Tem has raised $75 million to reshape power markets using AI.

As AI data centers drive up electricity prices, London-based startup Tem believes AI can help solve this.

Tem has built an energy trading engine that leverages AI to lower prices compared to other energy traders. The company has signed up more than 2,600 business customers across the UK with the promise that they can save up to 30% on their energy bills if they buy energy from the utility sector.

According to TechCrunch, the startup recently closed a $75 million Series B led by Lightspeed Venture Partners with participation from AlbionVC, Allianz, Atomico, Hitachi Ventures, Revent, Schroders Capital, and Voyager Ventures.

Sources familiar with the deal told TechCrunch that the round values ​​Tem at more than $300 million. The startup plans to use the funds to expand into Australia and the United States, starting with Texas.

“We’re in a good position to control our own profitability, so we’ve been able to run a bootstrapped business that is, in some ways, great and cool without raising any money at all,” Tem co-founder and CEO Joe McDonald told TechCrunch. “Well, we’re not that kind of business. We know what we want to achieve as someone who has been going public for a number of years.”

Tem is a classic market play that connects generators with consumers. The company started by intentionally focusing almost exclusively on renewable energy generators and small businesses to fill both sides of the ledger. “The more decentralized and distributed the better for the algorithm,” McDonald said. “But this also applies to businesses.”

The company’s customers include fast fashion retailer Boohoo Group, soft drinks company Fever-Tree and Newcastle United FC.

Currently, Tem runs two different businesses. One, called Rosso, is a transaction engine that connects suppliers and buyers. This is where machine learning algorithms and LLM help predict supply and demand.

McDonald said Rosso’s goal is to reduce costs by eliminating several layers that currently exist in the energy market. “Each has multiple teams doing different tasks, taking different levels of profit from the back office to trading, from one trading desk to another, and a total of five or six intermediaries that enable the flow of money to move from one side to the other,” he said.

With AI, “we now have the opportunity to replace humans, labor costs, and disparate systems with one single transaction infrastructure,” he said. The goal is to bring the price customers pay for electricity closer to wholesale costs.

The other part of Tem, called RED, is a “new utility” created to prove Rosso’s worth.

“When we first started, we tried to sell our infrastructure to energy companies, but we got nowhere,” he said. RED is currently the only utility using Rosso, and McDonald said its growth has led the company to prioritize it over opening up Rosso to others.

However, at some point Tem plans to allow other utilities.

“The reality is, it doesn’t matter how good (RED) is. It’s never going to get more than 40% market share, and it shouldn’t because that makes it a monopoly, so I’d rather have access to all the deal flow,” McDonald said.

“In the long run, we don’t care who owns the customers and who owns the generation, as long as the infrastructure is in use,” he said. “This is just an infrastructure play in the same way as AWS or Stripe.”