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Funding updates
July 01st 2024

Backing Heat Geek: the vetted community of heat pump installers

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Manuel Antunes, Triple Point Ventures, explains why the team backed Heat Geek.

For anyone investing in the energy tech sector, heat pumps have been on the desk at some point or another. Today we are excited to announce we have made our first investment in the heat pump sector, bringing it from a desktop research focus to an exciting portfolio position.

For those in need, heat pumps are devices that extract heat from a source, such as air, ground or water, and transfer that heat into another location. Its use case in the UK is predominantly for heating purposes. The excitement around them is due to the better performance these have against conventional boilers — where for the same level of energy use (kWh units, be it of gas or electricity), the heat output can be 3–5x greater than gas boilers.

Whilst we have you on Heat Pumps, let us tell you a tale of SaaS in 2023

There’s been lots of chatter around the ability of pure SaaS business to fundraise later stage rounds. This is particularly interesting as SaaS was seen and perceived as one of the easiest business models to fund — revenue recurrence, high margins, software tech moats were reliable (were?).

The increased risk aversion in the investor market in 2023 (the result of tighter liquidity for VCs, higher interest rates, and all that macro…), combined with the appearance of ever more reliable AI solutions to programming and product development, meant what was seen as defensible technological moats, is now seen as less defensible and therefore less exciting. We are now seeing that *maybe* generic SaaS is now finally becoming as boring as SaaS business models were for long claimed to be!

Back-of-envelope, non-statistically relevant, evidence of this can be found in Crunchbase’s list of Series A announcements in Europe. We see the following trend:

  • 2019–2022: 35.8% of rounds tagged as “Series A” with over $5mn raised, were tagged as “Software” or as “SaaS”.
  • 2023 to today: that number is 28.5%.
  • [the same is true when searching for industry tags “relatable to” software: a trend from 52.5% of “Software” related transactions to 44.7%]

Similarly, between 2019 and 2022 (4 years), 13 large Series A rounds tagged as “Hardware” got done, whilst from 2023 until today (1-ish year) we’ve seen 8 already.

Extrapolation (and a bit of wishful thinking at this stage) would argue more intricate business models are more defensible propositions in a world disrupted by automation and its low-hanging fruit applications in software development.

We have therefore grown increasingly interested in solutions marrying software propositions with highly defensible non-software moats — be it media channels and communities (think of Modo Energy, one of our portfolio companies), some elements of hardware enablement, some elements of deep tech expertise, etc.

A tale of tech surrounding heat pumps

Our deep dive into the heating industry started off with a comparison to the more mature solar tech market. Solar technologies could be broadly grouped into solutions helping installers install faster/better and solutions smoothening the consumer journey, and we found something similar in the heat pump space.

The players supporting the heat installers were operating either servicing the whole suite of needs of an installer (those operating in a “vertical” way) or were building solutions to address a particular need for installers (e.g. procurement of parts, local permissions, etc.).

Players disrupting the usual go-to-market are innovating by controlling the sales journey, smoothening it with sales-supportive content, providing financing options, or simply reaching the potential buyer where typical installers wouldn’t reach.