A startup seeks to lower utility bills – and increase access to renewable energy for households without power globally – by using real-time bitcoin payments to cut out administrative costs in the energy industry.
Synota Inc. launched out of stealth mode this week, announcing a $3 million seed round led by Ego Death Capital. It's only the second investment by the firm focused on bitcoin technology, according to a post on its website, and naturally the fund's investments are made with the cryptocurrency.
The four-person Powell startup will hire to launch its commercial product early next year, said co-founder and CEO Austin Mitchell. The software using bitcoin's Lightning Network aims to eliminate months of lag time between utilities paying their suppliers and getting paid by customers.
"In five years, my goal is: You’re going to be paying your utility bill using our technology and you won't even know it," Mitchell told Business First. "We’re really creating a system that is enabling transparency and free markets to flourish across all energy markets globally."
Also participating in the round were Columbus-based Rev1 Ventures, Trammell Venture Partners, Hivemind VC, Bitcoiner Ventures, Recursive Capital and individuals.
“Synota’s team is building a platform that delivers incredible value to many stakeholders in the energy industry," Ryan Helon, Rev1's executive vice president for investment funds, said in an online statement. "We think Synota will have a strong positive impact, and we are pleased to be an investor supporting its mission.”
Mitchell and Chief Administrative Officer Lisa Scott, his co-founder and sister, started an energy consulting company just over a year ago, according to Ohio Secretary of State filings.
With partners, they worked to tackle the financial problems the two saw working in different sides of the energy industry for years, Mitchell said.
Mitchell earned a doctorate at Carnegie Mellon in engineering and energy policy, then started as an engineer with a Pittsburgh utility 15 years ago. In 2016, he moved to Columbus and worked in forecasting and risk management for IGS Energy and NiSource, the parent of Columbia Gas of Ohio.
Meanwhile Scott, an attorney and CPA, worked as a tax specialist for a utility infrastructure company based in Houston.
The energy industry's finance problem
Utilities have installed smart meters almost universally, now able to read usage by the minute.
"We still pay for it as if there were meter readers," Mitchell said.
An electric company borrows money to pay for natural gas or coal for its plants, then burns that fuel to generate electricity, which consumers pay for a month later – or can't make their bills – making it hard for the utility to pay for supply loans.
"Every energy company I’ve worked for experienced these seasonal cash flow issues," he said. "Companies have to post millions of dollars of collateral between each other – it’s just a mess. ... There are whole departments to manage this.
"It’s a whole problem that doesn’t have to exist anymore, because we have the technology to do better."
Bitcoin, because of its blockchain structure, is limited in how many transactions can be posted per minute. The Lightning Network, built over the past five years, creates a second layer that enables immediate, fee-free transactions.
"It’s a rapidly maturing technology, but we've only begun to scratch the surface in how it will change finance and money in dramatic and beneficial ways for society," Mitchell said.
No one would need to abandon their bank accounts for bitcoin, he said. Synota’s software uses Lightning to convert the consumer’s payment to bitcoin, move it to the energy company, and convert back to dollars – all in less than 10 seconds, so the currency’s volatility doesn’t come into play. Utilities could do the same for real-time supplier payments.
Connected to utilities' existing smart meter data, those real-time payments can be based on real-time energy usage. Utilities could offer discounts for daily billing plans, for example, improving their cash flow.
The first product will be a pay-as-you-go conversion for Bitcoin miners, according to a release. They pay utilities for the electricity to run computers that generate the currency by solving algorithms. (There is considerable debate about just how much energy they consume, and how much that use contributes to global warming, but it is a fraction of all electricity usage. Miners say they are increasing their efficiency, using 60% renewable sources.)
Synota aims to reach more of the energy industry in 2024, its release said.
Cutting the costs from payment lags would ultimately bring down energy prices, he said. Long-term if the platform spreads globally, Mitchell maintains, it can help connect more people to cheap and abundant power.
"The financial system today is constraining innovation," Mitchell said. "It is hampering the ability for the free market to find and bring cheap energy to market."
Ego Death shares "a vision for the future" about the consumer benefits brought by Bitcoin and Lightning, he said.
Mitchell and Scott brought their idea through Rev1's Customer Learning Lab last year. Besides investing, the Columbus nonprofit provides resources such as entrepreneurial training, customer introductions and discounted business services.
"It was their process that really helped us refine our thinking," Mitchell said.
Currently based in Powell, the startup is seeking office space across Columbus and the northern suburbs, he said.
"This is the perfect place to be for what we’re building," he said. "There is incredible support and talent here."
