Lightbulb Moment Switched Us On
LED lights yield big savings, but retrofitting costs put customers off. Kevin Maughan’s bright idea was to make his product free
Kevin Maughan eases his gangly frame into a boardroom chair and calls Wilson, his large, friendly brown dog, gently to heel. A cross between a rhodesian ridgeback and “some sort of mastiff”, Wilson came to work one day at Urban-Volt, Maughan’s LED lighting firm, and liked it so much that he’s now a regular fixture.
The office dog and smart Dublin 4 mews office would be the envy of a dotcom start-up, and UrbanVolt is also borrowing business ideas from the tech world. In Maughan’s words, the one-year-old company sells “lighting as a service”, promising to drastically reduce both bills and hassle for big commercial customers.
The twist to the business plan is that UrbanVolt pays the upfront cost of retrofitting traditional lighting with LED fixtures that last an average of 20 years. It maintains the lights and makes money by splitting the cost savings with the customer for the first five years: if the shift to LEDs cuts a company’s lighting bill from €50,000 a year to €10,000, for example, Maughan gets half the €40,000 saving.
“It literally couldn’t be simpler,” says Maughan, a former Merrill Lynch banker who spent a chunk of his career in the US. “It truly is a risk-free model for the customer.”
It is so simple, in fact, that UrbanVolt initially struggled to convince Irish businesses that it isn’t too good to be true. “They ask, ‘Where’s the catch?’ It’s hard doing deals in Ireland — people are fixated on how much money the other guy is getting.”
Co-founded by Maughan and friends Graham Deane and Declan Barrett, UrbanVolt has overcome the scepticism to make decent progress. The firm has completed nearly 100 lighting projects this year and saved customers “over €20m”, says Maughan, though he does not give revenue figures for the company.
His case-study customers include forklift maker Cargotec in Dundalk, where almost 800 LED fittings were installed, and the sprawling Blackpool shopping centre in Cork. Maughan expects UrbanVolt will do at least 250 projects next year as it expands abroad.
We are being dragged to the UK and Europe with the customers. We are quoting right now on a project with 60 facilities in Ireland and the UK.” UrbanVolt has more moving parts than the average start-up. A €30m funding line has been agreed with the Swiss-based SUSI Energy Efficiency Fund to bankroll installations, and there are “hundreds of millions of euros more available, says Maughan.
The LED fixtures are made in China and shipped directly to customers, for installation by UrbanVolt. On the ground, the company employs 22 people directly and another 80 indirectly as LED installers.
To keep the lights on, Maughan has raised €1.35m from investors, including the rugby star Jamie Heaslip, and is about to raise another €5m to fund overseas growth. “We fully intend this to be a global business,” he says.
After he graduated in Dublin, Maughan went to the US and worked for his father’s medical distribution business, Surgical Distributors, for about three years. Then he set up one of the first mobile phone businesses in Florida — an entrepreneurial adventure that does not feature on his LinkedIn profile. “It went from zero to $14m [€14.8m] in revenues in 14 months — then it ran out of cash,” he says. “I don’t tend to dwell on it.”
The episode taught him he did not know enough about financing a business, so he went back to UCD in 1998 to do an MBA. That came in handy at Merrill Lynch in New York, where he worked first in investment banking, then private banking.
At the time, the private banking business revolved around high net worth clients making a return on individual trades and transactions, and the bank netting fees. “Sometimes the best deal for a client is to do nothing — but if you do nothing, the bank doesn’t get any fees,” says Maughan. “It was very messy.”
He was centrally involved in switching the private banking business to a regular fee model, which delivered recurring revenues for Merrill Lynch. “I think we were the first to realise private wealth clients are less concerned about return and more concerned about risks. They give you €20m and want to be sure it’s still at least €20m in five years’ time.”
In 2001, on the cusp of the Irish economic boom, he returned to Dublin to set up a private client office targeting wealthy individuals. It got $500m in new assets in a year and was the first office in Merrill Lynch to be profitable in its first year, says Maughan.
He became involved in the Merrill Lynch wealth business in 26 European countries, and put “advisory centres” in London and Bahrain to manage lower-value clients. With the data it gathered from clients, it could create and tailor investment products for them. “It turned into a very, very good business. It was delivering long-term stable growth and getting a lot of attention.”
Maughan was also getting attention within Merrill Lynch, becoming director of its financial advisory business in Europe, the Middle East and Africa. “I was in my early thirties, running an $8bn book of business and dealing with the chief operating officer. It was great.”
In 2003, he was at a board meeting of Merrill Lynch international bank in London when his PA interrupted to say his mother was on the phone: his father, recently retired at age 60, had a brain tumour and had been given 90 days to live.
Keen to spend that time with his father, Maughan offered his resignation on the spot but Merrill Lynch gave him paid time off. After his father died that year, he went back to the bank for a short stint, but: “My heart wasn’t in it. I didn’t want to work my life away, only to retire and drop dead.”
Maughan took “two or three years” off and moved to Provence in France with his American-born wife and two young children. “I was lucky I was in a position to do that,” he says.
He did some part-time advisory work on mergers and acquisitions and invested in some property deals. Being out of Ireland did not insulate him from the crash, however: “I lost a load of money on bank shares and some property stuff. It was very painful.”
He was back in Ireland in the late Noughties when a business associate asked him to look at the numbers for an unidentified business. Maughan spotted several issues to be addressed and put together a plan of action before being told it was McCormick Macnaughton, owner of the Caterpillar digger business in Ireland.
Highly profitable during the building boom, the company had been hit hard by the economic collapse. With the backing of Caterpillar International, Maughan was installed as chief executive to turn the business around. Deane, his UrbanVolt co-founder, was operations manager at the digger company.
“There are only two rules in restructuring: you can’t move fast enough and you can’t cut deep enough,” says Maughan.
McCormick Macnaughton went through a pre-pack receivership in the summer of 2010 and was acquired by the owner of the Caterpillar business in the UK. “It was tough, but it could have been a lot worse,” he says.
Looking around for potential deals after McCormack Macnaughton, he was introduced to Air Manager, a Manchester company that had technology to purify air in aircraft, hospitals and other facilities. “The technology was really promising but they didn’t have funding,” he says.
He bought half the business and Deane also became a director and shareholder. Oyster Capital, the private equity vehicle of tech entrepreneur Bill McCabe, later came on board as an investor, funding a push into the US.
The business, renamed Novaerus, has since raised more than $25m and has technology installed with customers in more than 30 countries. Maughan and Deane left Novaerus in 2013 but still have shares in the company, which has been valued at north of $50m in funding deals.
“We created significant value from a small warehouse in Manchester,” he says. “It’s in 42 states in the US and 28 countries in the EU.”
The idea for UrbanVolt came up over a pint in December 2014 with Deane and Barrett, who had just sold a property management business. They knew LED lights yielded big savings but their adoption was hamstrung by high costs.
“We sketched it on the back of a napkin. Our starting point was: if we were giving LED lights away for free, would anyone want them?” They got moving on the business in the middle of last year, sealing the SUSI financing and a relationship with Chinese manufacturers. Maughan describes the business as a “financial platform”, securitised on the cashflow of hundreds of companies, rather than a lighting company.
UrbanVolt gets its share of the LED savings monthly and he is philosophical about the risk of customers going bust during the five-year deal phase. “We do business with people we think are good strong partners for the long term, but we have to accept that sometimes bad things happen to good companies.”
He is already thinking ahead to a suite of UrbanVolt products, including solar installations and battery-based energy storage for businesses. The “green” element of the business is a bonus rather than an essential ingredient.
“No social or environmental problem gets fixed until someone figures out how to make money out of it,” says Maughan. “We have a sustainable business model that does the right thing for people.”
He expects to expand to 60 staff within a year and will be clocking up air miles bringing UrbanVolt to new markets. “My trick is turning asset-heavy, capital-intensive businesses into a service model with repeating revenues,” he says.
“A friend likes to say that I’m a one-trick pony — but it’s a good trick.”
By Gavin Daly