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Some startups are having a hot heat-pump summer

Aug 22, 2022
Animated illustration of a thermometer in the shape of a dollar bill sign, with temperature rising rapidly

Illustration: Annelise Capossela/Axios

Between the passage of the Inflation Reduction Act and relentless heat extreme events across the U.S., Europe and Asia, weatherization startups are having their own hot heat-pump summer.

Why it matters: Investors are phoning in from beach homes and mountain retreats as the ordinarily dull last month of summer turns into an all-out funding frenzy.

State of play: Weatherization startups often fall into two categories — hardware startups that make more efficient heating and cooling systems, and software startups that help customers arrange contractors and finance retrofits.

  • Pitches for both have been harder sells due to the upfront capital needed for hardware development and the general lack of customer demand for pricey home renovation projects.
  • But the passage of the Inflation Reduction Act coupled with an ongoing series of heat events in the U.S. has completely altered that dynamic, Lauren Salz, CEO of weatherization software and financing startup Sealed, tells Axios.

Zoom out: The TAM on these startups just exploded.

  • Heat waves that have affected as many as 100 million Americans simultaneously, from the Pacific Northwest to the East Coast have highlighted the need for cooling in homes that did not previously need it, adding net new customers to the market.
  • The Inflation Reduction Act includes incentives for homeowners to weatherize their homes, including installing heat pumps in place of air conditioning and heating units that rely on fossil fuels, expanding the existing set of customers to include those with lower incomes.

The intrigue: "We've gotten the highest volume of investor emails over the last two months or however long it's been since it started to look like the IRA was going to pass the Senate," Salz says.

  • And that's during August, a "completely dead" month for investors, Salz adds.
  • Sealed raised $29.5 million in April from existing investors Footprint Coalition and Fifth Wall and is not actively raising, Salz says.
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