Octopus Energy, a 10-year old upstart among 100-year old energy firms, has quickly grown to become one of the UK’s largest energy suppliers.
But the real high-growth potential may lie not in supplying energy to customers, and instead in selling Octopus’s software platform, Kraken, to other energy businesses. The platform helps companies to bill customers, as well as manage energy assets like solar panels, heat pumps and EV chargers.
Speaking to Sifted, Kraken CEO Amir Orad compares its potential to that of Romanian business UiPath which helps automate repetitive tasks. At its height, UiPath was valued at $35bn and is often touted as the European poster child for SaaS companies.
“We are talking about something in the order of magnitude of that company and then some,” Orad says.
The market seems to concur: as one banker recently tells Sifted, Octopus Energy’s cap table offers equity investors the chance to get in on “an expensive utility company or a cheap tech company.”
Kraken’s finances vc Octopus Energy’s
Octopus originally built Kraken in 2016 for use in house. It’s now licensed out to other energy companies, which use it to manage their energy mix as they incorporate more renewables. The platform also allows companies to provide flexible tariffs for households that use solar panels, electric car chargers and heat pumps.
Kraken files separate financial results to its parent company. It filed its latest this week, showing profits had grown by 483% to £35m in the year up to April 30, 2024. Recurring revenue increased 70% to £89.6m in the year to April 2024.
That’s compared to a slight dip in revenues at the wider Octopus group from £12.5bn in 2023 to £12.4bn in 2024.
Will Kraken spin out of Octopus Energy?
Orad is keen to make clear that Kraken is now operationally entirely separate from its parent company, including its offices, bank accounts, technology and contracts. That allows rival energy companies to feel comfortable using the tech, Orad says, and maximise Kraken’s reach. “It’s just like how AWS was part of Amazon and then slowly separated,” he says.
There’s speculation over whether Kraken will spin out from the Octopus parent company into its own legal entity.
“That’s for the shareholders to decide,” Orad says, declining to confirm but heavily indicating the direction of travel. “If you’re reading the tea leaves, it’s a very clear direction where we’re more and more separated from the Octopus group.”
Octopus Energy’s shareholders include Al Gore’s Generation Investment Management, the Canadian Pension Plan (CPP) and Galvanize Climate Solutions, a fund co-chaired by former US climate envoy John Kerry.
All equity has so far been raised by the Octopus parent company rather than Kraken itself, and Orad says there is no present need for Kraken to seek its own separate funding as the company is profitable, but that it could do so to fuel acquisitions in the future.
The competition
Orad says Kraken’s main competition comes from established SaaS companies like Salesforce, Oracle and SAP, which offer energy management products.
There’s also a cohort of younger startups in Europe working on software for different parts of the energy management system. Kraken has made several acquisitions recently, including Jedlix, a Dutch EV charging startup it acquired in October 2024.
Orad says Kraken’s edge is that it combines multiple areas of energy management, compared to the younger startups.
“Almost all of them are very, very niche,” he says. “They solve one problem, in one use case, in one scenario. The challenge for these companies is how do you reach critical mass.”
Next up America
Orad is based in America, where much of Kraken’s focus now is.
The country’s undergoing a huge energy transition as it transitions to EVs and increases its manufacturing capacity, which ups the country’s energy needs and means Kraken’s tech is particularly useful, Orad says.
Kraken’s also starting to venture into markets outside of energy, where it says its tech is still applicable, including telecoms firms and water companies.
Read the orginal article: https://sifted.eu/articles/octopus-energy-kraken-ceo-uipath/
