A Dream Come True
With a few flicks of the thumb on their BlackBerries, David Brewster and Tim Healy can turn down lights and lower air conditioners at stores, offices, and factories across the country. And that has helped stave off a costly brownout in New England and rolling blackouts in California.
The two "power brokers," as Forbes dubbed them, are the founders of Ener-NOC, Inc., a $500 million public corporation built on one of those revolutionary ideas that seem obvious in retrospect: Instead of constructing pollution-generating power plants to handle peak surges, why not lower demand by temporarily reducing nonessential electricity use at commercial and industrial sites—and pay them for doing so? The Internet has made it possible to run such an operation from a remote location, but it took unrelenting diligence to move the behemoth utility industry into the new mode of action.
It happened in only six years, and it started in the halls of Tuck. At the beginning of their second term in 2001, Brewster and Healy began hashing over energy technology ventures. Healy, energetic and creative, had grown up hearing his father—a fuel-cell engineer—discuss energy and had hard-won entrepreneurial experience. Brewster, thoughtful and detail-oriented, had a master's in environmental management from Duke, had worked for a renewable-energy company, and had come to Tuck to explore win-win solutions for business and the environment. Brewster was to become president and COO, and Healy chairman and CEO.
In a basement conference room at Tuck, they scrawled strategy on a whiteboard from midnight to 4 a.m. Their first concept was to aggregate individual companies' generators and sell power to utilities, in effect adding energy back into the grid. While they eventually concluded that wasn't the right model, their effort was notable. "David and Tim showed extraordinary persistence in developing their venture while also being full-time students," says Professor Colin Blaydon, director of Tuck's Center for Private Equity and Entrepreneurship. "They went on to win entrepreneurship competitions and awards at Tuck, and since then we've launched programs to encourage and support student entrepreneurs like them."
It was T'76 Bill Hart, a center board member, who led them to a conference sponsored by ISO New England. At this meeting of grid operators, Brewster and Healy heard about "demand response"—reducing energy demand at key times by turning off nonessential uses, such as warehouse lights. Other companies were working "around the edges," says Healy, of providing these "negawatts," but the two resolved to be the "first, best, and biggest."
But the task was a catch-22. They needed funding to build the technology platform and enroll enough businesses to entice utilities, but capital wasn't easily obtainable until they had proven they "were more than two guys with a PowerPoint presentation," says Brewster.
Getting creative, they wooed software engineers from Reciprocal Designs in Manchester, N.H., and persuaded them to build a beta platform in exchange for equity in the company. The pair then spent months cold-calling potential clients. The energy manager of grocery chain Hannaford Brothers stayed on the line once he heard "Tuck" and eventually signed a multistore contract. The town of Fairfield, Connecticut, with big homes and an aversion to new power plants, followed. Both installed hardware devices that, on a remote command from EnerNOC's Boston network operations center (the "NOC" in EnerNOC), would lower their consumption from the electric-power grid. In exchange, they got smaller utility bills plus additional payments from the utility, of which EnerNOC kept roughly half. Slowly, more stores, offices, towns, hotels, colleges, hospitals, and warehouses signed on.
The growing list gave the two something to show to VC firms, which at the time were reeling from the dotcom bust and viewed utilities as stodgy and impenetrable. Healy and Brewster met with about 36 firms without getting a single "Yes." They financed the operation on credit cards, and for two months Healy even lived out of his car, unable to afford Boston rents. At night, he recalls, "I would wonder, am I crazy? Is this more than I can bite off and chew?" At one point, only a pep talk by Brewster's mother kept them going.
After a year of rejection, the 37th firm, DFJ New England, agreed to invest, in June 2003. Only two months later, on August 14, 2003, EnerNOC's demand response system helped stabilize the power grid in Connecticut during the largest blackout in U.S. history—a scenario repeated at varying scales more than two dozen times since. The big client breakthrough came in April 2004, when ISO New England signed a contract worth roughly $10 million. "Our biggest account up to that point was $40,000," says Healy. "Finally, we had traction."
In the last two years, running EnerNOC has been a matter of managing its galloping momentum. By the time the company went public in May 2007, it had annual revenues of $26 million. Healy recalls being in Times Square, watching their ticker symbol on the NASDA Q billboard: "David turned and hugged me and said, 'This is amazing! What a dream come true!'"
As of September 2007, EnerNOC had aggregated 918 megawatts from 691 demand-response customers at 2,034 sites in New England, New York, the Mid-Atlantic states, and California. Big-name customers include AT&T, MIT, and ESPN. "Based on market-potential studies," says Brewster, "we're in the ballpark of only 1 percent penetration at this point. If we can shave off 10 percent of demand, we're talking about a $45-billion-plus market opportunity—and that's just the U.S." In addition to having a regulatory team working to open up more opportunities for demand response, EnerNOC has acquired four companies that expand its reach and services. And it's moving into value-added services: increasing energy efficiency, enabling better energy procurement, and reducing carbon emissions.
The biggest challenge now is "finding good people and bringing them in," says Healy. Their 275 employees, all of whom own stock, include more than 20 Dartmouth and Tuck graduates. And Brewster and Healy want more. "We love Dartmouth and Tuck as places that attract incredibly smart, dedicated, hard-working key players," says Brewster.
"We followed our passions, and that enabled us to work incredibly hard and keep the faith," he adds. "Life is too short not to do what you absolutely love."
