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The last case company, Start-Up U is based in the United States and develops a variety of applications for the energy industry such as API, smart meter and blockchain. Although it was founded in 2012, I decide to include it in this study, because it represents the pioneer in this field and shifted its focus to blockchain-based P2P energy trading not before 2015. Most notably, Start-Up U as the first company successfully piloted such an application and consequently enabled the first P2P energy transaction in 2016. The start- up is financially backed by strategic partners such as energy companies and venture capital firms, while it has grown to a team of more than 20 employees.

The core markets of the start-up are Northern America and Europe. The energy markets in both regions are largely deregulated, although in some parts of the U.S. they have yet to open up for competition among energy retailers. For both environments, regulated and deregulated, the BDL of Start-Up U emphasizes that “regulators are not set up for P2P transactive energy business models”, which represents a significant challenge for his start-up to enter the market. He further elaborates on the key distinction between regulated and deregulated environments. For a highly regulated market in the U.S., he exemplifies that “utilities earn a regulated rate of return based on the capital they invest to expand, operate and maintain their capacity to distribute and in many cases to generate electrical energy”. Hence, if start-ups enter this market on their own, they would only achieve a financial return based on the capital they invest into infrastructure. As none of the case companies intends to invest heavily in infrastructure, the non-partnership entry strategy

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is not financially viable under these circumstances. Interestingly, Start-Up U is involved in discussions with the governmental institutions to explore concepts for the future of the energy industry. In this context, the interviewee elucidates that “we certainly do want to influence that [the regulations] to the extent we can. However, we are a small company with limited resources”. Nevertheless, he hints that “the future is going to be way more competitive in the energy industry”, as governments increasingly liberalise energy markets.

“For us as a start-up, we need to have a near-term business model and I can describe to you what the ultimate vision is, but realistically, we need to stay alive as long as we get

there. Where is the commercial value for a company like us today and where is it leading to? The regulatory aspect is definitely the biggest challenge at the moment.”

(BDL, Start-Up U)

This quote points out the impact of the commercial environment on the strategy of the start-up. As the regulations have yet to evolve to the stage where the case company can directly pursue its vision, it needs to create value for customers immediately to generate financial returns. As a result, Start-Up U follows the “Software-as-a-Service” model in the short-term, offering a blockchain-based software solution to incumbent energy retailers, allowing these companies to improve their existing offering. Hence, Start-Up U chooses not to become an energy retailer themselves. The BDL justifies this decision: “being an energy retailer is not an attractive model […]: Energy retailers are in the fight for the cheapest electricity right now, so the margins are very thin, and it is tough to differentiate”. This implies that with this strategy the start-up avoids entering a mature and highly competitive market and instead focusses on collaborating with established companies in this market, which are exposed to increasingly fierce competition and thus seek to differentiate their offering.

However, the BDL expects that the “commercial value of [Start-Up U] will change as regulation changes”, alluding to his start-up’s long-term strategy and vision. As he anticipates that the commercial environment becomes increasingly favourable for innovative P2P energy trading solutions, Start-Up U aims to gradually expand its software solution. Features such as distributed energy and occasional pricing are progressively added to the software, allowing the firm eventually to offer a “Utility-as-a-Platform” concept. With this solution, the case company aspires to transform the value proposition

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of incumbent energy retailers into a platform to empower individual consumers to expand the control of their electricity purchasing decisions. This concept has major implications for the relationship with its partners. Start-Up U is deploying its platform collaboratively with the incumbent company. While the start-up provides the technical solution, the incumbent can utilize the platform to sell its energy and to offer its customers more options.

In accordance with its short-term strategy, Start-Up U is involved in several partnerships with incumbent companies in the energy industry. For my research, I focus on the most extensive and mature partnership of the firm with a leading British electricity retailer (Incumbent U). So far, the partners have collaboratively conducted pilots of the P2P energy trading platform and are currently in the phase of launching a large-scale trial in Southwest England. The interviewee of Start-Up U conveys multiple motivations for entering the partnership. Most importantly, his firm has the possibility of extensive publicity by collaborating with a leading energy retailers, explaining that the partnership is of “large national and international interest”. A second rationale for the start-up is the acceleration of its growth:

“We think that as a company we want to grow fast and probably in multiple markets. So, we think that we need partnerships, because otherwise we could not do that in

multiple markets at the same time.” (BDL, Start-Up U)

The BDL further hints that his firm requires a “retail license to sell electricity” as well as access to the electricity grid to transact electricity – two resources the incumbent possesses ownership of. Through the partnership with this party, the start-up can access these resources. Furthermore, the case company seeks to profit from Incumbent U’s knowledge “of the local markets and their customer base” (BDL). Lastly, the interviewee highlights that the learnings made in the cooperative trials enable the continuous improvement of the software. Due to the inhomogeneity of the partners, the incumbent has other rationales for initiating the collaboration:

“The question we want to answer through this pilot is whether blockchain can deliver significant value to the system as a whole. We don’t know, being brutally honest, if

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This statement indicates the main motivation of Incumbent U: exploring an emerging and potentially disruptive technology. Besides this, the CEO of Incumbent U argues that the partnership is “allowing us to find new and better ways to delivering energy to our customers”, alluding to differentiating his firm’s offering in a highly competitive environment. In this context, the BDL of Start-Up U explicates that the incumbents “have a really big interest of moving more into a service-based business model”. Hence, these established players are “trying to figure out what a platform business model would look like for them” (BDL, Start-Up U). These statements emphasize that the start-up envisions to deploy the “Utility-as-a-Service” platform collaboratively rather than competing with the incumbent firm.

In regard to the partnership itself, the BDL claims that “existing models have to change” and that “companies that are interested in cannibalizing themselves tend to be the partners [Start-Up U] works best with”. In fact, he admits that the concept of P2P energy trading is not profitable with the energy retailers’ current business model. He illustrates that the start-up’s partner needs to face “a short-term pain to get a long-term gain”. For the structure of the partnership, the interviewee explains that “the way that the relationships are structured is that we have an additional pilot that is sort of the kick-off”. He further elaborates on the structure:

“The average partnership is between us and a competitive retailer or a vertically integrated utility if we are working in certain markets in the U.S., but most of the

markets we are working in are competitive.” (BDL, Start-Up U)

During the relationships with incumbent companies, the BDL deems open communication and knowledge sharing very important, exemplifying that his team “thought about whether we want to incorporate billing into our platform. In working with our partners, we found out that billing is actually their only touchpoint with their customers and so we would be disintermediation the relationship with their customers”. As software development teams go through “multiple iterations as the technology improves” (BDL, Start-Up U), the feedback from the established firm is crucial. In addition, he argues that knowledge protection does not play a key role in the collaboration with Incumbent U: “Think about how fast blockchain is changing and how much infrastructure investments there is, we likely will be transitioning to new blockchains in the future”. Lastly, the BDL describes that an aligned vision of both partners builds the

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basis for the collaboration, so that both the start-up and incumbent move into the same direction.

The interviewee confirms that “the collaboration is critical, because it is our path to market. So, if the relationship does not work, the business model will not work”. The CEO and Co-Founder of Start-Up U underscore that “this is not a revolution or a disruption. It is an evolution”.

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