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ENERGY & UTILITIES | Electric / Transmission & Distribution
faradaygrid.com

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Founded Year

2016

Stage

Asset Sale | AssetsPurchased

Total Raised

$34.2M

About Faraday Grid

Faraday Grid is a system designer focused on delivering a technological solution to rebalance and reimagine energy distribution grids. It applies its method called Design by Rationalised Constraint to solve systems.

Faraday Grid Headquarter Location

1 Lochrin Square 92 Fountainbridge

Edinburgh, Scotland, EH3 9QA,

United Kingdom

+44 01313060411

Latest Faraday Grid News

Bullying allegations, $1,000 pens, and a celebrity chef: Inside the collapse of Faraday Grid, the billion-dollar energy startup backed by Adam Neumann

Oct 24, 2019

A failed funding round in mid-2018 helped Faraday Grid hit the jackpot. Amp, a small Canadian clean energy firm which previously invested in Faraday Grid and sat on its board, had committed to a further funding round before having to pull out, two sources said. To fill the gap, Amp's executives introduced Faraday to other potential backers — including Adam Neumann. Thus far, it had been a tough year for fundraising. Andrew Scobie was shopping the firm around to prospective investors, touting his firm's smart grid system, but without success, sources said. One investor source considered investing in Faraday Grid for a client, and saw the pitch. They expressed skepticism. "The conclusion [we] came up with was that the technology didn't stack up," they said. "He had a tech that sounded revolutionary, but the evidence they provided was based on a lab-based trial that couldn't be replicated. Every time we asked for details on how it worked in practice, he sent a video of the trial, but I have no idea whether that was real." The person advised their client not to invest. Meanwhile, office-sharing giant WeWork was flying high with a valuation of $47 billion and a prospective stock market float. Neumann himself was a paper billionaire many times over, and was known to invest eclectically in businesses that interested him — as evidenced by WeWork's $13 million investment in an artificial wave startup in late 2017 . In mid-2018, Andrew Scobie and Jacqui Porch duly boarded a plane to New York, along with Paul Ezekiel, the Faraday Grid board member and Amp executive who sources said had made the intro to Neumann. The eccentric Israeli-American real estate entrepreneur had none of the same reservations as other prospective investors. It was, one source with knowledge of the encounter said, a "meeting of the minds." (Faraday Grid seems to have appealed to Neumann's interest in environmental issues, which has seen him ban meat from WeWork company events in 2018 and banish disposable cups from its locations.) Faraday Grid's executives returned to Scotland triumphant, with $30 million in hand and a sky-high £2.75 billion ($3.5 billion) valuation for the business. "Andrew thought he was on the pathway to being a billionaire," the source said. Faraday Grid announced the investment in January 2019, and Scobie gave employees the impression the firm could secure more capital whenever it needed. For the next few months, Neumann's investment would be managed by a full-time WeWork employee in New York named Daragh Murphy, documents and sources indicate. It isn't clear why a WeWork employee was chosen to look after a personal investment. Neumann had separately set up a family office called 166 2nd Financial Services to manage his personal wealth, and it had been this entity that invested in Faraday Grid, according to 2018 filings . WeWork confirmed Murphy's involvement, but declined to give further details. Murphy did not respond to Business Insider's request for comment. A representative for Adam Neumann declined to comment. 'It was kind of a joke that he bought himself a £70,000 stereo' With $30 million in the bank offering much-needed financial breathing room, Andrew Scobie turned his mind to another worry: Jeremy Corbyn. Amid political uncertainty in the UK, there was the risk that the left-wing politician's Labour Party could seize power in an election — prompting the Australian executive to launch a new office in Switzerland in a novel scheme to shield Faraday Grid from potential socialist encroachment. "It was driven by a fear that if Corbyn gets in, he nationalizes the electricity grid and then Faraday Grid is at risk from the government stealing its intellectual property," one source said. The launch of this Swiss centre was part of a broader spending spree by the company in the first six months of 2019. It hired six C-suite executives, including a new chief financial officer and a new chief operating officer. It acquired three businesses in the Czech Republic from Chinese manufacturing firm Foxconn, forming a new local subsidiary. (The acquisitions cost around $3.6 million, internal documents stated.) It opened new offices and labs in the United States, in addition to Switzerland. The firm's headcount grew to 200 people. Scobie told Business Insider that Faraday Grid had developed the Swiss backup plan as a response to the uncertainty around Brexit. He said: "The board gave appropriate consideration to [Faraday Grid's] location due to the ongoing political instability in the United Kingdom. For this reason the decision was made by the board to develop a contingency to move the company's HQ to mainland Europe." By this point, the firm's monthly burn rate was between $3 million to $4.4 million, two former employees said. But despite a rapidly depleting balance sheet, Scobie was bullish and pursuing additional funding. "Andrew would keep saying, for a long time, that he'd got some really important, really rich person who would invest," one employee recalled. But it would fail to materialise, and "everyone would forget about it." In the months after Neumann's funding, Scobie told employees that Goldman Sachs had valued Faraday Grid at $6.5 billion. Former employees aren't sure the valuation ever happened, though Andrew Scobie said in a statement that a "tier one bank" had come up with the valuation. Goldman Sachs did not respond to a request for comment. As the business expanded, Scobie became more extravagant with his own spending. Internal documents detail that he and Jacqui Porch borrowed at least $100,000 from the company, using the cash to renovate their house in Edinburgh, ostensibly to hold board meetings and corporate events. It was here that the $5,000 dinner for Adi Neumann was held in February 2019. Adi Neumann, sister of WeWork cofounder Adam Neumann Roger Kisby/Getty Images Andrew Scobie told Business Insider that this loan had been approved by the board. "Despite this fitout being for the explicitly benefit of the company, I insisted it be treated as a loan to avoid any appearance of conflict of interest," he said. "This loan was repaid in full." Other expenses listed include £64,000 ($81,000) spent on a hi-fi and speakers and a rug costing £2,625 ($3,300). Scobie said all this expenditure was part of the original loan. "This expenditure was part of the approved loan mentioned above, and was used to equip the house to be used as a space for private meetings, Board meetings and overflow work from the office. All monies were repaid," he said, adding that the firm had had appropriate governance from the start. The pair were open about their spending, and also spent lavishly using the company credit cards, according to internal documents. "Andrew and Jacqui went everywhere together, they stayed in the finest hotels," one former staffer recalled, and added that one board member would observe that "watching Andrew and Jacqui's Instagram [accounts] was like watching a permanent holiday channel. "  Andrew Scobie's Instagram feed featured images of Michelin-starred meals. Instagram Another said: "Andrew loves living a lavish lifestyle, that's his thing. It was kind of a joke in the company that he bought himself a £70,000 stereo for his office. "  Scobie's Instagram account (now private) would show beautifully arranged meals at Michelin-starred restaurants in Geneva and ski trips. "None of this was done discreetly," a source said. Documents show that on the company credit cards, Scobie racked up thousands of pounds on a custom suit, a new shirt, and a $1,000 Mont Blanc pen. His partner Jacqui Porch took her school-age daughter on a business trip, and charged the fare back to the company. Documents also listed costly philosophy books, worth some £2,500 ($3,100) altogether, plus a miscellany of smaller expenses costing thousands of pounds. Scobie said some of the purchases were made in error on company cards. "I purchased a number of personal items which were misallocated to company rather than personal accounts, and were repaid to the company," he said in a statement. He described the collection of books as a corporate library available to all staff to create a "culture of mutual learning discovery and discussion." He said the books were not antique, as some sources described, but second-hand. Porch said: "Any personal expenses over time were subject to a reconciliation process and repaid." She said that she had taken her daughter on a business trip as a special case, and that this had been approved by the board. According to documents filed by Faraday Grid's administrators in October, Scobie and Porch did indeed pay back their loans — but only after the company had already collapsed. Companies House Adam Neumann's new aide unearthed multiple issues Documents suggest that up until this point, 166 2nd's involvement with Faraday Grid was still being overseen by Daragh Murphy, the WeWork employee. But Stern was a blue-chip investor, with stints at venture capital firm General Catalyst and Soros Fund Management. He immediately began scrutinizing his client's investment, and took a board seat at Faraday Grid. He quizzed Faraday Grid's newly hired C-suite about its finances, and this probing shed light on Scobie's loans, the seemingly undisciplined spending on expansion, and business travel. Scobie had also handed himself a £200,000 ($253,000) salary increase, documents indicated. Scobie said this increase had been approved by the board. At some point during the year, Adam Neumann had separately loaned Andrew Scobie $110,000 . The idea was that Scobie would use the money to pay off his debts to Faraday Grid, although documents and sources state that didn't happen. Scobie confirmed the loan, but declined to discuss the terms or repayment. A further, quiet investigation by in-house counsel Nathan Fagre threw up more unpleasant surprises — credible allegations from staff that Scobie was a bully. There are six incidents listed in the documents obtained by Business Insider with accusations around Scobie's behaviour. According to one entry, the CEO responded badly to criticism with: "If you don't like how it is, you fuckers can go home — there's the door. "  Four ex-staffers also described a "culture of fear" to Business Insider. "Despite the company's values of rational thinkers, being open minded, challenging the status quo, if you didn't bring good news you were quickly on the out," one former senior staffer said. Another former employee said: "He could switch between his moods quite easily and my impression was he would just use this to intimidate people basically. There was this one time I heard him yelling in a different office. It was so loud I could hear him through the wall." In emails to Business Insider, Andrew Scobie said the allegations were "deliberately misinterpreted" and said there had been a positive culture at Faraday Grid. He denied calling employees "fuckers" but acknowledged that he sometimes swore. He said: "Famously I do swear at times — I wish I didn't but I do. I am working on improving this. I have never called employees 'fuckers.'" Asked if he had shouted at employees, Scobie responded: "I am a passionate person who believed (and still believes) strongly in the goal we had set ourselves to materially reduce carbon emissions and increase human prosperity — occasionally that became audible but I absolutely reject there was any pattern of swearing and temper. This is simply a gross exaggeration." After its internal investigation, Faraday Grid's board felt it had sufficient grounds to fire the pair in June. Amp executive Paul Ezekiel took over in the interim, and the firm scrabbled to stay afloat. But in all the months it had been hemorrhaging cash, Faraday Grid was not making any money. The company had shown off a prototype transformer at a flashy US launch event in the spring of 2019, costing the firm some $1 million, but it wasn't close to finalizing a product. British power infrastructure firm UK Power Networks had agreed to trial the technology , but hadn't committed any funds. One source said ENEL, an Italian energy firm, had also shown interest in a trial. It was time for drastic action. Scobie had once boasted that the firm was aiming to employ 1,000 staff by the end of 2019. But the board took immediate cost-cutting measures, and halved Faraday Grid's existing staff to 100. It also closed a number of offices. Initially, the remaining staff were still optimistic that Adam Neumann might stump up a lifeline for the company after its drastic restructuring. But six weeks passed, and no funding came. Although Scobie was out, Faraday Grid's cash shortage was chronic and there was no chance of resuscitating the business. The firm went into administration in August 2019, and almost all of its employees were let go. The company's intellectual property and some of its assets were then sold to the highest bidder — straight back to excommunicated Andrew Scobie and his new company, Third Equation. According to the administrator's report, parts of the firm he had once valued at $6.5 billion were sold for less than £400,000 ($515,000). 'The WeWork parallels are so bizarre' Andrew Scobie says he just wants to get on and run his newly acquired business, now operating under the banner of Third Equation Limited. This new enterprise is backed by James Brooks, a former Goldman Sachs executive and now chief strategy officer at solar energy firm Lightsource BP. Scobie's partner Jacqui Porch is the other major shareholder. It remains to be seen whether he can make the Faraday Exchanger, or something like it, commercially viable. Grant Thornton, Faraday Grid's administrators, are investigating what happened at the firm as part of the usual administration process. The firm wrote in its administrator's report that Faraday Grid owes some £8 million ($10 million) to its creditors, including £1 million ($1.3 million) to employees. Grant Thornton declined to comment, other than confirming that Andrew Scobie and Jacqui Porch had agreed to pay back their loans as part of an agreement to require Faraday Grid's IP. And at least one investor is now mulling taking legal action. Amp CEO Dave Rogers, another Faraday Grid backer, said in a statement: "AMP is considering its own legal remedies arising out of the Faraday situation, and therefore won't be commenting at this time, except to say that it is satisfied its nominees on the Faraday board acted prudently and appropriately at all times." As is often the case when a startup implodes, those left most shellshocked by the chaotic ride are the employees. Those who spoke to Business Insider were left stunned and angry by the past six months. Some were overseas workers dependent on Faraday Grid for their visas. Former employees are also grimly struck by the similarities they saw with WeWork's own financial troubles and its CEO's ignominious exit from the firm. Adam Neumann was ousted from WeWork in September 2019, following intense media and investor scrutiny of his behaviour and the company's finances, culminating in the derailment of the startup's planned IPO. One former senior staffer at Faraday Grid said: "The WeWork parallels are so bizarre. You had lots of cash coming in, no diligence, empowering an egomaniac CEO to conquer the world and an inflated valuation. That's the SoftBank-WeWork model. "  Have something to share? Contact the reporter, Shona Ghosh, at sghosh@businessinsider.com, shonaghosh@protonmail.com. Her DMs are also open on Twitter @shonaghosh. NOW WATCH:

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Expert Collections containing Faraday Grid

Expert Collections are analyst-curated lists that highlight the companies you need to know in the most important technology spaces.

Faraday Grid is included in 2 Expert Collections, including Grid and Utility.

G

Grid and Utility

254 items

This collection includes companies that are working on software and hardware to improve grids, utilizing new pricing models, and developing microgrids.

S

Smart Cities

1,650 items

Faraday Grid Patents

Faraday Grid has filed 2 patents.

The 3 most popular patent topics include:

  • Analog circuits
  • Electric power conversion
  • Electrical engineering
patents chart

Application Date

Grant Date

Title

Related Topics

Status

9/14/2017

8/11/2020

Electric power conversion, Analog circuits, Electrical engineering, Electronic circuits, Electronic amplifiers

Grant

00/00/0000

00/00/0000

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Application Date

9/14/2017

00/00/0000

Grant Date

8/11/2020

00/00/0000

Title

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Related Topics

Electric power conversion, Analog circuits, Electrical engineering, Electronic circuits, Electronic amplifiers

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Status

Grant

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