As investors, our job is to find and evaluate technology breakthroughs with the potential to seem obvious in hindsight. Solid-state transformers (SSTs) are one such innovation, and at Clean Energy Ventures (CEV), our conviction in their potential is exceptionally high due to their immense value opportunity and uniquely profitable commercial features. Accordingly, we wrote our largest initial check ever for DG Matrix earlier this year because we’d finally met the team talented enough to fulfill the promise of SSTs.
Why Solid-State Transformers?
SSTs are not a secret. They have been actively researched in national labs for the past fifteen years. Leading electronics companies that we’ve spoken to unanimously agree that SSTs are the future of transformers. All are actively investing, as the leading edge of technology development is in the startup ecosystem, and the most promising startups are just now rounding the corner to commercial readiness.
Depending on the application, SSTs cut costs, footprint, and weight 70-95% by eliminating the need for and/or merging inverters, transformers, and substations. Due to fewer power loss points, SSTs also boost power efficiency to 96-99% compared to today’s 85-93% standard.
SST applications crosscut rapidly growing sectors. Datacenters, microgrids, and EV charging are obvious ones, where value propositions transform business models. However, any industry requiring more efficient power—from green hydrogen to steel electrification to wastewater treatment— stands to gain significant advantages from SSTs.
Why DG Matrix?
Due to the 50%+ value created, DG Matrix sells units that represent six-figure revenues at strong gross margins, while enabling material discounts to customers for similar functionality and better performance relative to incumbent technology.
As compelling as their unit economics, unlike most breakthrough innovations in climate tech, DG Matrix does not rely on fickle utility or OEM customers, nor does it require the financing and building of capital-intensive manufacturing facilities.
Customer demand is strong. All pilot customers that we spoke with indicated interest in orders of hundreds of units following 3-6 months pilots, and the company has already received such orders from customers keen to secure initial inventory. Today, the company has the capacity to manufacture units representing $100M revenues in a room that is 2,000 sq. ft.
Bottom-up math for how the company scales to billions in annual revenues is evident. Any building that requires reliable backup power, EV chargers, and/or more efficient power – from hospitals and grocery stores to gas stations and data centers – would benefit from DG Matrix power routers in high volumes.
Yes, data centers are a major opportunity, and interest among some of the most active hyperscalers is high. Apart from the strong growth in this sector, the complexity of power supplies makes SSTs even more critical than under a simpler grid-supplied scenario. Multiple power inputs and multiple uses make data centers a massive opportunity for this technology.
Stand Out Leadership
Most importantly, the team’s rapid progress stems from its pedigreed leadership. CEO Haroon Inam has led every phase of a power product’s life cycle, as a startup CTO for a decade and at United Technologies, Honeywell, and other industry leaders for two decades. Notably, Mr. Inam’s global relationships create speed advantages for the company, which was formed in July 2022 and advanced to the leading edge of the SST world in only two years. Meanwhile, the co-founder, Dr. Subhashish Bhattacharya, is universally acclaimed as a top SSTs expert––other SST companies CEV evaluated all quote his work–– and his problem solving for developing know-how is invaluable.
Differentiated Technology
To assess differentiation, CEV thoroughly evaluated the DG Matrix intellectual property, and our Venture Partner, Vlatko Vlatkovic, former CTO of Power Electronics for General Electric, led the CEV technology evaluation and will serve as Board Director.
The opportunity not only attracted CEV but also a premier syndicate. Our co-investors include ABB (a $100B market cap power electrics company), Cerberus’s venture capital unit ($70B AUM financial firm that owns scalable DG Matrix customers), Chevron (one of the largest O&G companies in the world), and fellow financial investors Piedmont Capital and Helios.
CEV believes that, in a few years, the broad adoption of DG Matrix will seem obvious in hindsight.
