eMeter’s CEO on its new $12.5M and holistic approach to the smart grid

eMeter, one of a number of companies building software for smart meters, has raised $12.5 million from Sequoia Capital and Foundation Capital — two prestigious Silicon Valley names looking to get in on the growing smart gird business.

As the caliber of these investors suggests, eMeter is no arbitrary pick. Going up against public companies like meter maker Itron, it has quickly risen to the top of a brand-new field: smart meter management. It partners with the likes of Siemens, Oracle, IBM, and Accenture to expand its footprint. And now an IPO might be just around the corner.

“We have a unique offering for full integration of the smart grid into the existing utility infrastructure,” says eMeter CEO Gary Bloom. “This includes demand response programs and curtailment to cut back the amount of power being used when it becomes important, like it is now with the situation on the East Coast — all of the blackouts and brownouts happening now during the heat wave.”

With hundreds of utilities across the U.S. and the world racing to deploy digital meters capable of wirelessly transmitting data to utilities and consumers, demand for software to operate and control the devices and power flow has skyrocketed. Not only are utilities interested in software that can parse data to improve their services, but more homeowners than ever before are looking to keep tabs on and manage their energy use.

eMeter has jumped on this consumer-facing strategy in a big way. In addition to rolling out software for 24 million smart meters in the field, the company launched its own home energy management system, called Energy Engage, last year. Earlier this month, the company briefed President Barack Obama and the Department of Energy on the promising results of a pilot test of this technology. Called the PowerCents program, this included the installation of smart thermostats and meters in 900 homes in the Washington, D.C. area. Accordingly, eMeter has become an authority on real-time pricing in an increasingly competitive industry.

The company doesn’t seem to be at all intimidated by its crowded playing field. As an early entrant, it has gotten a generous lead on newer startups, achieving scale before many of them are even on the market.

“We’re global already,” Bloom says. “We offer an environment where our customers can build all sorts of applications to make the smart grid even smarter. And we have a lot of very successful customers.”

These customers include Texas utility CenterPoint Energy, Toronto Hydro Electric System, Bluebonnet Electric and Vattenfall in Sweden and Finland. Recently, it brought Westar Energy — the largest electric utility in Kansas — into its fold, to improve the company’s consumer engagement with a web-based communication portal, Bloom says.

Now, with strong momentum and cash in hand, eMeter is planning to expand its sales and marketing operations. Its products are already being distributed by some of its partners including IBM, which bundles the software with servers. But eMeter wants to beef up its own sales channels while it has the runway — the key to leveling up in scale.

“We’ve characterized this as a double-down round,” says Bloom. “We have to grow our sales capacity and, along with that, our services capacity. Now we can do both in parallel.”

The key to jumpstarting its sales is to convince utility partners that a software solution to their smart grid goals will be more effective and affordable than competing hardware approaches, the CEO explains.

“Over time, we saw a huge value shift on the internet from hardware to software companies,” Bloom says. “It used to be all about building a big enough server farm. Five to seven years later the internet is all about Oracle and Amazon — a whole generation of software. I think we’re going to see something very similar with the smart grid.”

As Earth2Tech points out, eMeter didn’t think it was going to need a fresh round of capital after its last, third round. Word on the street was that the company was going to go public, beating wireless meter communications company Silver Spring Networks to market as the first big smart grid IPO in a long time. This may still happen, but it looks like the company needs more cash to get it there.

The San Mateo, Calif.-based company seems to have a pretty high burn rate. It previously raised $57 million from Sequoia and Foundation. Now Northgate Capital has swept in to join the most recent round. eMeter clearly still looks like a good bet.

That said, the public markets don’t seem to have warmed to cleantech candidates. Tesla Motors saw a blockbuster $226 million public exit last Tuesday, but it was definitely the exception to the rule. Investor enthusiasm has been dampened by poor performance of green technology stocks like A123Systems, Codexis and Jinko Solar. These unfavorable conditions even convinced solar module maker Solyndra to cancel its IPO filing.

eMeter my very well hold back on its public sale for the same reasons. The emphasis on revenue generation make sense in this light, but the company can only stay on VC life support for so long.