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How Opower’s Dan Yates Persuades People to Use Less Energy
Comments () | Published July 12, 2012
Dan Yates. Photograph by Stephen Voss.

Yates and I finish our run by racing to the top of a hill. It’s the first time in an hour he has quit talking and started sucking air. We stretch, layer up, and walk to a cafe where, over a decaf cappuccino, he spins the story of Opower for me.

The start-up has its roots not in a Silicon Valley garage but on the Pan-American Highway, which runs from Deadhorse, Alaska, to Argentina’s Tierra del Fuego. It was there, on a yearlong road trip, that Yates first saw the ravages of widespread environmental degradation.

He had started dreaming of driving across the Americas soon after cashing in at Edusoft. He stayed on there for a year but grew restless. “It was painful watching my twenties slip away,” he says.

Whitman finished her PhD in international relations at Cambridge—she’d been a year behind Yates at Harvard, and the pair had struck up a long-distance romance after reconnecting at a wedding in Alabama—and joined Yates in San Francisco.

The couple bought a used Toyota 4Runner, shipped it to Anchorage, and picked it up on the docks in August 2005. With gas cans strapped to the roof, they drove south, sleeping in motels and by the side of the road. They studied Spanish in Mexico, sailed off Belize, and trekked through Panama’s cloud forests. Yates was struck by denuded hillsides, charred cropland, and the Galápagos Islands’ stunning megafauna.

The adventure ended where Ruta Nacional 3 does, in Ushuaia, Argentina. They put the 4Runner on a boat to the US and moved back to San Francisco, where Yates kicked around the idea of starting a green nonprofit, trading “socially positive” diamonds, or funding habitat protection in Bolivia.

The issue of impact nagged at him—whatever he was going to pour time into, it needed to punch above its weight. “I basically asked myself a simple question,” he said in his Google keynote address. “What do we suck at here? And the answer was pretty clear: At the end of the day, we use a lot of dirty energy.”

Working with Alex Laskey, a Harvard classmate, he began casting about for business ideas. Clean tech was hot, especially solar. One scientist “had designed this crazy system to use, effectively, birthday balloons—big Mylar shiny balloons—to concentrate solar power onto small cells.” Yates built economic models, trying to figure out which moon-shot ideas might be profitable.

“I’d had this unformed idea that the utility bill was really crap,” he says. “That it was a huge missed space and there was something to be done to better it.” Then he got turned on to the work of Cialdini, the ASU psychology professor. “He had just done a study that showed, effectively, that this neighbor-comparison stuff gets people to save energy. And that’s how it started.”

Positive Energy, later renamed Opower, was born in San Francisco in 2007. It wouldn’t boil the oceans or revolutionize solar or liquefy carbon dioxide. It would train people to worry about whether they had left the porch light on.

What inspires venture capitalists to give a couple of young guys millions of dollars and tell them to go save the planet?

“When they first came up with this, I was like, ‘Wow, can you make a great business out of conservation?’ ” says Eric Paley, a managing partner at the venture-capital firm Founder Collective and one of Positive Energy’s seed investors. “The idea was really unsexy.”

Opower’s actual customers aren’t homeowners but utility companies, which are under pressure from states to meet conservation goals. A utility company writes Opower a big check and hands over all its customer data—millions of homes’ worth. Opower crunches the data and sends “home-energy reports” to homeowners. The owners use less electricity, and the company stays in the good graces of state regulators.

Harry Weller, a general partner with Chevy Chase-based New Enterprise Associates, recalls meeting Laskey and Yates: “They started telling me about their strategy. Dan said, ‘So I get the utility data and I analyze it, and they pay me X dollars per household to provide a report of the consumer’s consumption.’ I stopped him right there and I said, ‘Hold on—the utilities are giving you their data and they’re paying you? How do we invest?’ ”

Investors were also eager to bet on the Laskey/Yates duo. The two—who’d met at an ice-cream social on their first day at Harvard—were good foils for each other, with Laskey the gregarious networker, Yates the idea-driven CEO.

“I don’t think I’ve ever seen him have a temper, but Dan is one of the most anxious, neurotic, stressed-out people,” says Joe Greenstein, Yates’s former Edusoft colleague. That’s not necessarily a bad thing in a CEO, he points out. “He’s one of the five most inspiring people I’ve ever met. He’s brilliant. I would invest in anything he ever does.”

Laskey, Yates says, “has an encyclopedic memory of the first names of everybody he’s ever met, their kids’ names, and their birthdays.” He’s the storyteller, the salesman with the winning smile. Yates is the logistician and strategist who keeps a pen and paper on his nightstand for making 3 am to-do lists.

Walking into Opower’s Arlington office is like diving into a fish tank at feeding time—a hungry energy fills the open floor plan. Designers stand at their desks or balance on yoga balls. Engineers sketch algorithms on whiteboards, and VPs hurry by in jeans and company T-shirts. (One reads I’M NOT LAZY, I’M ENERGY EFFICIENT.)

Opower established its headquarters in Virginia because of an agreement Yates and Whitman had made years before: After the Great Road Trip, they would give priority to her career in international relations. Whitman is now a senior adviser at the Institute for Inclusive Security, specializing in women’s empowerment in post-conflict countries. “Being an entrepreneur in software and energy, the obvious, obvious epicenter of that is Silicon Valley,” she says. “I know it was a hard thing for Dan to have to do.”

But Yates and others dismiss the idea that Washington has been anything less than fertile ground. “You’re a little bit outside the echo chamber,” Paley says. “You don’t get swayed that you’ve got to be doing exactly what everyone else is doing, which can be dangerous.” He points to Seattle—people said Microsoft was crazy to build there. Geography isn’t everything.

Not for Opower, anyway. Two years ago, the firm did about $30 million in revenue. It expects to more than triple that next year. The company has gone from being an anchor of the local tech scene to being a gravitational force; at 250 employees and growing, it can’t hire engineers fast enough. Yates says his servers store utility data for about a third of the homes in the country. He’s luring world-class programmers away from Silicon Valley. And then there’s the emerging European market, the Facebook app, the thermostat deal with Honeywell, the new San Francisco office, the prospect of an IPO . . . .

So Yates is living the dream, right?

“The problem is that being a CEO is a very lonely job,” NEA’s Weller says. “You start off companies with people you know well. Some of those people scale, some of them don’t. You have to let people go. You have to make a lot of very decisive, painful, human-oriented decisions.”

“It’s lonely at the top,” Whitman agrees. “But I can’t really imagine Dan working for anybody.” She chuckles at the thought. “It’s a tradeoff. It’s either lonely or very frustrating. And I think Dan will always pick a little lonely.”

A few weeks after our run, Yates calls me from the Akron airport—he spends a day or two on the road each week, visiting clients and investors, and we chat while his flight boards. I tell him what Weller said.

“Yeah, he said that to me two years ago, and I was like, ‘This guy’s nuts—I don’t know what he’s talking about.’ I thought at the time it didn’t apply.” Yates laughs, a little sadly. “But I felt what he was talking about the first time I had to make a controversial, unpopular decision.”

Gone are the days of desks in the server closet. Here are the days of 300 unread e-mails and unfamiliar faces in the office.

In any case, Opower’s “double bottom line”—turning a profit and protecting the environment—is holding up. The company has more cash on hand than it knows what to do with. And while it took Opower five years to save its first billion kilowatt-hours of electricity, the second billion will come much sooner. Yates’s gospel of tiny, incremental action is winning converts, including Pepco, which inked a deal with Opower this spring.

“I’m somewhat of a contrarian,” Yates told the Google crowd, “so it gave me a lot of pleasure to think that nobody was thinking about this problem.”

This article appears in the July 2012 issue of The Washingtonian.

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