Interview with Nate Richards and Jason Beck

ERCG continues its ABC leadership interview series with Nate Richards (Co-Founder and CFO) and Jason Beck (VP Sales) at Enerex. We did a zoom interview with Nate and Jason, and here are some of the many excellent quotes from the conversation –

  • On the importance of scale and why they merged


“Get to size … together – with the stroke of a pen – we were over 100 brokers, over 75 TWh”


  • On the gold standard of data security, ISO 27001


“One fumble on security – that could be game over for a software company”


  • On the idea that the most successful brokers are process-oriented


“Suppliers have a bigger appetite to work with people who have their act together and present a consistent experience”


See the interview video link and a transcript of the conversation below.


Young Kim, ERCG: Welcome everyone to another installment of ERCG’s ABC leadership interview series. We have today two experts in the video format! Jason Beck and Nate Richards of Enerex, and we'll just dive into the questions right away. So, Nate, since our last interview in 2016, Energy Frameworks merged with Powermatrix. Can you give a little background on how this how this came to be? You know, whose idea was it, why did you do it. And also, how are things going now that you two companies have merged?


Nate Richards, Co-Founder Enerex: I'll let Jason actually tell the longer story. But, I think that background-wise, Powermatrix was always a company that we, on the Energy Frameworks side, had respect for. I had a chance to meet Deepinder [Singh, founder of Powermatrix] very briefly (who's now my business partner based out of New Jersey) at New York TEPA a couple of years ago when I was a one of the keynotes there. And people know Deepinder – he's very soft spoken, he's sort of a low-profile guy. That's just the very beginning of how much complementary nature there was as we got to know each other better, both principals, as well as the rest of the team … and fast forwarding to the end, or maybe even arguably the beginning of the next story – it's been fantastic. I can remember when I was single, and you're about to get married and you're sort of like oh my gosh am I going to regret this one week from now? [Laughter] And there's that fear of the unknown: it's very hard to go back once we pull the trigger on this thing and there has been none of that. And certainly no regret and why didn’t we do this sooner? if anything. It just made so much sense. But let me let Jason tell the story because there is kind of a fun story to it.


Jason Beck, VP Sales Enerex: Yeah, you know, and it's always interesting – the different perspectives we all share. And first off, Young, thanks for having us today, really appreciate it. You’re one of those industry stalwarts to move retail energy forward. So really do appreciate you having us. In terms of the merger story. One of my most fun stories to tell. Simply because in my career, I've been with retail energy suppliers for 12 years and I was always looking for a way to impact the future of retail energy. So after joining Powermatrix in 2017, we grew the company of Powermatrix from six clients at the end of 2017 to 50 at the end of 2018. And they talked about this too when we first started. Deepinder and I literally said CORE is the gold standard. That's who we're going after, right? Like, let's figure out how to be them and then continue to grow. So, ton of respect for the company as well. And so, when we were going into 2019, Deepinder and I were pretty confident that we were going to continue our mission to change retail energy. But then, during the 2018 holidays, Nate reached out and said, “Hey, let's grab some lunch.” So we met in at an Afghani restaurant. So just to show Nate and I are foodies … we had that culture, eat all the different types of foods.


Nate: It was a hole-in-the-wall. Definitely lock your car door when you go. But the food is fantastic.


Jason: It was. And then, it was 55 minutes of no conversation about business. Literally just a get-to-know-you session and so it really made me feel like I had a friend here right across the aisle, even though it was a competitor at the time. Somebody who I could really relate to. And then in the last five minutes, Nate asked a question: “Why are we fighting against each other? We could be so much more powerful together.” And honestly, the statement could not have been more correct, Young. We both share the same vision to create efficiency in an industry that is incredibly inefficient at communication between the broker and the suppliers. And so that's where the idea came from for our mission statement: to connect people through technology to build trust in retail energy markets. And as we talked to the suppliers, Nate and I ran into the same thing. They were like, “Get to size, if you want to do that. Get to size.”


Well, together – with a stroke of a pen – we were over 100 brokers, over 75 terawatt hours of load, and over 145 BCF of gas. So simply put two plus two equals five. You asked a question about how smooth it was to integrate, so touching on that real quick. On the M&A side all of my activity in the past had been on bidding on retail books and not winning. Or selling books of business, so never really a true merger or integrating processes, people, etc. If this is how it works, sign me up for more of them because it was generally seamless. I'd say about three months of discussion from January to get to a deal in principle, another three months to do the legal paperwork, because that's a big pain in the butt. And then came this how do we merge the companies together?


And so, on the face of it, think – CORE/Energy Frameworks: they had 10 years of experience working with brokers. They had Nate being an entrepreneurial guy in two different businesses and just that business prowess. And then the customer loyalty – the brokers that were on the CORE platform were super, super loyal. On our side [Powermatrix], newer UI/UX design, newer software design, a very scalable team. We had 10, and – just as an FYI, now we're at 50 developers – so when I say developers, I mean the whole development team across the aisle. That's what we had. And so the merger was really fairly easy. Karen Altekruse joined the team to take care of customer success. And then it all culminated last year and right around October. We had our 2020 strategic planning session. Nate led the leadership team, which was, Deepinder, myself, Karen Altekruse, Director of Customer Success. And we went through a series of exercises, and it really brought the two different perspectives: where we were unique, but where we could really gel together. And just as a wrap-up to this, this is where a lot of our mottos came from. We celebrate progress, which is one of our value statements. Even “all for one, one for all” – that purple color you see in Nate's background – that came out of that strategy session as well, which is a fun story. So, gelled all of the pieces together during that planning session. And yes, it was awesome.


Young: So it sounds like it was a combination of like minds and also kind of completing one another, in terms of perhaps skill sets or people that the other had that you wish you had. So, it's a great complementary business. Congratulations.


Nate: Very true, very true.


Young: Speaking of pain in the butt processes … changing your company name after all these years. So, you announced a new brand in early August. First, why did you do that, and also how is that going?


Jason: Before Nate starts up, you say pain in the butt – I literally had customers say “what name do you go by now?” And it's like, I promise you this is it, Enerex. This is it. I promise. But really, really good story behind it of the why – Nate, please.


Nate: Well, I was just gonna say we actually had this name in mind, even before … we actually acquired the domain prior to finishing the merger details. So it's been in our mind to take on this bigger vision, bigger identity. I think the question was, what's the right timing – do you sort of change everything in one big bang? Do you stage it? Initially the plan was to kind of go live with the new brand at the end of the year. That sort of got extended a little bit … we needed to just sort of go for it, even though you know in COVID maybe your message is not as clear and defined – there's so much other noise and just apathy for new things right now. But I think the results of it have been phenomenal in terms of just clarity of vision. And I think turning the corner from a company that had a product for brokers. From product to platform – that's really the big pivot, ideologically, and Jason can maybe speak to some of the ancillary benefits in the marketplace.


Jason: Yeah, I'll pick up on that, but, Young … I was looking for somebody to come on to my sales team, to double down on our efforts within the broker community – a Director of Business Development and we posted the opportunity in June. An outpouring of amazing in-industry, in retail energy professional resumes. We went through this detailed three-part hiring process that we put in place recently, and we yielded some really good candidates. And I was really close to landing a candidate. But then on Monday the rebrand comes out, and Tuesday I receive a phone call from someone who I think a lot of people who listen to this would know: Doug Brennecke. Doug was one of the co-founders of the highly regarded retail energy exchange (REX) platform that NRG bought back in 2015. And Doug simply called me up and said, Jason (and I know Doug really well, we've stayed in touch over the years). He said, “I want in.” He's like, you guys are doing exactly what I wanted to do with the REX platform. But we were a broker of brokers, so it always prevented us from getting there and attracting the larger broker firms that Nate and I have as customers, as clients of ours that we serve on a daily basis. And he said, “I want to change retail energy with you.” And I said, “Where do we sign?” Right? I mean it's exactly what you want. And so I really feel like this type of feedback that we're getting from the marketplace and the clarity of vision: this is really needed for retail energy. It's been great, the brand redo could not have worked out better.


Nate: We also just listed a role for customer success, and we had 250 applicants over a matter of weeks. The hardest thing was really dealing with the top 10% -- you still have 25 really qualified people, and making some tough decisions, but ultimately we were able to hire Lacey Price, who was at Incite and then at Advantage. So she knows our products, she's worked in the back office of a broker. Especially as we press into the CORE-to-Sparkplug transition, she's going to be an instrumental part of that. And it looks like we're probably going to be hiring for several more roles in the near future. So I think just that visibility and clarity of message and just a refreshed website that actually says, hey, this is what we're about … that’s been updated more recently than just a sort of blog posting basis, and actually talks about the overall platform and what our core values are, what our vision is, what we're about, how we manage our people, what's our culture like – the story had not really been told well, and I think this really gave us an opportunity to tell that story.


Jason: That culture piece cannot be stated enough. I think that's one of the key elements of the rebrand, too – that other people now know what our internal culture has been like for the last three and a half plus years on the Powermatrix side and 10 years on the Energy Frameworks side. Now, this idea of “all for one, one for all” which ended up being a hex color code that Nate found …


Nate: Yeah, this magenta hex code is a4004a, which is “all for one, one for all” – so it’s sort of like an easter egg embedded in our brand is this color, which represents our culture. Another side effect that Jason didn't mention was that we've had some unsolicited acquisition offers come out of this. We've had a lot of investment interest, both from professional money and from industry money. None of which we've availed ourselves of, but it's definitely created some resonance for us in the marketplace, without a doubt.


Young: Excellent. All right, so I've never had a chance to do this before, because I've never interviewed the same company twice.


Nate: Thanks, we’re honored to be the first!


Young: That’s right! And so this is a rare opportunity, and it allows us to reflect a little bit … so, it's been about four years since that first interview with Energy Frameworks. And, Nate, during that interview you pointed out there were several issues in the broker/supplier industry. And I kind of wanted to get your take on how much of that has changed four years later. And some of those issues that you talked about were 1) that the broker industry had too many error prone manual processes, 2) there's a chance in the supplier-broker interface that there are just too many cooks in the kitchen, and 3) when you're in a lot of markets, there's just an issue of lack of standardization, so it's hard to do business, and then finally 4) just a lack of trust between parties. So fast forward four years, where are we today? Did we make good progress on any of those?


Nate: Yeah, I still would say that, sadly, most of these have not seen a lot of progress. I think the market itself, the dynamics of the market and how suppliers think about channels, the nature of a channel, and how well-developed the periphery of “the meat & potatoes” – if you will – of the C&I broker has grown … we're now powering four or five different shopping sites online. So we have sort of a digital offering. We're now powering two to four CCAs in New York (we should have a press release coming out about that probably next week), really thinking about how do we create the CCA of the future. We have a mass market offering and we have aggregation pooling capability. So one thing that it has forced us to do is to create a diversity of product feature offerings to manage and maintain all the diversity of processes across those different types of channels. It's not just a broker. We thought of them as ABCs (aggregators, brokers, and consultants), but there's even yet more diversity within that envelope that needs unique capabilities.


I do think that this divergence of platforms – we really tried to address that with the merger, which was, hey, is there really a lead horse out there that is likely to garner enough market share to be material in terms of the ability to unify the industry? We would love to raise our hands and say, that's us. That's what we're out here trying to accomplish. I think representing, by your estimation earlier in one of your webinars you gave, I think US C&I load to be between 600 and 650 TWh projected for 2020 – notably down for the first time in some long period of time – and we've watched our procurement, annual sourcing on our platforms approaching 80 TWh. So we feel like we continue to gain the mindshare in the broker community and gain the deal volume that really starts to make connectivity makes sense.


Things that haven't changed: there's still no standard. I think there's still this portal mentality out there where – hey, we'll build a portal and everyone will want to log into it. Now, that hasn't really played out well for people who have invested heavily in portals. We don't see today any difference in brokers logging into portals. There's no world where brokers are going to log into 17 portals. And there's no world where a broker is only going to have three supplier relationships. And so I think both of the theses that spurred portal investment have not played out. What I do think is now it's – we'll connect API to API, broker to broker, supplier to supplier, and the challenge with that is it doesn't scale to 300 suppliers, 2000 brokers, 600,000 unique connections.


Jason: Well, on that, Young, Nate’s exactly right – over the last four years, not much change. However, I think that's one of the silver linings in this post-COVID era. I think what people realized is that technology is an enabler. But change is super scary, and that's where the balance of technology has always played out. When I see people in their life, they’re like – man, I know I'm gonna have to take some time to learn something. The first month or two learning something new is going to be really challenging – and that's right. There's a lot of truth in that statement. However, now that everyone was thrown into this change together, I've seen more come in the last six months. We've obviously had a much bigger (in retail energy) change in terms of focus on compliance, right? Retail Fraud Consortium with you – which you are a founding member on (and so nicely allowed me to become a Steering Committee member of) – to focus on compliance as well in our industry. I think it's driving change faster in 2020 than I've ever seen before. So, while not much has changed in 4 years, I would say in the last six months, things are really heating up and people are really talking about this stuff frequently.


Young: It takes time to solve these kinds of systemic problems, so it makes sense. If you're seeing that there is hope in on the horizon for solving some of these issues, that's terrific. So, beyond solving problems from 5-10 years ago, what kind of new problems do you think are out there and solvable, that you're working on today?


Jason: Yeah, I think this really boils down to three main topics and I think these are all challenges that the industry has known for a while, but yet we're solving them in new and unique ways. So the first one we'll talk about is connectivity. When I think about connectivity, it's twofold: first off, it's in the secure exchange of data and information across broker/supplier relationships, and then the second piece is how the industry communicates. We have recently launched Exchange. Exchange is our solution for those that want to communicate but they want to use their own software. We're software-agnostic in what we’ve created, and connectivity is all about your unique software program talking your unique language but translating it (like Nate was just saying) into the language of what your counterparty wants to talk about. And that's really what Exchange is, a Rosetta Stone for retail energy. The other place we're trying to focus on connectivity is how people communicate through our product, Enerchat – where you can speak fluidly to your supplier channel managers, or maybe even, again with other ancillary products and services and having a place where we can even eventually do secure transactions through chat. Getting everything out of email and Excel has to be one of those things that we have to focus on as an industry. Those are not scalable tools. I'm sure we'll talk more about that later but connectivity being number one.


Number two would be efficiency. I think a lot of other people have tried to solve this by saying let's do a marketplace. It's not how retail energy works. Suppliers don't want a race to the bottom. They want to be able to be differentiated and they want to choose the partners that they want to work with. Brokers are the same way – they don't want to sell for every retailer, they want to sell for the people that they trust, that they work with on a regular basis. And when we talk about efficiency of how that comes together, the Exchange was just that – there's probably about 40 or so brokers out there that have their own software, maybe another 20 on other software platforms, and we have 120 on Sparkplug. Majority still exists on Excel and email, right? So this efficiency of communication – bring your own software instead of 1.2 million connections like Nate was mentioning – how about 2300 (2000 plus 300) that allows this involvement of technology to come through faster.


Young: So you're talking about Exchange and I went to your website and you’ve got a LOT of products, by the way.


Jason: Just eight today.


Young: What's Exchange versus Exchange Live?


Jason: Great question. So, very different actually. Exchange is this API model – that's what Sparkplug and Propeller use to speak to each other. And we have just opened those APIs up to those brokers that use their own software that want to still communicate with one line of communication, as well as those suppliers that might have spent – I don't know, 100 million dollars building out something like Salesforce. So, that is what really Exchange is. It's that connectivity layer. Exchange Live is formerly CORE Marketplace. I’d love Nate to talk a little bit more about Exchange Live.


Nate: Exchange Live is sort of that same thing around deals – meaning brokers and suppliers coming together exchanging information, but it's sort of the visual, the user interface, experience. And that's why we called it Live, because Exchange Live is our online e-procurement offering. So if you're a broker and you do public procurement and you need to publicly publish RFQs, you need to circulate to a named bidder set, you need to pre-qualify bidders by requiring them to complete certain tasks in advance, you need to have a transparent bid sourcing process. Now we don't prescribe what type of process a broker uses, and it's really just about having a login so they send an invitation, your bidders get qualified, they can move on. You can have a series of procurement activities. Maybe you price the 12-month deal separately, or you group your meters in different ways so that you have different load blocks that you're bidding out of different ways.


So again, we're not becoming the broker. I think this is a big key theme that you'll see – we recognize there are different types of brokers out there. Some do a lot of online sourcing, some don't do any. Some do aggregations, some price one deal at a time – they think that's the best way to serve their customer base. Some use a third-party agent network where they're running one-logo, single-branded campaigns (we think of that as mass market in terms of how they reach those customers). Some always price their full relationship set on every deal because they think: that's my duty to my customer. So we're not prescribing how to be a broker, whether one way is good or one way as bad, or one way is better or one way is less better. We're saying the broker marketplace has several demonstrated successful models to go to market and source energy transactions, whether they're representing one brand in a person-to-person transaction digitally, or online and more governmental, large C&I, where the customer needs to have an experience as part of their buying process.


Young: Reverse auction?


Nate: It does have a reverse auction capability but the vast majority of transactions are not actually auctions. And that's I think the novelty that we bring is allowing traditional brokerage sourcing to be a visual experience for the customer. So the customer can see all of the different quotation data live as it comes in, without having to force suppliers into an auction. And I think that's really something unique that we


Young: That is unique. I've never heard of this before. Can you explain …


Nate: Yeah, so what is traditional brokerage? There's a data gathering phase, then there's a pricing stage which is identifying who might be a good candidate to price this load (whether we're talking about gas or power). What are the different product structures that we might want to see priced and then what's our process …


Jason: Young, I’ll add on to that. I think Exchange Live is for those brokers that want to differentiate themselves from the fray of just making a phone call or just sending a proposal (that's the common way and that's what Sparkplug supports). But if those brokers that want to differentiate and come up with their own unique process, Exchange Live gives them the framework to customize basically those bidding events that Nate talked about – fully white label brand. The only people that we care about showing the Enerex brand to are those in retail energy. For all the end-use customers, let it be the broker … we try to make the broker the hero. So that's what Exchange Live is – it's bringing your suppliers, focusing on your end user customers’ buying experience, and then obviously the broker as well – in one pre-bid format that's customizable to everybody's unique needs.


Nate: So you get all the benefits of what you would think of as a reverse auction platform, which is logging, security, transparency: I know every bidder that I sent it to, I have a log of everyone who declined, everyone who submitted a bid, the bids are timestamped down to the nanosecond, they’re put in in order. So I have all of that tracking and transparency, but I don't have to force my suppliers into reverse auction. I can allow them to submit quotations. We even allow the supplier to submit non-compliant bids. So let's say that a broker says I want all-in fixed requirements and the supplier says we really think that passing through transmission makes a lot of sense for this customer. In fact, we think that the underlying market is over-pricing fixed transmission charges on this contract term. And we think it would actually be in the customer’s best interest to pass through. Now in a blind reverse auction, they would say, “oh, we don't like that because we can’t have different products; we’ve got to force everyone into the same product.” So our platform, Exchange Live, was really set up to be supplier-friendly and specifically to allow them to submit different product structures. And then even non-conforming bids. So if a broker says, I only want to see X, but I'll consider other terms, other products structures, and allows the supplier to put their ideas out there for the customer’s consideration.


Young: Thanks for thanks for taking that little digression.


Nate: Sure.


Young: I think that was really interesting and, Jason, I think I cut you off there. You had another concept, another problem you're trying to solve?


Jason: I promise you, that's something that I always do – circle us back to the original conversation. Yeah, we were talking about what are three things that we're working on now right as Enerex, and we talked about connectivity, we talked about efficiency, and I really actually appreciate the digression. To finish off efficiency, I think there's one more product out there to mention, which is Propeller. Propeller is our CRM, BRM (broker resource management) tool. When we think CRM, we don't think about a place to store your data – that it is – but it needs to be well beyond that. Workflow automation, process improvement, etc. And what we're really trying to do with Propeller is make a retail electric supplier the hero of the broker market in terms of ease of doing business. Young, I've been a proponent of your [ABC] Study for quite some time now, and when I was using it at Source Power and Gas back in 2015, it was a very apparent that there were a lot of brokers out there that highly valued, not quite but almost as equally as pricing, the ease of doing business with a retail supplier. So then I asked the question why are retail suppliers not easy to do business with? if it's that important. That's what Propeller’s focus is – easily communicating out, even automating some of the process. Could you imagine a world where you didn't have a matrix? That information just came seamlessly into your CRM as a supplier and was able to go right to pricing – interconnected pricing, CIS, billing data, as well as load forecasting, all in one place – so you could seamlessly serve your broker clients. That's the efficiency that we're trying to tackle with many of our products, but especially Propeller.


And the third piece. Nate said it was an issue in 2016 and I agree it still is – trust. Trust being the third –connectivity, efficiency, and trust. Now with regards to trust, the reason we're trying to solve this is because I think it's the only way that we as a retail energy industry proceed forward. Again, mentioning RFC – bringing multiple parties together and to speak the same language – being competitors, but yet finding those commonalities, those base issues that we can solve collectively, which means that we will save money if we can solve those base issues that we all have together. We're trying to solve trust, so we have not taken on investment money from any retail energy source – brokers, suppliers, etc. We are our own entity. We are not a broker. We are not a supplier. We hold no [market participant] licenses whatsoever. We want people to trust us. And then we went out and got the gold standard in certification around trust, data security trust, which is ISO 27001. You can read more about it on our website. Nate, in fact, you did a lot of the work for this – the legal review, etc. I'd love you to talk about more of what this means to us.


Nate: Yeah, briefly, how do you say you can trust me? And usually the one thing you don't want to say is “trust me” because the type of person that says “I'm very trustworthy, trust me, you can trust me” is probably not very trustworthy. So that's the one thing you know, and so we felt that one of the long running gold standards for data security is the ISO 27001 standard. Microsoft has it, Amazon has it, banking software has it. We thought, wow, imagine if there were a platform in retail energy that had this standard. And as we sort of move and want to address larger and larger customers. We felt like we need to do the work first to show that we are trustworthy rather than saying we're trustworthy. Let's demonstrate it through our behavior and through documented auditable findings … And I think this is probably something that's a trend. As we look across, you see PUC entities … that the PSC in New York already sort of taking motions, not just CCA, suppliers, and DERs already have to also sign off on this. NY doesn't regulate brokers, as we all know, so that's not looming, but I can see this idea of stewardship of data and the expectation that you can't just take customer data, throw it in a spreadsheet and put it on some Dropbox file and email out a link to whoever you want. That there's some sort of requirement, an expectation that we're stewards of this data and that we have to treat it as such, just like medical record data, patient portability.


Jason: Specifically to third party audibility of something like that. I think that just saying that you do it is one thing and then having somebody else not part of your organization come in and verify that you do that is a trend in many different industries.


Nate: We don't mess around with security. We know that one fumble on security – that could be game over for a software company. And that's something that we take super seriously. One other point I want to make on Propeller (and Jason sort of alluded to it didn't make) was again this lack of prescription. We're not saying, “hey, you have to use our pricing engine, you have to use our credit engine, you have to use our …” right? We're saying, hey, it's plug and play – this is the orchestration layer. You plug in your pricing, you plug in your credit, you plug in your load forecasts, and you plug in your risk management pieces. And we're the orchestration piece that sits between all of that back-office software (which there's a well-established industry of players there). And whereas most suppliers had to build their own in this space, which is the space between there and the channel facing piece. Now there's an off-the-shelf solution that isn't tightly coupled with one of those. It's rare that someone's running pure-play from one vendor. Oftentimes it’s best of breed: this EDI provider, that load forecast, and this pricing engine, this credit risk. So we really felt like there is a need for something that that was purpose built for retail energy as opposed to, say, put $40 million into Salesforce and eventually you'll get a retail energy platform. What's affordable for the mid-market supplier – that's really where we're targeting, it's the mid-market supplier – and yet out of the box comes ready to plug into your different back office systems – and it’s not competing with … we're not offering a pricing engine, we're offering an EDI platform, we're not offering these things.


Young: I imagine some of those suppliers that merged, and all the back-office systems that are overlapping and perhaps competing …


Nate: [Laughter] Yeah. Who's gonna end up with the contract at the end of the day? Or we all still coexist? There are several suppliers out there that have done a lot of acquisitional growth, and they run one of everything, two of some things. In the Northeast, they run this and in ERCOT run that. Obviously different suppliers of software had strengths, regional strengths, just like the actual market participants. There's sometimes a call for that too.


Young: Well, speaking of M&A you guys help brokers with their M&A processes. If they come to you and say, hey, we're looking to sell … how do you help them and what has that process been like?


Jason: Let’s start off with the problem. First off, I feel like the biggest problem here is their [brokers’] data sucks … it's definitely not in any format. Some of our brokers that have come to us, literally have come with a Dropbox file of every single contract that they've signed … Then you’ve got somebody like Sean Kelly, a friend of the Enerex family (he had used Sparkplug for three years) and then he decided – he's a very entrepreneurial guy – he said, “I want to go follow my dreams of building more technology for retail energy” and that's with his AI-enabled load forecasting platform, Amperon. His original brokerage firm was Bridge Energy, and he knew we wanted to sell that to get the seed capital to move forward with this bigger dream. And he told the story (it's online for anybody who wants to see it), but he really ran three reports out of Sparkplug. It was 1) here's my forecasted future revenue report, 2) here is my audit history of all my deals to prove out that I'm actually being paid on every single deal that I say I'm getting paid on and you can see that audit trail, and then lastly, 3) the missing payments – what was that additional revenue that he hadn't gotten yet but was working with the supplier to say, hey, why am I not being paid on this deal? That's what the data room really is – those three reports out of Sparkplug. I'm good to sell. And we've had several clients that have been able to do that, super seamlessly. And so, if you are a broker that even wants to think about selling, get on a software platform now. Get something that you can execute on, every single day. So when that time comes, it's as simple as running three reports.


Young: So let's try to wrap it up on this one. So, you guys are one of the leaders in the space for sure. And you process a lot of broker transactions, probably the most out of any software provider in the space. So, if you were to think about your client base, what do you think are the characteristics of the most successful brokers that you work with?


Nate: I’d say number one: they are process-oriented. I think everybody knows that relationships are key in this industry, but a lot of people have relationships and struggle to put together an enterprise. And I think the ones that can scale beyond the “solo-preneur” phase recognize that there's a process, and also (Jason likes to quote the phrase that “retail is detail”) there's this idea that to do well in retail energy requires an attention to detail, requires watching the data: knowing which meters switched and didn't, paying attention that can make a difference between profit and not profit. So I think this nature of brokers who are process-oriented – they think of it as a business, as opposed to a sales pursuit or collection of individuals, and take it seriously. And I think that's maybe one industry trend that's played well in our favor is sort of the “growing up” of the channel. Even in spaces like mass market, I think people who orchestrate networks of individuals well with process and a platform are winning as opposed to loose bands of sometimes-work-together individuals. And I think suppliers have a bigger appetite to work with people who have their act together and present a consistent experience, not just for their customer but experience for the supplier and doing business with them and it's very difficult to be consistent when you don't have a process.


Jason: Yeah, process and something that's scalable as well. I would say the brokers that I work with from time to time will say, “Hey, I do have a process. It's … I do this on my Excel spreadsheet.” Cool, but could you train somebody else on that? Right? Is it really scalable if you had an ops person? I would say that most things in Excel aren't going to be scalable simply just because of the fact that it's your way of thinking, and you put this together. Versus a tool where I can customize it to my liking, but I now have a process: this is what happens at every stage in the customer lifecycle, both pre- and post-deal. Those are the customers that we see really growing fast and growing well.


Nate: I think capex on differentiators is another piece. It’s not a particularly large segment (maybe 5 or 10% segment in the broker space), but it’s like – okay, we're going to hire a bunch of programmers, and we're going to build the world's best commission reconciliation software. Well, something that a customer never cared about is how good you are at counting your money. And they won't pay a premium for it, and you won't get a premium for it. Where we have seen premiums is in differentiating investment. So, brokers who built unique customer-facing experiences, unique agent-facing experiences or third party, not all just specifically agent, but sort of the channel of channels, if you will. Those firms have scale because they're optimizing their capex where it matters. And those are areas where we're really not playing. We want brokers to have room to differentiate and be different and be a vibrant differentiated ecosystem. Versus everyone is same. Where it doesn't pay to be unique is in commodity back-office data processing. And that's really where we shine, and we can do it cheaper and faster and better than anybody out there by two orders of magnitude. So, some brokers say I have to parse my own utility historical usage data, and no one cares how good you are, or how bad you are at that. The market is never going to pay for that. It's very hard to get return on that capital. Again, versus differentiating capex.


The last thing is a focus on the top of funnel. I think a lot of the solo-preneurs that struggle to grow – they just farm in their existing account base, you can probably do that with a spreadsheet, with a blackberry mentality – like, I can just text and call my way into making some money that way. In terms of scaling and if success is growth (or somehow linked to growth), I think at some point you have to think about marketing. You have to be more to your customer than just a price getter. And I think that's another thing that we try to unlock for brokers. Some people may not know that we send three quarters of a million emails out on behalf of brokers a year. That's a lot of email. But if you think that we have several million meters under contract across our broker footprint. We think there's even more that could be done. But how do you create a touch and interaction that's branded, that's differentiated, that gives the customer a sense that you're there for the entire energy experience and not just at contract renewal time? We all want to be there for contract renewal time, but I think that the successful brokers understand that it's the care and feeding of their customer base, and that being visible and being present and having something unique that customers can see – that's more than just a number. I think some brokers think I need to put my brand and the only thing that comes from the supplier proposal is the number plugged into my spreadsheet. I think it's a missed opportunity. The idea that we're going to commoditize our supplier relationships. And also something I don't think is scalable – the idea that all suppliers are going to quote the same product, and I'm just going to put a bunch of numbers on page. The future probably looks a lot more like group health insurance, where I need like 17 rows just to compare the “comparable plans” and I need a broker to sort of walk me through – okay, this one has a lower deductible, but you're going to pay more in the emergency rooms, but your plan doesn't actually use that much emergency room. So maybe that's a good trade for you. You know, that consultative approach. And I think that the future is bright for brokers and suppliers who can differentiate and really do take care of their customers’ full need, versus just putting numbers on a page.


Jason: Customer communication is huge and, Nate, with that capex comment, too – our brokers that are on Sparkplug, they're using that capex (that they would have otherwise spent building their own systems) on marketing and customer facing elements and etc. And they're growing their businesses way more rapidly than others. And so that capex piece is a really good point as well.


Young: Yeah, a lot of good points in this hour and all different – just highlighting all the knowledge and all the tools that you guys bring to the table. So, thank you very much for your insights today.

Print | Sitemap
© 2023-2024 Energy Research Consulting Group. All rights reserved.