Effy is at a crossroads. The energy renovation company based in France is doing well, but it is addressing a market that is much bigger than anticipated. That’s why it is making a bet. The company just closed a €20 million funding round (roughly $22 million at today’s exchange rate) from Felix Capital. This is the first external funding round for the company.

“Our story starts 15 years ago,” founder and CEO Frédéric Utzmann told me. “We tackled this market very early on because we really believed in it.”

At first, Effy wasn’t a tech-enabled startup. The company worked on energy renovation for public buildings, residential buildings and industrial facilities. “We started with heavy energy consuming projects with a business that was very much ‘brick and mortar’, old school. But this allowed us to develop the company in a self-financed and profitable way,” Utzmann said.

Quickly after that, the company started acquiring websites and services that were useful for energy renovation projects. In 2011, the company acquired Calculeo, a tool that helps you calculate how much you can get in public subsidies for energy renovation work. In 2015, Effy acquired Quelle énergie, a VC-backed startup that could calculate how much money you would save by isolating your roof, changing your windows and more.

At the same time, Effy’s traffic started growing rapidly. Search engine optimizations led to more organic traffic. Effy started building a significant network of contractors and redirecting home owners to these partners.

In 2019, Effy chose to focus exclusively on small residential projects. Engie acquired its B2B activities for an undisclosed amount. Effy chose to reinvest everything in product development and growth. In addition to organic traffic, the company spent some money on brand awareness ads (like TV spots), as well as Google and social media ads.

And it has paid off as Effy attracted 18 million visitors to its websites in 2022. Some people just want to use Effy’s tools to see how much money they could save with energy renovation projects. Others go one step further and submit a request for some construction work.

Effy then contacts those potential customers to understand their needs. To give you a sense of Effy’s scale, last year, the company ended up contacting 500,000 individuals and completing 100,000 energy renovation projects. Effy handled €800 million in transactions on its platform.

Owning the relationship

Effy can still improve its service in several ways. In particular, its marketplace is still mostly a lead generation product for energy renovation contractors. When potential clients want to move forward with their home projects, they are connected with independent contractors.

These contractors supply quotes, which means that it creates some friction for the end customer. They have to compare quotes between multiple contractors and pick one.

Of course, Effy spends a lot of time curating its marketplace. There are currently 3,800 contractors working with Effy. The company gathered 16,000 reviews and the average rating is 4.8 stars.

Similarly, Effy can handle the paperwork to obtain subsidies for energy renovation work. The company takes a cut on this administrative process and charges contractors a small nominal fee for new potential clients.

Effy now wants to switch to a first-party marketplace model. Clients interact directly with Effy and negotiate the quote with Effy. “Historically, we had an almost 100% third-party business — it represents 90% of our business today,” Utzmann said.

It opens up some new possibilities on the product front. First, there are a lot of optimization possibilities when it comes to creating a quote, sourcing materials and everything that isn’t the construction work itself. This way, contractors can accept more jobs as Effy handles the rest.

Second, Effy could start offering some financing options with partners. For small amounts, Effy can use ‘buy now, pay later’ products. For bigger sums, Effy has an internal team that can negotiate credit lines with Sofinco and Cetelem.

Sure, energy renovation projects can be expensive. But customers often end up paying smaller bills once these projects are done. Effy could even look at the impact on your bills thanks to smart meters.

“Let’s say you pay €2,000 per year and you will pay €1,000 per year starting tomorrow. You could set aside €800 to pay back your investments. You end up saving less because you have to pay something back, but your house is also worth more money,” Utzmann said.

In addition to this product roadmap, Effy’s business could end up growing rapidly thanks to favorable market conditions. The was in Ukraine has had a significant impact on energy bills.

At the same time, the European Union wants to finance projects that have a positive impact on climate change. Residential buildings indirectly generate a ton of carbon emissions as it requires a lot of energy to heat and cool them. Many EU countries are rolling out generous subsidies to foster energy renovation projects.

Finally, Effy is only available in France for now. The company could expand to other European countries in the future, starting with Germany and Spain.

After bootstrapping for 15 years, energy renovation company Effy raises $22 million by Romain Dillet originally published on TechCrunch