Global energy demand is astronomical. As the world continues developing, so too will energy consumption rise. This is indisputable. To meet demand, particularly during peak times, utilities often have to produce more than what’s typically needed. End users, too, often waste energy, with commercial buildings wasting an impressive 30% of what they tap from their providers. This creates a tremendous cost on both sides of the supply chain.

One company that’s dedicated to reducing energy waste and the costs associated with it is COI Energy. The company operates as a hardware-and-software provider. Operationally, it targets the detection, elimination, and monetization of energy waste. The company does this by connecting its technology, its system, to a user’s meter and other energy-related assets. It then collects data from the system that enables real-time insight into consumption. Examples of analytics include measuring a firm’s carbon footprint, looking at both traditional and renewable energy consumption figures, and measuring energy efficiency. Users will then be able to plan their consumption and energy production based on real-time and historical data — thus lowering waste and costs. COI Energy utilizes machine learning and AI protocols to help with the analysis of the data their system collects.

It can be difficult to gain traction for an early-stage business in the enterprise space. Even so, COI Energy has done well since launching the platform. Today, they have more than 150 paying customers. This roster includes Citi, US Foods, TECO, and the New York Power Authority. It also has partnerships, including one with SAP Software Solutions. Pricing specifics were not provided, but the company does have a couple of revenue streams. The first of these involves one-time activation charges the business collects. After that, the customer continues to pay for the service through a monthly subscription plan. Management claims that the average payback period generated from customers’ savings is about 6 months. After that, net savings flow through to the subscriber for as long as the technology is being implemented.

COI Energy is still very much an early-stage business. Its sole focus now seems to be on growth. But when you look at its financial results for the past two years, you notice something that’s initially disturbing. In 2018, the business generated revenue of $365,749. Instead of surging into 2019, it fell to just $191,935. Though this may look worrisome, management assured investors that the drop was caused by activation fees in 2018. In 2019 the firm’s main source of income was its subscription fees. Official data has not been provided for 2020 yet, but the company did say that it expects sales of $1.5 million for the year. On the bottom line, COI Energy has not done particularly well, but that’s to be expected given how early stage the business is. In 2018, the business lost $270,932. This loss skyrocketed to $793,777 in 2019. Operating cash outflows in 2018 were $383,481. This expanded modestly to $501,632 last year. No estimates have been provided for 2020 yet.

The market that COI Energy operates in is difficult to assess. The firm’s management team pegs the global addressable market for its industry at about $92 billion by the year 2025. Our assessment of the industry came up with something different. One source, looking solely at the smart grid market as a whole, pegged the opportunity at $35 billion today. It projected that with annualized growth of 22%, it will reach $94.7 billion by 2025. A different source suggested a similar outcome, with the industry growing 20.9% per annum from $34.8 billion this year to $61.3 billion by 2023. Yet a third source forecasted something far greater, with the market rising 12.4% per annum from $95.1 billion this year to $169.2 billion by 2025.

Narrowing down the opportunity, we get a smaller immediate market for the business — the global energy and utilities analytics market. One source pegs the market opportunity this year at about $2 billion. It forecasts an annualized growth rate of 16.3%, which should take the industry to $4.3 billion by 2025. A second source estimated the market’s size at $1.5 billion last year, with a 12.76% annualized growth rate taking it to $2.9 billion by 2025. Yet a third source projects that with a 10.4% annualized growth rate, the market should grow from $1.15 billion in 2018 to $2.31 billion by 2025. These figures may feel lackluster by comparison to the broader market. However, they are still attractive enough and provide enough room to help build COI Energy into a valuable player in the energy industry.

The management team at COI Energy consists of six individuals, including two developers and a marketing manager. The top two members, though, are SaLisa Berrien and Prakash Bhatia. Berrien is the founder and CEO of COI Energy. At present, she is also a cohort member of both the Nasdaq Entrepreneurial Center and Morgan Stanley. She currently serves as a Board Trustee at the University of Pittsburgh, and she is the founder of STRIVE, Inc, a STEM leadership development company. In the past, she also worked as a Board Member at Valley Youth House. 

The other key member, Bhatia, is the Head of Value for COI Energy. At present, he is also serving as the Global Strategy Pricing Director for LivaNova. In the past, he worked as the Head of Global Sales Operations and Strategic Pricing at Capsugel. This was a role he was promoted to from a lower position at the same company. And before that, his experience included working as Manager of Strategic Contracts and pricing at Stryker.

Our team has rated COI Energy as a Deal to Watch. The company’s sales figures look worrisome at first glance. But when you understand why revenue dropped in 2019 and where it’s expected to be this year, the situation is far better. Yes, COI Energy does generate significant losses, but that’s to be expected given its stage of development. Add in the small industry it operates in and the $18 million valuation cap, and investors may wonder what there is to be excited about.

For starters, on the plus side is the initial traction the firm received — 150 B2B customers is not an easy target to hit. Their system’s 6-month average payback period is also very appealing. As is the fact that the industry opportunity, while initially small, is growing at a very attractive rate. The projection for $1.5 million in revenue this year is also encouraging, as is management’s call for annual recurring revenue to hit $25 million by 2022. Even if the firm achieves half that target, the valuation cap today could look logical. Add all of this together and it’s hard not to like what COI Energy is doing.