Dandelion Energy raises $70M to take geothermal heat pumps mainstream

Dandelion, the Google spinout making geothermal heating and cooling for homes, just raised $70 million to grow its operations as market demand surges.

The startup focused on heat pumps well before the building-decarbonization tool arrived at its current moment in the spotlight. Dandelion powers heat pumps with slimmed-down geothermal drilling in a household’s backyard. By drilling hundreds of feet into the ground, Dandelion taps a secure reservoir of heat in the winter, and in the summer, the pump removes heat from the house to cool it.

Now the company is tapping deeper reservoirs of capital. The financing was led by the venture arm of national homebuilder Lennar and the energy transition investing division of NGP. Breakthrough Energy Ventures participated alongside several other investors.

This round was intended to be an extension of last year’s $30 million Series B, but ​“there was just more demand than we anticipated,” CEO Michael Sachse told Canary Media. As a result, this B-1 raise surpassed the total $65 million that the company raised previously.

“There is a lot of understanding that heat pumps are going to be a big part of the solution” to decarbonizing buildings, Sachse said. ​“Investors are trying to understand how they might play in the heat pump space.”

In 2017, Dandelion graduated from Google’s ​“moonshot factory,” X, with some promising IP around residential-scale geothermal. Prior to that, people could hire a local contractor to drill a well in their yard, but nobody had tackled home geothermal as a technology problem and innovated on it with Silicon Valley–style R&D.

Tech is great, but Dandelion needed to prove customers actually wanted this. The startup shifted operations to New York state, where it could go head-to-head with gloppy old fuel-oil heating, offering cleaner heat and fuel cost savings. In Westchester County, utility Con Edison can’t even supply new gas hookups to homes, so Dandelion jumped in to fill the gap. By now, it’s installed 1,000 systems across New York, Connecticut and Massachusetts, and tripled its commercial operations since the start of 2022.

Meanwhile, macro trends have made Dandelion’s offering all the more appealing. More households recognize energy costs as a pain point, due to general inflation and energy-specific price spikes stemming from Russia’s invasion of Ukraine. Congress included thousands of dollars in tax credits for home electrification in the Inflation Reduction Act, and groups like Rewiring America have been pounding the pavement evangelizing the benefits of heat pump technology.

The easiest way to install home geothermal heating is to do so as part of new construction — hence the value of having Lennar as a strategic investor. Dandelion will spend some of its new capital developing a new-build market in partnership with homebuilders, Sachse said.

Thus far, Dandelion mostly retrofits onto existing homes, and it honed a relatively less invasive drilling rig to fit into customer yards. But it still has to confront the challenge of timing: Homeowners who recently paid for fossil-fueled heating are loath to rip it out and replace it before it breaks. And when heating equipment does break, people generally want the quickest and easiest replacement.

Dandelion’s product also costs roughly double the price of a new fossil-gas furnace and air-conditioning system, Sachse said. But once installed, the geothermal system costs one-third to operate compared to traditional heating and cooling.

Currently, customers can get a loan from Dandelion so they can access those monthly energy savings without paying a fat sum upfront. The system typically pays for itself in seven years, Sachse said, after which customers enjoy much lower heating and cooling bills.

But a new federal policy in the Inflation Reduction Act could soon give customers more financing options. The landmark climate legislation gives households a 30 percent tax credit for ground-source heat pumps like Dandelion’s, while third-party-owned systems get a 40 percent credit if they meet the criteria for domestic manufacturing. Prior to that legislation, third-party-owned heat pumps could only access a much lower tax credit.

Once those credits are flowing, companies like Dandelion could finance heat pumps, monetize the higher tax credit and get paid back over time by customers. That could expand the pool of customers who want to adopt this technology.

“From a company standpoint, we think that if we’re able to do 2,500 to 5,000 homes a year, that is public-company scale,” Sachse said. He added that electrifying home heating and cooling is a big enough market to support multiple billion-dollar companies, as regions such as Europe and states including California, Washington and more push to eliminate fossil-fueled heating.

The new funding provides at least two years of runway for Dandelion, and the goal is to get at or near cashflow breakeven in that time, he added.