Europe’s Tado raises another $23M to grow smart thermostat and AC control business

Munich-based Tado, maker of smart thermostat and AC control products, has raised another $23 million for further international expansion. The new investment is led by Inven Capital, the venture capital arm of the Čez Group, a multinational energy conglomerate based in the Czech Republic. It’s the startup’s third funding round and brings the total raised to $57 million since being founded in 2011.

Tado’s previous backers include the venture capital unit of Siemens AG, and Statkraft Venture Capital, the investment company of Europe’s largest producer of renewable energy. In addition, Target Partners, Shortcut Ventures and BayBG are also investors.

Sharp-eyed readers will have noticed that, along with a number of traditional VCs, Tado’s investor list has a definite strategic bent to it, spanning the energy industry, including renewables, along with one of Germany’s largest engineering companies. That plays into the fact that the startup’s longer term mission is to not only make home climate control smarter for the benefit of each individual household but also the environment and national energy grid as whole.

The company’s two current products are a smart thermostat — resulting in Tado sometimes being called the Nest of Europe — and a smart AC controller. Both enable a home’s heating/cooling to be controlled via the Tado smartphone app, with a flagship geo-location feature that means Tado is able to know when you have left home or are returning and adjusts your heating or air conditioning accordingly.

This, co-founder and CEO Christian Deilmann argues, is better than a purely ‘self-learning’ approach, such as that utilised by Nest, or relying on schedules alone, however much easier they are to program using a modern smartphone app.

In a call yesterday, he said that Tado’s location-based automation is still the main feature that provides differentiation from competitors at the point of sale in retail stores, such as Dixons Group in the U.K., where the Tado will often be sitting alongside products from Google-owned Nest or British Gas’ Hive. He also says 87 per cent of all Tado users take advantage of the geo-fencing functionality to automatically control their home’s climate.

But actually Tado is a much deeper tech play than smartphone and location-based control of your home’s heating and cooling systems alone. The startup’s smart thermostat has been painstakingly engineered to be able to connect to a boiler’s digital serial interface, more typically found in heating systems in Germany and elsewhere in Europe and in newer systems in general, which enables the cloud service to be able to do all sorts of other clever things.

This includes the ability to modulate heating, rather than simple switching the boiler on or off, as well as monitor the health of a house’s heating system remotely, sending diagnostics to a maintenance company or engineer. The former offers much greater energy efficiency, says Deilmann, while the latter can help prevent a boiler from failing outright because problems can be more easily caught in time.

Tado currently offers its diagnostics portal to partner installers and services companies as a way to build long term value into those relationships. However, in future it could monetize that aspect of its offering via, for example, a marketplace for parts or by providing a library of technical information in the cloud.

Then there’s the way Tado is planning to make its service smarter for the benefit of energy management overall, including at the national grid level. In practice this means partnerships with local utilities companies — and is perhaps where the startup’s strategic investors come even more into focus — to enable Tado and its customers to opt into ‘demand response’ schemes so that a home’s heating and cooling systems are utilised where possible outside of known peak energy times.

This could be a simple as turning your heating down by a few points without it really being noticeable or heating your home up a little ahead of time. In aggregate, this can make a tangible difference to the national grid’s ability to stabilize energy consumption and production, and, says Deilmann, is where the bigger picture of smart home climate control really kicks in.