German energy corporation E.ON, which serves over 30 million customers in over 30 countries, plans to invest in Israel startups in the coming years, sources inform "Globes." E.ON wants to find Israel startups for strategic cooperation and invest in them at the intermediate stages as part of its Agile Accelerator program, through which it already invests in startups in the early stages.
Like other conventional industries, such as banking, insurance, and real estate, the energy market has also experienced enormous technological changes and many permutations. Companies and corporations find themselves in need of new network management, Internet of Things (IoT), and cyber technologies. Israeli startups not working in or aiming at the energy market thus find themselves becoming relevant to the major energy corporations. German company RWE, UK company Centrifica, and US company Eaton preceded E.ON in beginning scouting in Israel.
E.ON VP scouting and co-investments Philipp Ulbrich told "Globes," We distinguish between three types of processes. The first is a dramatic decline in electricity prices following the use of renewable energy sources, which is in turn leading to electrification. We see the use of oil being banned in many regions, and it is possible that the same thing will also happen with natural gas in order to lower the carbon footprint. We also see similar private initiatives among customers who prefer renewable energy sources.
"The second process is digitization of energy networks, which facilitates smart management. The third thing we see is a decentralization process: in the future, there will no longer be dependence on the large energy producers. More energy will be produced by 'consumer-producers' - people consuming and producing energy by themselves." Ulbrich added that in recent years, the company had invested in startups developing peer-to-peer energy trading solutions.
Open to all types of innovation
E.ON has invested in 50 startups to date in Europe and the US. In recent months, the company hired an Israeli representative to scout for it in Israel, and also joined the SOSA innovation platform in Tel Aviv. When its acquisition of Innogy, which has an innovation center in Israel, is completed, the center will become E.ON's local headquarters.
E.ON is looking for innovation in diverse fields, but is especially emphasizing cyber in its activity in Israel. Cooperation with SOSA focuses on locating cyber companies. Last week, E.ON held a startup competition in an area for cyber companies. The winner was Indegy, which develops a cyber defense solution for critical infrastructure. Following this result, Indegy and E.ON will begin a joint pilot.
E.ON Group CISO Rene Rindermann said that the company wanted to install cyber solutions to protect against various scenarios, including a takeover of a loading station for vehicles that could result in the electrocution of users and break-ins of electricity meters resulting in changes in customers' accounts by competing energy companies aimed at damaging E.ON's credibility.
"Globes": Your company is in the process of change, a significant part of which is working with startups. Where do you see yourselves and the energy market going in the future?
Rindermann: In energy, we've gone from a very stable industry a decade ago, and in Israel it's still that way, but the rate of change is constantly increasing. Prices of solar batteries and panels are continually falling, and this is certainly accelerating the change, but there's a lot more to be done. Regulation can delay the change, and certain markets progress faster than others in various areas. For example, in smart measuring tools, there is great progress in Nordic areas, while there is a lot of peer-to-peer progress in the UK.
"We don't think that the new model will replace the current model. As a company, we want to help customers in two spheres with new solutions we're looking for. The challenge is to select in which areas to adapt yourself and in what areas to invest. You can't be a leader in everything."
What are you looking for in a startup you invest in or cooperate with?
"There's a lot of competition in these markets, so you have to be open to all sorts of innovation, and not just restrict efforts to companies in the early stage or in the later stages. Our cooperation with research institutes is at even earlier stages. On the other hand, one of our investments in a company with a product included setting up a joint team that sold their solution to our customers.
"With the completion of the Innogy deal, we'll have 50 customers under one roof, so companies have to have a certain level of maturity, because we've got to have confidence that what we sell to our customers will still be there two or three years from now. A good point of departure will be a team that has been together for at least 18 months and already has a product. We'll invest in an innovative solution that the company needs money in order to continue developing, and which is strategically important for us."
How much do you usually invest, and what are you asking for in return?
"We usually lead investments, starting with €200,000 in the early stages that the company can use for a six-month pilot, up to €10 million at later stages. We never seek exclusivity, because we don't want to limit the startup. We sometimes enter a strategic partnership in which the company develops a product tailored to us, in addition to developing its usual products, because we need adjustments of the product to our needs.
"Besides our needs, we check startups' motivation. There's a lot of money in the market, and what startups are looking for is cooperation and development partners. Israeli startups make excellent partners, because we can instruct them and orient them - they tend to be less mature than startups in the US and Europe. On the other hand, we don't want to push ideas on a company; motivation has to come from the company, and not because we'll invest in it and the company is told that it has to go in certain directions; this is not a sustainable approach."
Published by Globes, Israel business news - en.globes.co.il - on December 12, 2018
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