When looking for new markets, Edgeir Aksnes should have come across Germany quickly. The Federal Republic has been investing in the expansion of renewable energies for years. Already 42 percent of the electricity demand by solar and wind power plants covered. More than in any other country on earth. And yet: The electricity prices in this country are the most expensive in Europe – and are rising steadily to the annoyance of many consumers. Also because many energy companies pass the costs of expanding the infrastructure on to their customers.
For Aksnes, on the other hand, it is an ideal starting position with his startup Tibber, where he has been offering green electricity at cost price since 2016. The electricity is purchased at hourly updated prices and passed on directly to the consumer. The company waives a margin. The customer only pays for what he actually uses and also transfers a monthly fee of around four euros to Tibber. Termination? Possible at any time with a period of four weeks. Tibber has also been offering the electricity tariff in Germany since May.
Marion Nöldgen, the MD of Germany at Tibber explains to Gründerszene: “We are very satisfied and were overrun even without major marketing activities, which at times led to operational challenges.” She does not want to say how many customers the startup has already won in this country. Just this: “It’s a middle five-digit number.”
Alibaba investor joins
In order to continue to grow, Tibber has now obtained a capital injection from donors at the equivalent of around 55 million euros. The round is led by the London-based VCs Balderton Capital and Eight Road Ventures. The latter has already invested in the Chinese Alibaba group, among others. Existing investors also invested again in Tibber, including the Founders Fund of billionaire Peter Thiel. Together, the investors raise a good half of the total financing amount.
The rest is to flow as working capital from the Finnish bank Nordea. For Tibber, this money is “almost more important” than pure risk capital, explains Nöldgen when asked by the Gründerszene. “In this way, we can easily pre-finance the electricity that we buy for our customers but only invoice them at the end of the month.”
The company also wants to invest in expanding its energy platform. In Scandinavian countries, in addition to electricity, Tibber also offers smart home devices for sale, such as intelligent thermostats, sockets or e-charging stations. Users can use the app to interconnect the devices and control them so that the washing machine, for example, only starts up in hours with particularly low electricity prices. This should be reflected in the electricity bill: On average, users save around 20 percent of their costs, promises Tibber.
Not everyone saves
In Germany, on the other hand, this business is still in its infancy. The reason: Unlike in Norway, for example, very few households have so far had a digital electricity meter, also known as a smart meter. But that is necessary to take full advantage of the Tibber platform. In addition, if you buy such a meter, you often pay more annually for the Tibber package than for a conventional electricity contract because of the higher basic fee.
Consumer advocates therefore warn against excessive savings expectations. Tibber is hardly financially worthwhile for new customers with low power consumption, said Udo Sieverding, energy expert at the North Rhine-Westphalia consumer center and the Heise IT portal . “For customers with higher consumption who already have a smart meter, this can also be quite economical.”
Tibber Germany boss Marion Nöldgen points out that users can benefit from Tibber even without a smart electricity meter. Approximately. by using the app as a hub for smart home devices and being able to view consumption. When it comes to the question of costs, she agrees with the consumer advocate: The company is primarily focused on larger households outside of large cities. “Ideally with a solar system on the roof and an electric car in front of the door,” says Nöldgen.
This means that Tibber’s business model is also a bet on the future. Admittedly, neither digital electricity meters nor electric cars are widespread in Germany. But that should change in the coming years. According to the will of the federal government, all private households should be retrofitted with modern meters by 2032, and the smart meter will even be mandatory for heavy consumers. Meanwhile, the demand for e-cars and private solar systems is increasing. Fueled by purchase premiums, for example, registrations of e-cars increased by 182 percent to almost 17,000 units compared to the previous year. In the first half of the year, 20 percent more solar systems were connected to the grid than in 2019.
Half a million euros in profit
From Nöldgen’s point of view, the business model is already worthwhile for Tibber today. Across countries, 100,000 people have already signed an electricity contract with the young startup. “In the past third quarter we were already profitable with a profit of over 500,000 euros,” said Nöldgen. The company doesn’t talk about sales, probably also because the competition is growing.
In this country, for example, the Awattar company offers a monthly cancelable green electricity tariff with an app connection. The young provider Fresh Energy, which is even a spin-off of the German electricity giant RWE, is also developing a comparable model to Tibber.
Tibber will have to prepare for a hard-fought competition. The startup therefore not only wants to use the new financing to expand into other countries and hire new employees. The product range is also to be expanded rapidly – especially in Germany. According to Nöldgen, plans include a retrofit kit that customers can use to add intelligent features to their existing electricity meters. Sales should start in the coming year.
360Leaders helped support Tibber by hiring Marion Nöldgen as MD Germany to launch this major market and help drive the commercial growth across the company.
Read our case studies to learn how we support our client’s to scale or contact Martin Falch at 360Leaders to learn more about the hire.
Article first published on Gruenderszene.de on 17th November 2020. This article has been translated to English.