SMC raised $30 million for its 'smart' electric motors

Electric motors — which consume a staggering 45% of the world's energy — help run everything from air conditioners, to refrigerators, to conveyer belts in factories.

Software Motor Company (SMC) — a Sunnyvale, California based startup — has created a more efficient electric motor that it says cuts energy usage by 40-50%.

To help bring its motor technology to more buildings, SMC announced last week that it raised more than $30 million from investors including JLL Spark and Meson Capital.

Business Insider recently spoke to SMC Executive Chairman and Meson Capital President, Ryan Morris, about the company's long journey and bright future.

“When you look in a year, it'll be like, 'What's this overnight success thing？'” Morris told us. “[But] this has been a really, really long time in the works.”

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Electric motors are all around us. They help run our air conditioners, our refrigerators, and just about anything that moves in a factory, like conveyor belts. In fact, as much as 45% of the world's energy is consumed by electric motors, by some estimates, yet most people don't know much about them or even think about them.

That's because — as Ryan Morris, Executive Chairman of Software Motor Company (SMC), told Business Insider in a recent interview — these motors are mostly hidden.

“People are aware of lighting because it's in the room with you,” Morris said. “But when you just see a little hole in the ceiling with air coming through it, you don't think, like, 'Oh, there's a motor turning a fan that's actually consuming probably twice or three times the energy of all the lights I can see.”

In hot summer months, when AC units are blasting, high energy bills are mostly a result of these motors, which, as Morris tells us, use a technology invented by Nikola Tesla in the late 1800s.

“How many things that we use at scale today that were invented over a century ago？” Morris asked.

To create a more energy-efficient motor, Morris and SMC's Sunnyvale, California-based team of around 70 have been hard at work. In a similar way that consumers are replacing incandescent light for energy-saving LED's, SMC wants building owners to swap out their existing electric motors for what it calls a “Smart Motor” system.

Morris says that those who have made the change are saving over 50% on their heating, ventilation, and air conditioning (HVAC) costs, and importantly, cutting down on their carbon emissions.

“We're making a huge impact for climate change,” Morris said. “Half of the electricity in the world is electric motors and if we can reduce that by 40%-50%, that's going to shut down most of the fossil fuels.”

SMC says that Sprouts, a grocery store chain, swapped five existing motors for SMC's “smart” units in a small-scale test, and cut down on its energy usage by 40%. By Sprouts' calculations, says Morris, that would mean each motor would pay for its initial cost in about a year and a half — versus the ten years that Morris estimates it takes for solar panels to do the same.

To help fund this ambitious switch campaign to replace the world's outdated electric motors, SMC announced last week that it recently raised just over $31 million from investors including JLL Spark and Meson Capital (notably, Morris serves as president of Meson Capital). To date, the company has raised $48 million since it was founded in 2014.

'What's this overnight success thing？'

Switched reluctance motors, the underlying concept behind SMC's flagship energy-saving Smart Motors, had been theorized on and tinkered with for years. One was even built and used in niche use cases around 1990, Morris said. But the SMC team was the first to create a switched reluctance motor efficient enough to reach a mass market, he boasts.

A big part of what makes these motors special, says SMC, is the software that it's created. Where conventional motors always draw the same amount of energy, an SMC Smart Motor only draws the power it needs for that one specific task, and only gulps up more electricity as needs demand.

Until recently, the cost of the computing power needed to control these motors would have made buying them impractical. But the plummeting price of processing power has meant that SMC can afford to put sufficient computing horsepower in each motor, without having to charge exorbitant prices.

Morris also highlights the work that SMC has done in solving other issues with these reluctance motors, including how to generate enough power in a relatively small device, while also tamping down on the “ringing” noise that the devices naturally make.

These were no easy feats. SMC's CEO Mark Johnston and his team worked on developing their Smart Motor for over three years. They had also acquired over five years of intellectual property on the matter when first starting out.

“When you look in a year, it'll be like, 'What's this overnight success thing？'” Morris said. “But it took ten years to get to this point, and there's so much hard work from the team, the engineers, the scientists, and the Ph.D.'s to build the core technology. This has been a really, really long time in the works.”

Building a 'redwood forest'

For Morris, who says he's been obsessed with clean energy since learning about nuclear fusion at age 11, the opportunity to join SMC in an operating capacity in 2017 and work alongside Johnston has been the bright spot in an already impressive career.

Morris has been the President of Meson Capital since 2009, investing in companies in more traditional, not-so-attractive industries and helping them become profitable. The last company he worked with, Sevcon, made the power electronics for forklifts.

Read more: The deck a 29-year-old Russian-born VC used to persuade investors to contribute millions to her fund

But Morris has had his eye on electric motor advancements for some time, knowing the huge impact a design change could make. When he came across a critical patent for switched reluctance motors and traced it back the Silicon Valley-based firm, he knew he had to get involved.

Today, Morris is focused on scaling the customer and business side of SMC, while Johnston handles engineering and supply-chain management.

To grow the business, Morris wants to get SMC's motors into more people's hands and installed in more buildings. To start, his team is focused on retrofitting existing commercial and industrial buildings, like retail stores and office buildings.

“The core technology is the seed in a redwood forest,” Morris said. “And we're building the redwood forest starting with the one tree, which is the first market we're entering.”

Eventually, Morris envisions creating motor units for residential homes and consumer products (like a refrigerator) that are as easy to change out as a lightbulb.

As for how SMC has been able to recruit employees to work on such a long-term and difficult problem, Morris says the company's potential environmental impact is its biggest selling point.

“I'm not aware of any other single energy measure that can have anywhere close to the reduction of the burning of fossils fuels than we can have,” Morris said. “It's not just some 'nth' app that solves something that nobody needs that sells ads or something.”