A tech firm that reduces business energy bills by up to 30 per cent has raised $75 million in a round led by US investor Lightspeed Venture Partners.
The deal is understood to value Tem, a four-year-old London company, at about $300 million. The cash will enable it to further develop its technology — which slashes the fees earned by the energy industry on each transaction — as well as to expand in the US.
Joe McDonald, Tem’s co-founder and chief executive, said it was using AI to replace the “middle men”. The company’s software — which is already being used by 2,600 businesses, such as Boohoo and Fever-Tree, to lower their bills — matches supply and demand without the transaction needing to go via the wholesale market.
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“We calculate that about $1 trillion is taken out every year in transaction fees by ‘Big Energy’. Our mission is to take that cost of transaction down to zero,” said McDonald, 36.
He said that “Red”, Tem’s neo-utility, had saved its customers $35 million since the service was launched in November 2024. Two unnamed schools have also signed up, saving one £55,000 a year in fees.
“I do not see why every single electricity transaction will not be run by an infrastructure like ours over the next ten years,” McDonald said. “It will happen, one way or another. There is too much inefficiency in that outdated process that 99 per cent of transactions currently use.”
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The company was set up by energy experts Jason Stocks, Bartlomiej Szostek, Ross Mackay and McDonald in 2021. It has raised $94 million in investment in total, with other shareholders including Hitachi Ventures and venture firm Atomico.
McDonald said Tem had set up its neo-utility “as a bit of a stick” to show the big energy companies what the technology could do. Long term, it wants to license its platform to utilities around the world to reduce their cost per transaction. It has two unnamed utilities already using its software, McDonald said.
“With energy, the big problem sits right in the centre — the energy transaction. That transaction is ultimately owned by Big Energy. All roads lead to them,” he said.
“If I am a business and am looking to buy my electricity, I am paying 25 to 30 per cent higher than the cost that energy is being generated at by an independent generator. The reason is because to complete the transaction, it goes through seven intermediaries, who all have a role to play sequentially in getting that electricity transacted to that business.
“Your incumbents don’t have the technology and ability to re-engineer the market and no reason to, because they control it and make huge profits from it.”
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Tem has facilitated two terawatt hours of energy transactions so far — equivalent to powering Liverpool for a year. Its Red service to businesses is managed by two AI agents, supported by a team of four.
“Four humans serving the number of customers we have … the equivalent of a traditional utility would be about 170 people. It just shows the technology infrastructure allows for this improvement across the board, and all of that at the same time as lifting the customer experience,” McDonald said.
