of nichey, um, KFI engineers bought Stacks and Fisher and MEP engineering firm.

One of the things, we've talked about this a lot of in. Uh, mechanical branches, mechanical engineering firms are getting bought up and rolled up together. Lot of private equity money. Behind that general thesis, uh, Energy Capital Partners acquired metrics energy generally in the energy efficiency as a service bucket.

Actually a week later or so, Partners Group, uh, made an investment into Butterfly. Again, energy efficiency is a service. Um, I'm going to mess up the name here. NG had spun off a business called Equin, or Equin. Uh, ng obviously big French Utility has a lot of energy Services operations. Um, Equin was their facility services group.

Um, so they had bought a few businesses [00:40:00] in the Northeast, in the us in, in, in France as well. France, in Europe. But, uh, B Bwe I think is, uh, how you pronounce it, it was a French facilities company bought Equin. So Equin had been spun off and then shortly thereafter was acquired. Um, hqo. There was a, there's a, you know, just as Jean you mentioned Seaberry and, and vts, hq, O and, and JLL are.

Tying up in a variety of ways. J invested in hq. Um, they've merged the JET product into hq. So my understanding is if you were a jet subscriber or user, you're now going to moving forward be on hq. Um, C Power in the demand response space. They bought cent's US DR. Business, uh, Evermore Industries, uh, bought a Ty.

A TY is in the, um, space, utilization space. They make a space utilization hardware and software solution. Um, carrier finalized, I think the acquisition of Toshiba's Light, vrf and Light Commercial hvac. They had been partners for maybe up to a decade, but for a very long time. [00:41:00] Every US HVAC company has. In one way or another has tied up with a Asian, usually Japanese VRF business.

Um, so basically the idea there is VRF is really disruptive, um, to overall, uh, traditional HVAC in a lot of ways, even before electrification. And so every US HVAC company needs and IS has acquired or partnered with, um, usually a Japanese HVAC company. Um, and they had been partners, but I think Carrier has now made the acquisition to own that part of the business.

Um, Envoy, which hybrid? Well, they started as, as kind of, uh, you know, visitor management, but now they've gone beyond that. Um, they bought a company office together, which was a little more focused on desk booking, hybrid work, uh, software, uh, Omers Private Equity bought, uh, Pueblo Mechanical, uh, and controls, again built up.

Pueblo is built up by a private equity firm, and now it's been sold to a larger private equity firm. Um, Spark Fund bought, and this was covered, uh, EPX Group. Energy Cap [00:42:00] bot wa um, Wad X gets them more interval data. Um, this one we might be talking about Measurable bot. We wise, we'll talk about that one. Um, Robin bought a company, uh, flow and form, which I was not familiar with, but it was Robin actually very similar in a lot of ways to Envoy you could say direct competitors flow form was, was a little bit more beefing up the tenant occupant experience.

Um, and then just a couple weeks ago Generac bought Blue, which also is very interesting. Generac has been very acquisitive. A lot of the acquisitions they've made though I tend to think of them more on the residential side, whereas Blue, very much commercial, industrial. That was a mouthful.

[00:42:38] James Dice: I love it. Love it.

Obviously we could go deep on all of those if we wanted to and we haven't done research on all of those, but I'm pretty sure we could talk for like five hours on that whole list. Yeah. Thank you Joe. You're like the encyclopedia of. Smart buildings, m, m and a.

[00:42:53] Joe Aamidor: Yeah, everyone. I'll just note, every once in a while I'll get an email from somebody that says, Can you give me edit access to the list[00:43:00]

And I, I usually try to be nice and ask, Well, what do you, what do you do? You need just a copy. And, and a lot of times it's like, Oh no, nevermind. I'm sorry. Like, oh, But you know, it never seems like I could say company that says, Can I go in and change something in your list? It's just, so I, I probably, for anyone listening, will not give you edit access to this list just because it's a nice resource for the industry.

But

[00:43:21] James Dice: yeah, it's gonna be like on GitHub soon. Um, yeah. Okay. So what I'd like to do is sort of draw a little nice circle around the measurable and deep key acquisitions, and maybe we'll get into energy cap and wad a little bit and just call it like ESG consolidation sort of thing. Right. Um, and by the way, when this goes live, this episode goes live.

The previous episode will be with Matt Ls, CEO of Measurable. Um, Shout out to Matt. He's probably listening to this one now. Um, he's, he's a big fan now that we're covering all these measurable acquisitions. Um, so [00:44:00] Measurable follows up Hatch with Wego Wise, right? That's the main acquisition that happened in this quarter.

Last episode we talked about hatch data. Um, maybe I'll just start with. Since I had Matt on the, on the podcast last weekend or last week, what, what he told me, um, this one sort of represents if we, if we think back to Hatch data and how that represented, um, an expansion across the user journey. So they were doing mostly reporting and data acquisition Hatch lets them expand in the interval data, expand into fd, expand into more action in decarbonizing.

So if you think about the whole decarbonization journey, they're now able to expand more of that than they were before. What he told me about WegoWise is it's a little bit different. It's, it's one expansion into new customer base, right? So Wego Wise has a big multi-family, um, user base, right? I think he told me 1.6% of all apartments in the United States.

Use [00:45:00] WegoWise. And so it's a pretty big chunk of, of users to acquire for sure. Um, but then he also told me, and this is interesting for us to discuss, I think was more vertical integration. So while Hatch data was horizontal or um, integration, this is more vertical integration in terms of the tool set that Wego Wise had built around attaining and automating the access of utility bill data.

Um, and I think this is interesting cuz last time we talked about how Arcadia had bought ANet while who's one of the biggest users of net uh, measurable. And so part of one of the reasons why I think that happened is, okay now Matt views, um, Arcadia as a potential competitor, which I think we'll get to in a minute.

Now, how do I then cut Urgenet out of the stack, which is I think a very strategic, uh, move there. And, and I think it relates to hi them also spinning [00:46:00] out a data platform as part of, uh, one of their product offerings at Measurable, which is a, again, in direct competition, I think with arcadia's data platform as well.

So interesting moves. I see those two as a very, you know, they don't have the same data set, obviously. Mm-hmm. totally different. They have utility build data, but they're both sort of spinning out this data platform or, you know, API as a service type of, um, approach. And yeah. And you guys have any thoughts there?

[00:46:36] Joe Aamidor: Yeah, I'll, I'll add a couple quick ones. The other interesting thing about WegoWise, they were owned by AppFolio. And AppFolio is a one of the larger multi-family real estate operations platforms. They have a variety of different solutions capabilities, and I think that acquisition made five or so years ago.

Um, but WegoWise. Uh, does give them both the horizontal growth new asset class, you could argue, [00:47:00] um, similar use case, but new asset class. But then also that that vertical, uh, being able to collect more data on your own. Uh, I also just think it's another sign when you look at a and Gene, you probably have more to add to this, but if you own a lot of real estate assets, the first kind of step was you were being asked, Well, I need to be able to disclose current energy use and what does that mean in carbon?

Um, the conversion is not so complicated, but, but that was the first step. But then of course, there's the bigger question, How do you reduce, how do you drive, get to net zero or get on your way to net zero? And I think before these acquisitions, measurable didn't really have a great answer. To do that completely hatch definitely gets them there.

But you could argue WegoWise helps too because if they can more quickly get more data, that's at least the top of the funnel of well, we can start helping you benchmark, we can help start, we, we can help you start measuring. And then of course we want to stick with you and be the platform to help you actually decarbonize.

Um, [00:48:00] so that's the other bigger, bigger question I've heard from some real estate, um, owners. Operators who've just said, we we're really still trying to figure out how do we get where we need to be.

[00:48:09] Jeanne Casey: I have a question for you guys. It's a little bit. Not off topic cause I don't wanna derail too much, but like, just as you're talking, something occurred to me and that's, I typically see tech trends go from consumer markets and like the multi-family or housing mm-hmm.

sector to office and industrial and other commercial sectors. It seems like sustainability and I'm gonna say like sustainability instead of broader ESG trends might start more in office and commercial. And this, I Do you think it's like a, a false flag to, to view this WegoWise acquisition as kind of office leading in this area versus multifamily?

Or is this just like, you know, a random noise? Not necessarily signal, but it's just interesting and a [00:49:00] little bit counterintuitive to the way tech trends, I think usually proliferate across real estate segment.

[00:49:06] Joe Aamidor: Yeah, I, I had not thought of it that way, but I actually think that does fit a little bit. I mean, my, my sense again anecdotally, but my sense is where if you own or invest in real estate, the office was maybe the first, the, the first questions you were getting.

You know, what are you doing? If we're an investor in a fund that is investing in real estate, you know, a lot of the focus was let's decarbonize the office buildings. Moreover, the office buildings are usually the more complex buildings compared to a multifamily compared to even warehouse would, would be another big institutional asset class.

There's so much complexity in offices, the cha getting to net zero, I think you could argue is more difficult to do. Um, and there's more, there's more work from just collecting all of the data, analyzing all of that information. Um, That would lead you to, to say that that's where the first focus [00:50:00] has been.

Starting with, you know, the trigger of sustainability, but then leading down the path of, okay, well we know our footprint, we know our current performance, what do we do about it? Um, so I think that actually, I hadn't thought of it that way, but I think that actually fits.

[00:50:11] James Dice: I think people think that there's this like black and white, like residential and commercial, but there's really this like, you know, broad spectrum from, you know, black to white, right?

There's, um, on the, on the full end of the spectrum, there's, you know, the consumer industry, which is single family homes, and on the full other end of the spectrum, there's, you know, owner occupied office buildings and like, uh, landlord owned multi-family assets probably sit somewhere in the middle, right?

Where it's like you have the consumer, which is the apartment renter, and then you have the commercial landlord, which is the building owner, and it's like right in the middle. So, I don't know. I think it's, I think it's like kind of like the asset is both [00:51:00] in

[00:51:00] Jeanne Casey: a way. Yeah, that's totally fair. And I mean at the end of the day, even in owner occupied office building is trying to please its end user of the space, which are humans who also are influenced by consumer trends and want nice things.

Totally. That's cool. Just curious what you guys thought.

[00:51:20] Joe Aamidor: That's a good

[00:51:21] James Dice: question. Yeah, yeah, absolutely. So one of the other deals, or assuming there's nothing more on the measurable, the other deal that's looks like this, or at least maybe looks like measurable buying hatch data was deep key buying fabric.

And Joe, I wanted to see if you had more of an idea than I do about sort of what Fabric was doing, what sort of use cases they were really good at before the acquisition.

[00:51:50] Joe Aamidor: Yeah, yeah. So deep, deep key. European based, I think France specifically, they're based in France. Um, and they were very much focused on ESG reporting [00:52:00] data management.

So very similar to Measurable, but in France, Deep key, or sorry, fabric, Uh, I think based in London. Um, a lot of references to just pounds, not dollars. Um, they were certainly in the interval data category, although I would say they were a little different than Hatch. And then I think their platform was a little wider.

There were, there were references on their website to integration with indoor air quality sensors. Um, we're seeing this growth maybe in the past year or so of companies that I would, I would describe, or that they would describe as smart building platforms, right? Any data. So any iot sensor you have in a office or other type of building, we can pull it into our platform.

I think we'll see more of this. The challenge with some of those platforms is that they go really wide, but they don't go really deep. So, sure. Any streaming data you can put onto a simple trend analysis type visualization. Um, you can build certain types of graphics, um, reports that will make sense regardless of what that streaming data might be.

But you could argue there are specific things you might wanna do with indoor air quality data versus energy data versus just [00:53:00] occupancy data. You know, where are people, what is the trend over, over the day? So, um, uh, fabric specifically did go a little bit wider. There, there are references to being able to connect to a lot of different iot sensors, but they also talk about, you know, smart building, um, data, uh, uh, analytics.

So maybe touching fault detection to some degree, challenge. Some of these terms are used. Um, and, and I wouldn't say it's erroneous to use them, but, uh, you know, there are, you, you know, James question of depth fall detection means something very specific. It isn't just, you know, there's more energy being used today than yesterday.

There's something wrong that technically, I guess you could say you're identifying a fault, but it's not really fault detection, like the damper in that. Um, Yeah. It's just a measure of how's diagnosed. Yeah, exactly. Exactly. So, um, so it, it's similar in that you're going from big picture portfolio wide help with ESG reporting to a platform that now gives you much more granular data.

Um, and I think that that's, [00:54:00] that's where the story converges between what Measurable has done and what

[00:54:03] James Dice: has done. Yeah. And I think where it converges to is, is similarly right. Just kind of building on what you're saying is you have a reporting software expanding into more use cases than just reporting and starting to become more of a comprehensive.

Platform, for lack of a better term, also raising a lot of money. So deep key has raised the heck of a lot of money as well to sort of fuel these acquisitions, right? And it's sort of starting to look, look like a similar pattern, right? Where I, I've raised over a hundred million and now I'm starting to buy, you know, adjacent competitors to sort of build up this larger platform.

And one of the things I think is interesting about that, when you, you have these two, you know, one based in Europe and one based in the us well, who are the other sort of other categories, right? That if these are becoming, you know, these two are becoming a category of their own. I feel like the other categories are like the [00:55:00] big OEMs, you know, the big four, the, you know, the, the big, you know, large conglomerates in the industry, they're gonna start competing, competing on sustainability or ESG with.

Uh, measurable and, and deep key. Um, so that's one category. And then it feels like another category, if that's like up above these companies, down below these companies is all of the single singular point solution startups that are out there trying to compete on, like you were saying, Joe, I do this thing, this deep thing, or FDD or whatever you want.

I do that better than the more comprehensive platforms. So it's almost like there's now three categories in this ESG space that I think is really interesting. And it seems like we're gonna see, if we think about like future m and a, the big guys trying to maybe then acquire measurable or deep key, but then both measurable and deep key, acquiring more and more startups to sort of keep building out this, you know, more comprehensive

[00:55:59] Joe Aamidor: [00:56:00] platform.

Right. I also think at the top, to add to the, the framework you were describing. You have the big facility operators, facility management companies, they are involved in some cases in sustainability, maybe from a consulting point of view, but they are also, and we're gonna talk about this later, but they are also making technology investments.

Um, you could even argue energy services companies, which generally is maybe the most nebulous category because it, it can mean a lot of different things. But there are a lot of companies out there that maybe they're part of a utility, they're part of a utility in another country, and they're dere, you know, they're just a, a deregulated component of that business here.

And they're saying, you know, we can actually retrofit your buildings. We can actually, uh, help you participate in demand response. We can do all the actual, the, the things that will actually, or not just technology, right? But like services, technology, the whole enchilada. Um, they can actually drive reductions, both energy savings, dollar savings, carbon reductions.

So there's a lot of entities that, that are big, you know, billion, multi-billion dollar industries. I think any of them would look at this [00:57:00] space and say, There's some acquisitions we could do here that will build out our business, um, to add to your

[00:57:06] James Dice: framework. Yeah, that's a great point. Yeah. And, and maybe to kind of build back on what you were saying earlier about the, the acquisitions that happened, like Spark Fund buying, epx Group, Spark Fund is one of those examples of that, you know, energy as a service or sort of tech enabled esco sort of model that would be in that, you know, the bigger category as well.

Maybe that's a fourth category, not to add categories to the framework

[00:57:29] Joe Aamidor: there. Yeah,

[00:57:30] Jeanne Casey: I'm not an expert on the Europe market necessarily, but I think an interesting, um, dichotomy that I think exists and curious if you guys have any additional insights, but the PropTech and startup market is a few years behind, I would say the US PropTech startup market, just in terms of maturity and amount of capital that has been raised just.

Raw number of startups out there, but there is, I'd say, an [00:58:00] larger push from limited partners who are investors in real estate funds on down in ESG and sustainability requirements. So there's arguably, like Europe is arguably ahead in this area. Um, so I wonder how, like, is there as fragmented and robust of a mar startup market in Europe where these companies, you know, have kind of a, a plate full of options to acquire in the coming months in couple years?

Or is the fact that the market over there is potentially a couple years behind, um, make it a little bit more sparse?

[00:58:40] James Dice: The only thing I have to go off of here is my vendor landscape, which has 458 companies last time I checked. And there's, there's still quite a few, like a ton of. When we're talking about this whole user journey in each category that we've been talking about, there are still a ton of European based [00:59:00] companies across that user journey.

And I'd say I probably don't track the European market as closely and some probably still missing some. So it does feel like even though they might be behind, you know, if you think about like fault detection diagnostics for example, you know, Clockworks 2008, Sky Foundry 2008, uh, Iconics before that.

Right? So those companies have never tree around that time. Yeah. There aren't like the European equivalence of, of that history. Right. But there are still quite a few, you know, utility bill, interval data startups, like those types of things where you see, um, oh, and, and HVAC controls, sort of AI type of companies.

There's a bunch in that value prop. So yeah, I do think there are still quite a few to be acquired

[00:59:48] Joe Aamidor: for sure. Yeah. My perspective to build on that, it seems like the companies in Europe do take a bit of a stronger position around the sustainability, uh, side of what they do. Whereas [01:00:00] in the US you still have a lot of smart buildings companies that if you're meeting with them, they'll explain to you, Well, we help you save energy.

We can help give you an estimate of the reduced, reduced energy based on analytics. Maybe our platform identified this is the carbon equivalent, but that's not really a full enterprise scale or even building scale carbon reporting platform. It seems like the, the companies are certainly positioning themselves a little bit more as we do that, but, but you know, we want to talk about the fact that we also can help you with sustainability.

Um, I also see a little bit more fragmentation in Europe by country or maybe by region. You could argue maybe all of Scandinavia is, is, I know it's not a country of course, but there are companies that maybe are focused in that market. England is a little bit detached. Germany, a little bit detached. Spain.

There's, there's companies focused on Spain that I, I think they would tell you, we have clients across the continent, but it, it, it seems like as an outside observer, the companies are a little bit more entrenched in their home market, whereas in the US I guess you could argue there are some companies more focused on West Coast versus East Coast.

I, I still [01:01:00] think that's, that's probably less of a case, and I don't know that it's a language barrier. I don't know. You know, a lot of these companies, at least if I meet a company from Europe, they'll usually tell me, or I'll ask them. They, they've, they've, um, internationalized to some degree their platform, so it works in different languages.

Um, a lot of those countries, English is pretty dominant as a second language anyway. Um, so, uh, I think there's, there's some, some differences, but, um, but I tend to agree there are a lot of companies in Europe. Joe, real quick

[01:01:27] James Dice: before we kind of, I wanna, I wanna kind of zoom out on this real quick, but you mentioned energy cap buying wads.

Yeah. How do you feel like that fits in the same.

[01:01:36] Joe Aamidor: Yeah, it's, I think it's, it's largely a similar theme. It's a little bit different. So energy cap, um, is it started, and I think they spun out of it, um, Enron couple, couple years ago. So it was, it was a business within Enron, but they've been independent obviously for decades.

Um, and it's

[01:01:51] James Dice: more k12, higher ed. Yeah.

[01:01:54] Joe Aamidor: Type of the market, the market focus. Can't think of it as the mush market. Municipal university school, [01:02:00] healthcare. Some people call it the hugs market, which I think is funny. Um, uh, hospital, university, government school, but it's, it's public entities. I wouldn't say that's ex exclusively where energy cap works, but a lot of their customers, and that can be a good market.

One because there's far fewer companies that want to go sell to a lot of school districts or cities or states or counties. There's actually a lot of communication between them. Um, so if you do well by a couple school districts, it's likely all the others around you will, will call you and say, Hey, we'd like you to help us too.

Where they really focused and went very deep and had a very strong platform was within the utility bill management piece. Um, so this is the accounting side of, I have utility bills. You think of any of those entities, they have a lot of buildings, um, maybe not big buildings, but a lot of buildings and usually every building has, has a built, so they could aggregate all that together, provide a lot of insight into are you spending more, are you spending less, are there errors in the bills?

Have you paid the bills? Um, but they didn't go so deep on interval data. And Wad X really brings in [01:03:00] that integral data capability, which again, can be used to actually identify what's the root cause of, of my energy bill being so high this month. Um, just seeing utility bill to utility bill to utility bill, it can be very difficult to, to diagnose that.

Um, Wad X was a little bit wider in focus. They weren't exclusively focused on the, the musher hugs market. Uh, but a lot of the capabilities brought together there would be applicable to a lot of different building, building types and asset classes. But if

[01:03:26] James Dice: we compare that to like what deep key and measurable are doing, they're not, This acquisition doesn't take energy cap along the full user journey.

It's just utility bill and meter data, which I is, I think, yeah, you know, you could debate the importance of that, but it good. The other doesn't feel like as comprehensive of a platform.

[01:03:46] Joe Aamidor: I'd say that's a, that's a fair point. Um, There is, when you look at one of the big pieces that Measurable has been very good at solving really for the, the, the legacy of the business was the reporting out to all of [01:04:00] these, these voluntary, you know, Gz, uh, SAS v the, um, whole host energy star reporting is, is is more simple, I would say more, less labor intensive.

Um, when you get into the mush market, I, there's just less of that, right? I don't, I don't know a lot of mm-hmm. , Um, I mean energy cap is always a requirement, but I think that that makes the ESG reporting or the sustainability reporting story or use case just less common when you get outside of institutional real estate.

Um, which is one of the reasons why when you compare them there, that, that, that isn. Maybe addressed quite as much by this combined energy cap wads. Totally.

[01:04:37] James Dice: But if you have energy cap and now they bought wads, I'm still sitting here as an energy manager saying, Man, I still really need fault detection diagnostics.

Like, I have to go out and procure something else to get that at that point

[01:04:50] Joe Aamidor: is all I was saying. Right? Yeah, no, yeah, no, and that's fair. The the funny thing I'll add to that, I oftentimes when I run into conferences or just have like catch up calls with people I know, I oftentimes ask [01:05:00] them, So, uh, between buying a solution to solve all your problems or buying point solutions to de police solve individual use cases, I still hear, again anecdotally, but I still hear both very smart users and deployers of these technologies.

Take one or the other size. I think there's, there's not a great consensus, I'm going, going to do it this way or that way. Um, Eventually, maybe there will be, but um, especially when

[01:05:25] James Dice: you have such a broad spectrum of what people mean by these different capabilities. I mean, we teach this in, in the foundation, in our foundations course when someone says they have FDD or they have something else, right?

There's a very broad definition of what that that means. Just cuz you're able to check that box doesn't mean you're satisfying what different

[01:05:45] Joe Aamidor: users need. Right,

[01:05:47] James Dice: Right. So I wanted to sort of zoom out a little bit on this category. And when I say this category, this might be all the time we have to discuss.

This might be the only category we get to discuss today. But, um, do you guys feel, and, [01:06:00] and I'm kind of looking at this as not only a total nerd in this category, but now also an investor. Do you feel like there are more room for new startups across this user journey when you have platforms like this that, that seem to be raising a ton of money, acquiring competitors, consolidating, developing out new features?

What are your thoughts around, um, we like what white space is there from a technology standpoint, and do you have any confidence that a new startup in along this user journey somewhere can, um, you know, be a good investment for a VC given that they might just get snapped up immediately by a measurable or a deep key?

What are you, what are your guys'

[01:06:43] Joe Aamidor: thoughts? Jean, do you have any? Do you wanna go first? Yeah. Yeah. I have

[01:06:47] Jeanne Casey: two quick thoughts. The first is, I think there's always room, and I think when incumbents become, raise too much money, get too big, get a little complacent, maybe [01:07:00] that's when there's, you know, the certain opportunities are ripe for entry and a head-to-head competition.

It's hard to maintain that like market leading position over many years. Um, for decades even. Um, so I think generally the answer is yes, still more room. I think there's less. Um, I think we're also gonna see where that white space kind of opens up after this wave of consolidation that I think is going to take quite some time to play out just because transactions take a long time.

Um, you know, funding rounds take a long time. All this stuff takes a long time. Um, so I think we'll have a better sense of where in the user journey the opportunities still remain. And I'd say towards the end, like the actual project based like decarbonization initiatives and enabling, uh, building owners to actually [01:08:00] decarbonize is still relatively white, if not white, light gray.

Um, and I'd say that is particularly exciting area as an early stage vc.

[01:08:13] Joe Aamidor: Yeah, I agree with, with, with those white spaces. I think, um, the specifics that Gene that you, you just mentioned, I think also just from a architectural point of view, it's still really hard to get data out of buildings. It's still really hard to make sense of that data.

It's, it's still really hard to take a lot of different buildings with different control systems and maybe separate metering infrastructure and maybe lighting control systems that have some interesting and useful data in them. It's really just hard at scale to bring all of that together. Makes it challenging in a lot of ways to be a seller of, of a vendor, if you will, of, of these solutions.

Because you can even go into a new building and not really know how long is it gonna take us to get this building up and running and, we'll, we'll give you an estimate, but, you know, and I, I saw this when I was, you know, on the vendor side, we would be [01:09:00] held accountable sometimes for things that really weren't our fault.

Not pointing fingers at whose fault it was, but if it takes, you know, four weeks to get a list of buildings and what kind of meter they have in the buildings or what's the metering infrastructure. You really can't do much if you're an interval data, uh, startup until you have that. But if you've told a customer, Oh, we should be able to do this in two to three weeks, and they, you know, but you can't also turn around and say, Well, you didn't get, you know, you don't want it to be adversarial as you're starting, uh, foray into a new client.

But, but that's a, an area where I think there's, we're just going to continue to find problems or, or gaps, white space that, uh, I hope more and more startups will, will, will, will enter the market to solve. And, and some are, right. I shouldn't say that it, it's a hundred percent wiped, but, um, you

[01:09:45] James Dice: guys are making me feel good because the Nexus syndicate will be investing in this space.

So I just wanted to just, you know, put it out there and see if you. Yeah. Validate me for a minute, but yes, Joe, I, I hundred percent agree with you, Jean. [01:10:00] A hundred percent agree with you too. Yeah. The i i white space around projects and making, and we've talked about this a lot on the show in the past, and I've written about this, making a decarbonization project happen.

There's still so much to be done there from a product perspective,

[01:10:16] Joe Aamidor: in my opinion. Right. I, I think also demand flexibility is one where there's a lot happening. Big picture. And a couple years ago, I remember there was, I think it was, uh, GSA had had their, they have the, um, the green proving ground, and they, I think they were starting to test, uh, they came up with the acronym, right?

G uh, grid, inter grid, interactive hyphen efficient building. Hasn't been a lot happening there. All in all, you could argue mm-hmm. . And I would also argue it's a little, when I talk to different people who talk about grid flexibility on the building side or on the vendor side, I don't know that it's quite as defined as maybe some of these other categories where, you know, you and I can say like, we know this is what fault detection is, whereas grid flexibility can meet a lot of different things, especially depending on, [01:11:00] um, what assets you have in the building, both generation.

And um, uh, and

[01:11:05] James Dice: to your point earlier, it, in order to make G happen, which I think is, that's how I pronounce pronounce it, Yeah. In order to make G happen, you still need this, you know, horizontal architecture with the ability to integrate with control systems and sort of have a cohesive control strategy.

All the stuff that we already talked about. You need to enable that concept for sure.

[01:11:25] Joe Aamidor: Right.

[01:11:26] James Dice: Yeah.

Well, we're gonna have to save the rest of the list, uh, for a future podcast. Um, Let's close this down. Any, any comments on m and a before we do our, our last carve out round?

[01:11:42] Joe Aamidor: I, I don't think so. It's always fun to talk about this, uh, in this, uh, this type of, uh, format. So yeah, I

[01:11:49] Jeanne Casey: think, you know, the theme that we started out with, uncertainty, I think, you know, holds truth throughout this discussion, but there's lots to potentially be excited [01:12:00] about too, so, All right.

Still an awesome time for this space and to be in this space.

[01:12:05] Joe Aamidor: Totally agree.

[01:12:07] James Dice: So let's do carve outs. You guys haven't given a, uh, a carve out for the last three months, so maybe hopefully you found a new book or TV show or podcast, but, uh, anything you guys can share that have sort of made an impact on you in the last couple.

[01:12:20] Jeanne Casey: , I just finished reading a book has nothing to do with VC or smart buildings. So breath of fresh air, I guess. I guess from my usual day to day consumption, um, educated by Tara Westover, it's a memoir. It's absolutely incredible if anyone out there hasn't read it yet. Uh, it's about a woman who grew up with no, like education, didn't go to school until she managed to get herself into college and went on to get incredible graduate and PhD degrees.

And she comes from a very interesting family and religious upbringing. And it's just an incredible story about the power of education and thinking through [01:13:00] complicated family stuff and dynamics and psychology and mental health. It's, it's a really incredible story and memoir, true story, I

[01:13:08] Joe Aamidor: guess. What about you, Joe?

Yeah, I'll share one. I, this is a book that I want to read, but I listened to a podcast, um, last week, I guess. So Steve Case, as we all know, we probably know from aol, he wrote a really interesting book 8, 7, 8 years ago called The Third Wave. And he was talking a lot about, I guess what others have called the fourth Industrial Revolution.

But I guess he just wrote a book, I think it's called Rise of the Rest. Uh, he's been for the past couple years really trying to build out an infrastructure and it touches what we've talked about with hybrid work of course, and infrastructure in other cities, um, to that, that have startup hubs or build out startup hubs.

His fund, he has an actual fund. He's investing in a lot of those secondary, tertiary markets, I guess you could call them. He probably would not like that term, but the inter the interview with him was really interesting and I think the book just came out last week, um, but, uh, seems like an interesting theme as [01:14:00] somebody who grew up in the Midwest.

He, he mentioned, I have to note, he mentioned I think two or three times during the podcast, Indianapolis is like one of the, one of those newer startup scenes. I. I mean, you could look at it and say yes, but, uh, yeah, so it was just kinda interesting to, uh, uh, interesting book on my list at. Cool.

[01:14:18] James Dice: And then mine is, I, um, just my continued self education on vc.

I read the book called The Power Law. It just came out this year. Um, it's like the history of vc. Uh, you know, if you hear the name Sequoia and Benchmark and on and on and on, just understanding who those people are and what the story was, how they started, why they're successful. Some of the really interesting stories around, you know, Uber kicking out the founder and ceo and like, um, you know, Airbnb, everything sort of getting off the ground.

There's so many good stories in there. So, of course, I, you know, devoured that on my honeymoon a couple weeks ago. And I, I definitely recommend [01:15:00] anyone, um, that's remotely interested in startups, check that book out.

It's

[01:15:04] Joe Aamidor: great. The one that is a great book, one of the analysis, an analysis I read of the book.

Was that, not only was it really just well done, but he, uh, Sebastian Maloy is the author. He did a great job of picking the right stories to tell. Cause you could argue, he goes from, you know, he is like decades long journey from seventies from when, you know, Fairchild Semiconductor was, was uh, you know, a big business that people had heard of.

And, you know, that start, and also just tell interesting stories of VCs where it used to be a journalist. Now you're vc. And that's not actually that uncommon. Um, I mean, it, it is probably in the grand scheme of all the VCs out there, but it isn't like now you have somebody who's gone from journalism to VC and Oh, that you, you kind of for forged that path.

Mm-hmm. . Um, so a lot of interesting kind of anecdotal stories like that too, that, that fit into a broader trend. Totally. Aren't you

[01:15:57] James Dice: too, this closes out [01:16:00] 2022. We'll have to do this at the beginning of 2023. And hopefully, hopefully there's less uncertainty by then. We'll see.

[01:16:08] Joe Aamidor: Yeah,

[01:16:11] James Dice: we're unsure. All right. See you later.

Thank you. Thanks

[01:16:14] Joe Aamidor: all. Bye bye.