Tem raises $75M to scale its AI-driven energy marketplace

London-based energy startup Tem has closed an oversubscribed $75 million Series B funding round. The investment was led by Lightspeed Venture Partners, and according to a source familiar with the deal, the round values Tem at more than $300 million.

Other investors participating in the Series B round include:

• AlbionVC
• Allianz
• Atomico
• Hitachi Ventures
• Revent
• Schroders Capital
• Voyager Ventures

Tem operates as a transaction engine—defined as a software platform for matching electricity generators with consumers—to streamline energy trading. The startup’s platform, called Rosso, uses machine learning algorithms and large language models to match suppliers with buyers, aiming to bypass traditional intermediaries. McDonald notes that current energy markets rely on multiple teams taking profits across five to six intermediaries to move money from one side to the other. He states that AI offers an opportunity to replace human labor costs and disparate systems with a single transaction infrastructure. McDonald also noted that decentralized and distributed setups are highly beneficial for the platform’s algorithms.

To prove the viability of its Rosso engine, Tem also operates a “neo-utility” division called RED, which is a modern, technology-driven utility company. When the company first started, it attempted to sell its infrastructure directly to energy companies but was unsuccessful, according to McDonald. This led to the creation of RED to demonstrate the platform’s value. RED is currently the only utility using the Rosso infrastructure. Tem has signed up more than 2,600 business customers in the U.K., including fast-fashion retailer Boohoo Group, soft drink company Fever-Tree, and Newcastle United FC. The startup claims that buying energy through this model can save business customers up to 30% on their energy bills.

However, Tem does not intend for RED to remain its sole focus. McDonald stated that RED will not exceed a 40% market share to avoid becoming a monopoly. Instead, the long-term strategy is to open the Rosso infrastructure to other utilities. “This is just an infrastructure play in the same way AWS was, or Stripe was,” said Joe McDonald, co-founder and CEO of Tem.

The startup plans to use the newly secured capital to expand its infrastructure play into Australia and the U.S., starting with Texas. While McDonald acknowledged that Tem is profitable enough that it could have chosen to remain a bootstrapped business, he emphasized the company’s larger ambitions. He explained that the company knows what it wants to achieve, with plans to eventually go public.

Why it matters

Tem is attempting to modernize energy markets by replacing human-heavy, fragmented trading systems with a single AI-driven infrastructure, aiming to lower costs for businesses by cutting out intermediaries.