How THG Energy Solutions Reached $2.4M ARR with 1,000 Paying Customers Across 20,000 Active Meters (Interview with CEO Daniel Frey)

Introduction and Company Overview

Nathan Latka

00:00Guys, THG Energy launched back in 2011 today doing about $200,000 a month in revenue, up from $125,000 a month just a year ago. They work with over a thousand folks powering their businesses, powering their utilities. These are like schools, hospitals, etcetera. They help these folks report on gas emissions with tracking and measurement. That's what their software software platform does. He charges $5 per meter per month as they scale looking to grow now. They did a $10,000,000

00:27seed round back in 2019. I called it a 50,000,000 valuation. Looking to raise 6,000,000 now at hopefully close to 75,000,000 valuation. We'll see if we can get it done. Hey folks, my guest today is Daniel Frey. He's got thirty five years of experience in the energy marketing and trading worlds, building and acquiring energy market marketing companies. At THG, they've built more than 35 energy in energy industry partnerships, excuse me, to help companies expand revenue and product

00:51offerings to include sustainable and energy management data and technology. Follow along with the podcast at thgenergy.com. Daniel, are you ready to take us to the top? Yes. All right. So just to be clear, this is a software platform, correct?

SaaS Platform and 300,000 Utility Accounts

Daniel Frey

01:06>> Yeah, it's a software as a service platform. We start with utility bills and we work with more than 300,000 accounts, commercial, industrial, multi facility accounts. We're in all 50 states and we're in 20 countries. We help companies

Nathan Latka

01:27What does that mean? Sorry, when my audience hears you say 300,000 accounts, they don't know what an account means, So make that

Daniel Frey

01:34>> you can think about it as a utility meter or or something that needs managed and measured to help you with your sustainability or your energy efficiency.

Nathan Latka

01:45Who's you? Is it me the consumer that owns a house or is it the local government that needs to charge me?

Daniel Frey

01:50>> You can think of it if you're a business and you have a utility bill that you're paying and processing and tracking, that's an account for us. So we help companies pull together their sustainability efforts around electricity, natural gas, water, waste, recycling. So all of those typically start with a utility account. In some cases they might be a diesel or a propane bill or something like that. But all of those, we put them in one spot. We

Greenhouse Gas Tracking and Energy Management

Daniel Frey

02:27>> provide auditable and verifiable greenhouse gas emissions tracking and measurement. And we also help customers identify energy savings through better energy management and particularly around electricity, an area called demand management or demand response.

Nathan Latka

02:47And Daniel, when you say 300,000 utility meters, is it a one to one ratio of utility meter per company or can one company have a 10,000 utility meters?

Daniel Frey

02:56>> Yeah, so our typical customers are the multi facility customers that are trying to manage many buildings and facilities and they're paying and processing lots of utility bills. So you can think about it as a school district or a hospital with healthcare organizations everywhere or banks with branches or manufacturers with warehousing and manufacturing and distribution. So most of our clients have lots of buildings and facilities. They're trying to manage lots of utility accounts and pull that into

03:31>> one place.

Nathan Latka

03:32So Daniel, how many unique schools, hospitals, banks do you work with?

Customer Count and Account Structure

Daniel Frey

03:36>> Over 10,000 customers that comprise those 300,000 accounts.

Nathan Latka

03:42Okay, average 30 utility meters per account.

Daniel Frey

03:44>> Yeah, that's correct.

Nathan Latka

03:46Interesting. Okay, that's very, very helpful. Give me the, I guess, me the pricing here. So what's the average customer pay you per month or per year to do all this?

Daniel Frey

03:55>> Yeah, so first of all, the customer spends a lot of time paying and processing their own bills. A lot of that is manual and it's old processes and it's inefficient and it doesn't gather the data that they need to be able to report to greenhouse gas emissions. So there are some new mandates around reporting requirements as well as just a stronger drive to pull together this information. So we provide a much more efficient process for gathering

Pricing: $5 per Utility Meter per Month

Daniel Frey

04:28>> and paying and processing your utility bill. And that actually saves the customer a lot of time and effort and money and streamlines that process and provides a much better data platform than what most companies are used to. So we think about it in terms of $5 per account per month to get started.

Nathan Latka

04:50Per utility meter or per account?

Daniel Frey

04:52>> Per utility meter that we're measuring and managing.

Nathan Latka

04:56Okay, so if the average account has 30 utility meters times five, the average customer is paying about $150 a month.

Daniel Frey

05:02>> Yeah, that's correct. And that gives them really good access to the SaaS platform, all of the energy analytics. It helps them get started on greenhouse gas emissions. There's a lot more to that as customers want to engage, but that gives them a really good start on energy management, energy efficiency and greenhouse gas emissions.

Nathan Latka

05:27Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

05:50your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

06:15get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here, right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole thing outright. Now what's cool about this is this is

06:37not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're

07:02going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right. We're gonna go back to the YouTube video here in a second, but

07:24if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into

07:50the interview. And Daniel, how many folks full time are you guys today?

Active Meters vs. Total Accounts: Clarifying the Revenue Base

Daniel Frey

07:54>> We have 30 folks, 20 of them are in Tulsa and they work on data management. And then we have about eight folks in Austin that are engineering focused and really help companies on their integration of meters and smart meter data and distributed energy resources, which is the other side of our business. We pull together a lot of multi facility, multi sourced data and put it in one spot. So if you're trying to track your solar panels

08:26>> and your batteries and your behind the meter information and integrating that into a platform, that's the other piece of our business.

Nathan Latka

08:34Before we get to that though, 300,000 utility instruments that you're installed on today at $5 a pop would mean you're doing about 1,500,000 a month in revenue. Is that accurate?

Daniel Frey

08:44>> That's accurate for that side of the business. There's also additional opportunities to

Nathan Latka

08:50Well, hold on. Daniel, before you go away from that side of business though, so if you're doing 1.5 today, just so we can calculate growth rate, what was just that part of business doing one year ago?

Daniel Frey

08:58>> One year ago, that same business was was probably about 30% less.

Nathan Latka

09:03It's about a million dollars.

Daniel Frey

09:05>> Dollars. Yeah. And we And

Nathan Latka

09:07Daniel, is that a month or a year just to be clear?

Daniel Frey

09:09>> Per year.

Nathan Latka

09:10Oh, got it. Got it. So it's not 1,500,000 a month. It's $5 per year per meter.

Daniel Frey

09:14>> Well,

09:17>> there's a lot of nuance to that number and there's a lot of different services and relationships around this. So although we track 300,000 accounts, we're actually engaged in about 20,000 active meters and we're seeing an opportunity to expand to another 250,000, 300,000 accounts. So we haven't deployed our full service offering to the

Nathan Latka

09:45So Daniel, I just wanna make this really clear for the audience. So if you're deployed on 20,000 meters at $5 a meter, then that's you're doing about a $100,000 a month on that part of the business.

Daniel Frey

09:55>> Correct.

Nathan Latka

09:56Across still 10,000 unique customers?

Daniel Frey

09:57>> Correct.

Nathan Latka

09:58So they each have two active meters on average then?

Daniel Frey

10:01>> Well, so here's here's what here's here's the opportunity, Nathan.

Nathan Latka

10:04Daniel, hold on.

10:05Sorry. You keep I wanna just make sure I get the economics right. There's 10,000 unique customers with two meters each. So you have 20,000 active meters today at $5 a meter.

Daniel Frey

10:13>> No, I'm sorry. We'll have to back up and look at this a little differently. So we've got 20,000 active accounts that we gather that $5 meter on and that's probably about a thousand customers. We have access to another 8,000, 10,000 customers that we've started to get their electricity data on, but we haven't fully deployed our services around. So when you look at total revenues and what we're engaged with today, we're in front of about 10% of

10:51>> our customers and starting to deploy a much broader offering to a much bigger population. So 20,000 active accounts, we've got access to around 300,000 accounts that we can start to engage this energy management

Nathan Latka

11:11Got it. Sorry, Dan, I'll just try to What I'm trying to focus on is your current paying customers. I understand you wanna talk about the big market and what you have access to but your customers, your paying customers, right? So you've got a thousand active customers today with 20,000 active meters at $5 a meter, would mean you're doing about a $100,000 a month in revenue on that SaaS recurring fee today.

Daniel Frey

11:29>> Correct. That is

Nathan Latka

11:31So then can we calculate growth rates? So a 100 brand today, where were you at exactly one year ago?

Daniel Frey

11:35>> We finished last year on an account of recurring revenue basis of around $1,200,000 Okay. This year in 2022, we finished at $2,250,000 Some of that recurring revenue, some of that one time revenue and there's actually two revenue streams associated with that.

Nathan Latka

12:00Hold on, Daniel. Sorry. Hold on. We have to compare apples to apples. So if you're doing $100 a month today recurring revenue, what were you doing exactly one year ago? Recurring revenue monthly.

Daniel Frey

12:07>> Probably around $75,000 a year recurring revenue for 2021. So finish

Nathan Latka

12:14that So one year ago. So beginning so March 2022.

Daniel Frey

12:17>> Yes.

Nathan Latka

12:18What were you doing monthly?

Daniel Frey

12:19>> 75,000 a month of recurring revenue.

Nathan Latka

12:23Okay, that's great. That's great. And then you said you finished 2022 with a total of about 2,200,000 in total revenue. So that's the recurring fees plus another million, 1.2 in what setup fees?

Daniel Frey

12:34>> So recurring revenue of about 1.8 in total.

Nathan Latka

12:40Hold on, that math doesn't work. If you're doing $75,000 a month.

Daniel Frey

12:43>> So there's two components

12:47>> of our revenue. There's what we've talked about the SaaS platform which you've identified as a 100,000 a month. And then we've got another component of energy management, advanced energy management which is device and integration of demand response products, which is another product that we offer. So all in, we closed the year at right at $2,000,000 of annual recurring revenue and have grown that we're growing it at about a $500,000 a quarter of annual recurring revenue. So

13:22>> we should end up the year at the end of twenty twenty three somewhere in the range of $4,000,000 of annual recurring revenue.

Annual Recurring Revenue and 2023 Growth Target

Nathan Latka

13:31That's helpful. The second product line you just talked about the device and integration demand response. That's also a recurring fee? Correct. Okay, got it. And so what that's like another $100 a month there?

Daniel Frey

13:42>> It's in that range, probably a little less.

Nathan Latka

13:45Okay, okay. So all in today, last month, you did about a $180,000 a month in revenue, something like that.

Daniel Frey

13:51>> Yeah, our revenues for the first quarter of this year were up significantly from that, probably in the range of 200,000 a month of recurring revenue and moving up. So we have seen pretty strong growth in the fourth quarter and the first quarter of this year.

Nathan Latka

14:11That's great. Thanks for breaking that all down for us. So what's your plan? You have a thousand paying customers today. You've already identified how big the market is. How do you go get the other 10,000 customers?

Daniel Frey

14:19>> Yeah, so we start with the electricity utility bill and we're working with a lot of our channel partners and these channel partners are typically energy suppliers or consultants in the energy space that help these end users purchase or supply electricity or natural gas. So they have portfolios of customers and they have a traditional gas supply, electricity supply relationship with those customers. So these channel partners, we private label our solution. We allow them to expand their services

Channel Partner Go-to-Market Strategy

Daniel Frey

14:57>> around energy efficiency, sustainability reporting. It gives them more revenue. It builds a deeper relationship with those clients and it allows them to actually build a broader base of energy management and sustainability. So our channel partners bring a lot of customers to us that are starting to look for those kinds of solutions. We private label it. You've identified, you said we've got 35 channel partners that utilize our SaaS platform. These are people that are in the market

15:30>> that have portfolios of commercial customers that they serve and supply. So our plan and what we've done is integrate the electricity bill with some of these large suppliers and then be able to go in and offer expanded services. So we've already got your electricity bill, we've already got a load profile on your energy use.

Nathan Latka

15:51Daniel, I've gotta jump in here, sorry,

15:54just because we're short on time. So quick, quick, quick back and forth here would be ideal. Talk to me how you've capitalized the business. Have you raised capital or are bootstrapped?

Seed Funding and Current Raise

Daniel Frey

16:01>> We have raised $10,000,000 of seed a capital.

Nathan Latka

16:06What year was that?

Daniel Frey

16:08>> 2019.

Nathan Latka

16:09Okay.

Daniel Frey

16:10>> And we're in the process of raising another $6,000,000 that will accelerate this growth that we see in front of us and really allow us to get to profitability and grow the business to north of $10,000,000

Nathan Latka

16:26And most folks in their seed round, you mentioned you did seed round in 2019 for $10,000,000. Most folks in their seed round are selling 15 to 20% of the company. Were you in that same range?

Daniel Frey

16:34>> Yes.

Nathan Latka

16:35Okay, so you're like a 60,000,000 valuation, 50,000,000 valuation back then?

Daniel Frey

16:37>> Correct.

Nathan Latka

16:38Interesting. What do you think your valuation would be today as you're trying to raise 6,000,000?

Valuation Discussion

Daniel Frey

16:42>> You know, it is interesting. Know, if you look at a multiple on revenue, we think we can get to $5,000,000 of annual recurring revenue and software platform that really justifies the investment. So if you look at that as maybe a 15 multiple in today's market, that's in the 75 to million dollar range, something like that is probably where both the market for sustainable products, software and that kind of achievable growth probably values the company.

Nathan Latka

17:19Are you guys burning right now? Are you guys profitable?

Daniel Frey

17:22>> We are not yet profitable but we can see profitability within the next year.

Nathan Latka

17:26That's great. So when you say burning, you're talking like 50,000 a month in that burn a $100 or more?

Daniel Frey

17:31>> We're probably in the

17:35>> $100 burn rate but it is, we are reducing that significantly as we move into 2023.

Nathan Latka

17:43How are you doing that? Team cuts, something else?

Daniel Frey

17:45>> Just growth in revenue and adoption. Revenue growth will be stronger than 70% this year and really see a lot of opportunity around it.

Nathan Latka

17:57Yep, now if you don't get the growth and you're still burning a $100 per month, I mean, do you have a twelve months cash runway in the bank today?

Profitability, Burn Rate, and Cash Runway

Daniel Frey

18:03>> Yeah, we have a great capital partner currently, George Kaiser Family Foundation, 6,000,000,000 foundation that's funded our seed round and has continued to support us as needs come along.

Nathan Latka

18:16That's great. All right, we're out of time. Great story here. Let's wrap up with the famous five. Number one, your favorite book.

Famous Five: Books, CEOs, and Tools

Daniel Frey

18:22>> My favorite book, have to have to be Team of Rivals with Yates from on Lincoln.

18:30>> Yep.

Nathan Latka

18:31Number two, is there a CEO you're following or studying?

Daniel Frey

18:34>> I follow a lot of CEOs and really try to look at that. Obviously Elon Musk has changed the world. So if I had to pick one, it would have to be Elon.

Nathan Latka

18:46Number three, what's your favorite online tool for building THG energy?

Daniel Frey

18:51>> You know, we've done a lot of work around our CRM, HubSpot and have developed a lot of CRM capabilities through that tool. So leaning on it more and more nowadays.

Nathan Latka

19:05Number four, how many hours of sleep do get every night?

Daniel Frey

19:08>> Well, I've learned to function on six hours and seem to be pretty productive on six to seven hours.

Nathan Latka

19:15And what's your situation Daniel? Married, single kids?

Daniel Frey

19:18>> Married for a long time, father of two, grandfather of four.

Nathan Latka

19:23Wow, okay, and how old are you?

Daniel Frey

19:25>> I'm 62.

Nathan Latka

19:2662, last question.

19:27Something you wish you knew when you were 20 years old.

Closing Recap

Daniel Frey

19:31>> Life is a journey and just enjoy the ride.

Nathan Latka

19:37Guys, THG Energy launched back in 2011 today doing about $200,000 a month in revenue up from $125,000 a month just a year ago. They work with over a thousand folks powering their businesses, powering their utilities. These are like schools, hospitals, etcetera. They help these folks report on gas emissions with tracking and measurement. That's what their software platform does. He charges $5 per meter per month as they scale looking to grow now. They did a $10,000,000 seed

20:04round back in 2019. I called it a 50,000,000 valuation. Looking to raise $6,000,000 now at hopefully close to 75,000,000 valuation. We'll see if can get it done. Daniel, thanks for taking us to the top. Thank you. One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal

20:27live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big

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