TL;DR: How Octopus Energy’s Kraken Spin-Out Offers Lessons for Entrepreneurs
Octopus Energy’s spin-out of AI startup Kraken raised €850 million at a €7.3 billion valuation, showcasing how strategic independence and AI-driven solutions can drive massive growth.
• Focus and autonomy: The separation allowed Kraken to scale globally and boost valuation while avoiding parent-company constraints.
• AI in niche sectors: Kraken optimized energy operations with AI, solving inefficiencies that resonate across critical industries.
• Investor appeal: Clear value proposition, proven customer success, and financial metrics helped Kraken secure funding from major investors like D1 Capital Partners.
Key Takeaways: Prioritize focus, leverage AI to solve industry pain points, and communicate clear value to investors. Looking for more tools to scale smartly? Join Fe/male Switch today.
Octopus Energy’s €7.3 Billion Spin-Out of AI Startup Kraken: Lessons for Entrepreneurs
If you’re building a tech-focused startup, especially one that plays in the high-stakes energy or SaaS sector, Octopus Energy’s spin-out of their AI-powered Kraken platform is a goldmine of lessons. By raising €850 million at a shocking €7.3 billion valuation, Kraken proves that a spin-out strategy can deliver exponential growth while redefining global industry norms. As someone who has launched and scaled ventures across education, deeptech, and blockchain, let me break down this game-changing event and pull out practical insights you can apply to your own business.
Kraken, now freed from Octopus Energy’s direct oversight, is poised to tackle energy digitalization at a scale that goes beyond operational improvements. This is an ambitious move that reflects the enormous market appetite for AI-driven platforms in critical sectors. The question is: what does this mean for entrepreneurs in complex industries like renewables, utilities, and beyond? Let’s dive in!
What does a spin-out teach us about strategic growth?
Kraken’s spin-out isn’t just about funding, it’s a masterclass in strategic independence. Octopus Energy retained only 13.7% stake in the newly independent Kraken, allowing external investors like D1 Capital Partners and Fidelity International to inject massive cash flow. But why does independence matter for scaling in a competitive market?
- Focus: By separating Kraken from its parent company, it gains a laser-sharp focus on becoming the backbone of clean energy utilities globally.
- Neutrality: Independence attracts a broader range of industry collaborations without conflicts of interest tied to its parent company.
- Global expansion: Kraken now operates in London, New York, Paris, Tokyo, and Melbourne, a clear signal that strategic autonomy enables aggressive international scaling.
- Valuation boost: The separate governance structure paved the path for an €7.3 billion valuation, far higher than it likely would have achieved as a subsidiary.
If you’re bootstrapping or gearing up for Series A, ask yourself: does keeping your project tied to your existing business limit your focus? Focus and autonomy, as Kraken proved, can be major scaling levers.
How can entrepreneurs harness AI in niche sectors?
AI’s role in Kraken’s dominance cannot be ignored. From automating customer billing to managing 70 million global accounts across utility sectors, Kraken’s AI engine offers solutions to longstanding inefficiencies. Entrepreneurs stepping into niche industries can apply this principle effectively without building billion-dollar valuation platforms immediately.
- Identify sector bottlenecks: Kraken leverages AI to optimize customer billing and energy usage. This is a clear example of applying AI where inefficiencies harm profitability.
- Scale cautiously: Entrepreneurs can start with smaller datasets and processes, scaling platforms incrementally.
- Focus on partnerships: Focus on multi-account licensing like Kraken did by partnering with utility giants like EDF Energy and E.ON Next.
- Outcome-based pricing: Use performance-driven pricing models to align customer incentives, such as rewards for decreasing peak usage energy.
As I always tell startup founders: leveraging AI isn’t about flashy tech, it’s about solving core pain points your industry already struggles with.
How did Kraken manage to raise €850 million? A breakdown of strategy
Securing €850 million in a competitive capital market is no small feat. Kraken achieved this by perfect positioning, strategic investor engagement, and delivering defensible value. Entrepreneurs can take several notes here:
- Value proposition clarity: Kraken provides an operational system for utilities. It wasn’t vague about its mission, this simplicity is what often wins over investors.
- Leveraging existing customer success: Kraken had over 70 million accounts globally under its purview by the time the funding happened. Show evidence of traction before approaching investors.
- Align with active investors: Like Teachers’ Venture Growth (Ontario Teachers Pension Plan Board) investing in late-stage opportunities, find funds aligned with your growth stage and industry solution.
- Metrics, metrics, metrics: Kraken didn’t just raise funds, it showed a contracted annual revenue of nearly $500 million (as of 2025). Investors love predictable revenue streams.
What this tells smaller founders is simple: you don’t need €500M revenue streams, but you do need clarity in what makes your SaaS indispensable.
What are the roadblocks founders should avoid?
- Scaling without adequate autonomy: Keep your decision-making agile, especially if you’re under the umbrella of a larger organization.
- Misreading market appetite: Kraken tapped into clean energy, a sector primed for digital optimizations. Research before assuming industries will adopt your platform.
- Underestimating the neutrality factor: Many startups decline because their structure locks out certain partnerships. Build governance that allows trust from multiple stakeholders.
- Overcomplicating your offering: Keep it simple. Kraken succeeded by delivering seamless solutions utility players could immediately adopt.
Remember: even billion-euro startups prioritize simplicity where it matters most.
Tying it all together: Lessons for future founders
Octopus Energy’s Kraken spin-out isn’t just a watershed moment for energy tech, it’s a blueprint for how to apply autonomy, focus, and AI-driven solutions to win global markets. As a startup founder, you don’t need to build platforms serving 70 million accounts (yet!). Instead, focus on building solutions your industry truly needs through accessible technology, neutral positioning, and clear scalability metrics. While advising female-led startups, one mantra always holds: clarity appeals to cash. Raise intentionally, scale strategically, and most importantly, solve real problems.
Want to learn more about building AI businesses or scaling efficiently? Join the startup game Fe/male Switch, a community designed for women who want to lead the next generation of scalable startups. Connect with other founders, test business models, and scale smarter. Become a part of the movement today.
FAQ on Octopus Energy's Kraken Spin-Out
What is Kraken, and why did Octopus Energy spin it out?
Kraken is an AI-powered operating system for the utility industry, designed to manage customer accounts, optimize energy usage, and automate billing processes. Octopus Energy spun it out as a standalone company to attract focused investment, scale globally, and establish itself as a neutral platform for multiple energy players. By separating Kraken and creating a new governance structure, this move allows increased autonomy, improved collaboration with external investors, and the ability to pursue aggressive international growth. The spin-out was accompanied by €850 million in funding that valued Kraken at €7.3 billion. Read the full story on EU Startups.
How does Kraken use AI to benefit the utility industry?
Kraken leverages AI to automate critical processes within energy utilities, such as customer billing and grid management. The platform handles over 70 million customer accounts globally and resolves inefficiencies that often plague the sector, like outdated billing systems and poorly optimized energy grids. AI integration allows utilities to shift energy demands, reward customers for reducing peak usage, and implement smarter, cost-saving operations. The system’s scalability has attracted partnerships with industry titans like EDF Energy and E.ON Next. Dive deeper into Kraken’s AI capabilities via BBC News’ coverage.
How did Kraken achieve a valuation of €7.3 billion?
Achieving a €7.3 billion valuation came from Kraken showcasing its operational scalability and consistent revenue streams. With over €500 million projected annual contracted revenue by 2025 and its ability to manage 70+ million customer accounts globally, investors saw it as a game-changing asset in utility digitalization. Kraken’s participation in energy modernization and its partnerships with global giants like Tokyo Gas further solidified its credibility. Discover more on Seeking Alpha.
Why did Octopus retain only a 13.7% stake in Kraken?
Octopus Energy retained a limited stake intentionally to offer Kraken the independence it needed to thrive in a competitive market without ties to a single parent company. This strategic independence enhanced Kraken’s ability to collaborate neutrally with multiple stakeholders in the energy sector, including direct competitors of Octopus Energy. By shedding majority control, Octopus unlocked massive external investment opportunities, which became crucial to Kraken’s €850 million funding round. Learn more about the deal structure on Axios.
How did Kraken secure monumental funding from big investors?
Kraken raised €850 million in its first standalone funding round by demonstrating robust market potential and showcasing its operational performance with €500 million recurring revenue. Major investors such as D1 Capital Partners and Fidelity International backed the platform due to its clear value proposition as a utility ecosystem enabler. Kraken’s readiness for international scaling and its impactful partnerships with utility leaders solidified its pitch for significant investment. Explore funding insights on ESG Today.
What makes Kraken an international player in clean energy tech?
Kraken operates across major global hubs in London, New York, Paris, Tokyo, and Melbourne, allowing it to address utility challenges in a variety of markets. By providing localized solutions tailored to specific grid demands, the platform strengthens its ability to deploy effective AI-powered systems worldwide. Kraken fosters partnerships with utility giants like National Grid and EDF Energy while scaling rapidly in renewable energy-focused territories. Its international network has been a core driver of its success. Check global expansion details on Vestbee.
How can AI entrepreneurs use Kraken’s strategic example for their startups?
Kraken’s success illustrates the importance of solving real-world inefficiencies using AI rather than simply producing flashy tech. Entrepreneurs should identify bottlenecks in their target industries (e.g., utility service management) and offer scalable, outcome-based solutions that incentivize customer adoption. By focusing on partnerships and autonomy, startups can create fertile ground for scalability and external investment, just as Kraken achieved with its AI-powered operating system. Discover similar insights on Minutehack.
What role do strategic partnerships play in Kraken’s growth?
Kraken strategically partnered with leading utility companies, EDF Energy, E.ON Next, Octopus Energy itself, and Tokyo Gas, to deepen its foothold in the energy market. These partnerships allowed Kraken to integrate its AI-powered system directly into existing utility frameworks, creating value both for customers and investors. Entrepreneurs looking to scale should emulate Kraken’s tactic of fostering multi-account licensing partnerships with industry leaders. Discover Kraken’s partnerships on CNBC.
What challenges might Kraken face as an independent company?
While independence supports scaling, Kraken must handle challenges like maintaining investor trust, sustaining growth momentum, and navigating regulations in diverse markets. Additional obstacles include finding personnel to match its aggressive international goals and ensuring the platform continues solving pressing utility problems without overshooting customer expectations. Strategic autonomy is a balancing act, where businesses must not detach so far from their roots that they lose operational context. Insights from similar companies are detailed across EU Startups.
How can women entrepreneurs leverage these lessons?
Women entrepreneurs can take key insights from Kraken’s spin-out strategy, particularly the value of autonomy and scaling through AI. Designing neutral platforms that allow for flexible partnerships and focusing on solving industry pain points creates undeniable appeal for investors. Communities like F/M Switch Startup Game provide invaluable resources and mentorship to develop scalable, impact-driven enterprises. Connect today to start building smarter solutions.
About the Author
Violetta Bonenkamp, also known as MeanCEO, is an experienced startup founder with an impressive educational background including an MBA and four other higher education degrees. She has over 20 years of work experience across multiple countries, including 5 years as a solopreneur and serial entrepreneur. Throughout her startup experience she has applied for multiple startup grants at the EU level, in the Netherlands and Malta, and her startups received quite a few of those. She’s been living, studying and working in many countries around the globe and her extensive multicultural experience has influenced her immensely.
Violetta is a true multiple specialist who has built expertise in Linguistics, Education, Business Management, Blockchain, Entrepreneurship, Intellectual Property, Game Design, AI, SEO, Digital Marketing, cyber security and zero code automations. Her extensive educational journey includes a Master of Arts in Linguistics and Education, an Advanced Master in Linguistics from Belgium (2006-2007), an MBA from Blekinge Institute of Technology in Sweden (2006-2008), and an Erasmus Mundus joint program European Master of Higher Education from universities in Norway, Finland, and Portugal (2009).
She is the founder of Fe/male Switch, a startup game that encourages women to enter STEM fields, and also leads CADChain, and multiple other projects like the Directory of 1,000 Startup Cities with a proprietary MeanCEO Index that ranks cities for female entrepreneurs. Violetta created the “gamepreneurship” methodology, which forms the scientific basis of her startup game. She also builds a lot of SEO tools for startups. Her achievements include being named one of the top 100 women in Europe by EU Startups in 2022 and being nominated for Impact Person of the year at the Dutch Blockchain Week. She is an author with Sifted and a speaker at different Universities. Recently she published a book on Startup Idea Validation the right way: from zero to first customers and beyond, launched a Directory of 1,500+ websites for startups to list themselves in order to gain traction and build backlinks and is building MELA AI to help local restaurants in Malta get more visibility online.
For the past several years Violetta has been living between the Netherlands and Malta, while also regularly traveling to different destinations around the globe, usually due to her entrepreneurial activities. This has led her to start writing about different locations and amenities from the point of view of an entrepreneur. Here’s her recent article about the best hotels in Italy to work from.