Candidus

Energy management platform for commercial greenhouses

The idea

Candidus sold cutting-edge sensors to commercial greenhouse growers that measure and control the amount of light needed to maximize crop efficiency. 

Energy usage from heating and lighting is a big cost for greenhouse growers. Currently, growers typically set a manual timer for running artificial lights based on weather predictions for the week, but in reality, nature is dynamic, and growers end up with massive energy bills in a business with thin margins. Candidus took the guesswork out of plant science, by using real-time data on sunlight and plant growth to determine exactly how much growers needed to run lighting. We initially thought the energy savings would be what closes deals with customers, and found that growers also loved the automation aspect and being able to see detailed data sets on how crops were performing throughout the year. Our product was appealing because some hothouse crops like tomatoes, lettuce and cucumbers are highly sensitive to under or over-lighting, and we were also able to address the macro industry problem of workforce shrinkage by helping growers do more with a smaller workforce. 

We sold our hardware at a fixed cost to medium/large commercial greenhouse businesses. It would be accounted for as a capex to their business. We did look at shifting to a “hardware-as-a-service” model but would have needed more capital to make that transition. The payback for growers was only 6 months just based off energy savings. 

Our “stage 1” audience was greenhouse growers, and our “stage 2” audience was the utilities companies. We ran pilots with utilities where we would enable our greenhouses to opt into demand response, as growers are willing to find the cheapest time of day to turn on their lights. If a utility wanted to partner with us, the utility would pay the bill for growers on the grid, and the growers would get our technology for free.

Competitors / Substitutes

There are several ECS (Environment Control Systems) companies out of the Netherlands like Priva and Hoogendoorn that include timers as a part of their overall offering. I consider them indirect competition since they offered only basic timers set for a certain time, versus real-time adjusting sensors. Over the last 18 months (after Candidus shut down), we have seen several startups entering the market offering the same thing we had, such as Microclimates and Leaficient. Hoogendoorn also released more advanced software/hardware (IIVO) a few months before we shut down. 

Sharing some market and pricing insights from our experience: 

ECS systems were charging ~$100-200k per system. Candidus charged ~10% of that price. Our initial deals with early customers were priced at $3k to $6k per system, but a year in we were averaging $10-15k, and customers expressed willingness to pay more as well for future years. 

We estimated there to be ~30k potential customers (defined as businesses who run supplemental lights) in the U.S. and ~100k globally. The limited customer count has implications on how much you must charge per system to support a sufficiently large total addressable market size. If you charge too low at the beginning, it can be harder to justify price increases later.

Amount raised

 The founder of Candidus had raised $2.5M in USDA SBIR grants before I joined as CEO. I came in 3 years after founding (Jan 2022), and raised $0.5M in pre-seed funding.

Duration

Candidus started in 2019 and ended operations end of 2023.

Team size

10

What went well

Product Market Fit: We had a really good sense of what we needed to build for the market. We checked in with our customers frequently to see what needed fixing, and I focused our team on prioritizing the subset of things that mattered most. During my first year, we had improved the software to a stable, working product that growers loved.

Prioritization: We had six different customer verticals when I joined, and we didn’t have enough expertise to sell across all of them. I identified the areas we were strongest in and got us to 50+ commitments and 43 systems deployed over one year.

Culture: The founder did a great job building a meaningful culture where people were excited to work there. When we had to lay employees off at the end, employees expressed interest in re-joining if we found a way to salvage the business.

Conditioning the market: Traditionally, the industry focused on PPFD, or photosynthetic photon flux density, which measures the amount of light hitting the plant at any given moment. With Candidus, we shifted their attention to DLI, or daily light integral, which measures the average light they are getting. DLI is the most important variable that influences plant growth and quality and we were able to train the market to use our language.

Challenges and what you'd do differently

Business model: We didn’t move to a SaaS (software as a service) model fast enough. We were more focused on landing customers with our hardware sales model before making shifts in our pricing model. Growers are very conservative. They know they need tech innovation but also don’t want continued expenses for unusable software if the vendor shuts down, or to have downtime on critical assets like lighting. Building relationships with Ag customers is a long game. A grower may test your product on a field plot for a few months to a year initially, depending on their growing season. They also want a plan for how we could roll it out across the facility assuming the pilot goes well. So we are often planning 12-18 months ahead - and that’s the time frame with which we plan on switching a customer to an annual subscription model in the future. 

Investors of course love the repeatable income of SaaS businesses, so moving towards SaaS would have improved our fundraising odds.  And landing a large funding round of $5M+ for example would also help boost customer confidence that you’ll be around for at least the next 3-4 years. 

Fundraising:  It was hard to find investors who could see how large this market opportunity was and were willing to take a longer time horizon. In Ag, money is concentrated with a few key customers, and deal cycles are long. Investors were concerned about the risk of long sales cycles and that it may take 4 to 5 more rounds of capital to build the business. My view was that 2 more rounds would be sufficient, as we were about to transition to a recurring revenue model. We were targeting $1.2M and raised $0.5M, and we were not at a point yet where we could be aggressive enough with our pricing model to sustain the business on operating cash flows. I began to look for potential buyers for the business.

Interview above with Mikhail Hutton, formerly CEO of Candidus.