Proptech innovator Switch Automation elects dilution-free growth
Learn how Switch Automation avoided further dilution, while financing growth - after an initial raise of $17M.
Context
Switch Automation is a technology-driven company transforming the real estate sector - helping property owners reduce operating costs and improve energy efficiency. Real estate is the largest asset class globally but to date, has seen minimal digital transformation. Launched into the U.S. in 2016, and with a presence in the US, Australia and UK, Switch Automation has a mission to bring data-driven management to building operations.
Key takeaways
- In 2022 the start up world shifted quickly with access to capital retreating quickly.
- Switch had raised $17M and was in the middle of a B round when this happened so they decided to rethink financing options.
- Switch Automation took $500K in financing from Efficient Capital Labs, enabling them to respond to this changing market without impacting growth.
Challenges
After a decade of growth, market conditions for startups shifted dramatically.
Changing Market Environment
In 2022, the fundraising environment for startups changed rapidly and Proptech had additional challenges from the headwinds faced by the real estate sector.. Switch needed to rethink its path to growth without investor capital and while watching the real estate sector recover.
Maintaining Growth Without Further Dilution
Switch Automation had to determine which financing path to take, to sustain operations and for future growth.. Having already raised $17 million, and established an iconic group of customers, the founders were looking for growth without further dilution.
Solutions
In 2023, Switch Automation turned to Efficient Capital Labs (ECL) for non-dilutive financing. This provided a crucial buffer that allowed the company to weather market changes and reposition itself for organic growth.
Switch Automation took its first tranche of $500K of financing in early 2023 - and rolled over a new tranche of $300K in 2024.
Agile Response to Market Changes: As the startup funding market reversed from rapid growth to contraction, Switch Automation quickly shifted from a more aggressive, venture-backed model to a bootstrapped, organic growth approach. The funding from ECL enabled this transition, giving the company the operational flexibility it needed.
Operational Stability: The financing was used primarily for operational expenses, ensuring that Switch Automation could continue to grow. This allowed the company to maintain operations without the need for further dilution, preserving ownership and strategic control.
Results
Switch Automation’s decision to leverage non-dilutive financing through ECL resulted in several key outcomes:
- Preserved Ownership and Strategic Vision By choosing ECL, Switch Automation avoided further dilution of ownership, which was crucial after having already raised $17 million in previous rounds. The founders felt confident in their product-market fit and customer base, and ECL's financing allowed them to maintain control over their long-term vision.
- Flexible Funding Strategy ECL stood out to the team at Switch Automation for its fast and responsive process. Switch Automation's CEO, Deb Noller, was able to provide the necessary documents for application within hours, and ECL’s funding decision was made within days. This quick turnaround ensured that the company had the capital it needed to continue operations smoothly - as well as take further tranches of financing when they were needed.
By securing non-dilutive financing from ECL, Switch Automation successfully navigated a challenging market environment and positioned itself for continued growth in the evolving real estate tech sector.
