Service 1st Financial has closed on nearly $20 million in its quest to create a new model for buying home heating, cooling and plumbing equipment, dubbed “Home Comfort-as-a-Service,” supplemented by sustainability goals.
The Bethesda, Md., firm raised $5.85 million in an ongoing Series B round co-led by S2G Ventures, and secured $15 million in subordinated debt, also from the same firm, which has offices in Boston, San Francisco and Chicago.
“Advancing sustainability in the ‘home comfort’ sector requires both new technologies and new business models that can deploy these technologies at scale,” said Anuj Khanna, founder and CEO of Service 1st. “While the vast majority of sector resources are dedicated to technological innovation, Service 1st is addressing the need to catalyze business model innovation to make these technologies more widely available for consumer use.”
S2G Ventures, which focuses on food, agriculture, oceans and clean energy markets, said it shares Service 1st’s faith in a service-based consumption model, together with sustainability goals. “Service 1st is effectively meeting the need for transformative business models that make energy-efficient products more accessible,” said Andrea Woodside, vice president for Real Assets at S2G Ventures.
Khanna, a former UBS executive and alum of the Kellogg School of Management, joined with New York’s Thayer Street Partners, a boutique private investment firm, in incubating Service 1st in 2019. He aimed to build service models in an industry segment focused on commoditized sales. Toward this, he brought tech and financial innovation, and supplemented it with sustainability goals.
The company has created leasing options, trained contractors and built new service-based pricing that together give homeowners a way to buy heating, ventilation and air conditioning products, and also be assured of replacements and upgrades when necessary. For a low monthly payment, homeowners receive the option to switch to latest energy-efficient equipment, while eliminating common pain points of owning such systems. Service 1st’s Premier Program additionally advances sustainability by allowing faster replacement of older and inefficient systems, incentivizing consumers to opt for climate-smart, energy-efficient solutions.
Service 1st has built strategic partnerships with sustainability-focused HVAC and plumbing original equipment manufacturers and contractors, and best practices training organizations. The company said it would use the newly raised funds to geographically expand its market, and invest further in training. It also expects a fillip to its business from the recently passed Inflation Reduction Act.