Octopus Energy has announced the spinout of its AI-powered software arm, Kraken Technologies, following a $1 billion standalone funding round that values the business at $8.65 billion.
The deal, led by D1 Capital Partners with participation from Ontario Teachers' Pension Plan, Fidelity International, and Durable Capital Partners, positions Kraken for a potential IPO by mid-2026.
Most coverage has focused on the numbers. But here is what the headlines are missing: this deal reveals something far more significant about the future of energy, software, and where the UK sits in an emerging global industry worth trillions.
What Is Kraken AI?
Kraken is not just billing software. It is an end-to-end operating system for utilities. Think of it as the infrastructure layer that runs everything from customer service and smart meter data to grid balancing and renewable energy optimisation.
The platform processes eight billion data points daily. It manages over 70 million customer accounts globally through licensing deals with major utilities including EDF, E.ON, National Grid US, and Tokyo Gas.
According to Frost & Sullivan, Kraken is the market leader in next-generation utility software, and has completed over 40 large-scale customer migrations on time and on budget.
Here is what makes it genuinely different from legacy utility software: Kraken was built cloud-native from day one. It was not a retrofit. Greg Jackson, Octopus Energy's founder, originally created Kraken as the backbone for Octopus itself. The energy supplier was the "demo client." When Octopus started outperforming competitors on customer service and operational efficiency, other utilities came calling.
The result is a platform that automates up to 40% of digital communications, reduces cost-to-serve by 40%, and enables utilities to launch new tariffs and products in days rather than months.
Kraken's AI tool, Magic Ink, uses GPT-style models to summarise customer histories and generate responses, cutting service times while maintaining the personalised touch that has made Octopus a Which? recommended supplier for five consecutive years.
The Deal Structure: More Than Meets the Eye
The $1 billion raise was led by D1 Capital Partners, the $21 billion hedge fund run by Daniel Sundheim. D1 has been betting heavily on European turnaround stories and energy tech, with profitable positions in Siemens Energy and other infrastructure plays. This is not a speculative bet on a pre-revenue startup. Kraken already has over $500 million in contracted annual recurring revenue, and that figure has more than doubled over the past 18 months.
Post-spinout, Octopus Energy will retain a 13.7% stake. Australia's Origin Energy, which invested $140 million in the round, will hold 22.7%. Origin has also agreed to waive its exclusivity arrangement for Kraken's services in Australia in exchange for additional equity, opening up the Australian market to new Kraken customers.
The spinout structure matters. By separating Kraken, Octopus resolves a conflict of interest that had limited growth. Utilities were hesitant to license software from a direct competitor. As an independent company, Kraken can pursue deals with any utility globally without the baggage of being attached to a retail energy supplier.
Why This Matters for Tech Founders
The Kraken story offers a playbook that UK startup founders in every sector should study.
Build for Yourself First
Octopus did not set out to build an enterprise software company. They built Kraken to run their own business. The product-market fit was proven internally before a single external license was sold. This is the opposite of the typical enterprise SaaS model, where founders build products based on assumptions about what customers want. By being their own first customer, Octopus ensured that every feature solved a real problem.
Spin Out When the Conflict Becomes a Constraint
The decision to spin out Kraken was not made lightly. For years, Kraken operated as an internal division. But as it grew, the conflict of interest became a barrier. Large utilities did not want to hand over their customer data and operations to a competitor. The spinout removes that friction. The lesson: sometimes the best way to unlock value is to let a business unit stand on its own.
The AWS Playbook Works Outside Tech
Kraken is often called the "AWS of energy." Amazon built cloud infrastructure for itself, then opened it to the world. Octopus did the same with utility software. This model works because internal use creates a forcing function for quality. If the platform is critical to your own operations, it has to work. The challenge is recognising when your internal tool has become valuable enough to license.
The Competitive Landscape: Who Else Is in This Race?
Kraken is not alone. The energy software market is heating up as utilities worldwide scramble to modernise legacy systems and integrate renewable energy sources.
Kaluza, spun out of OVO Energy in 2019, is the closest UK competitor. It recently signed a multi-year deal with ENGIE to deploy its platform across 20 million customer accounts globally. Kaluza has partnerships with Volvo and Volkswagen for EV charging optimisation and a joint venture with Mitsubishi Corporation in Japan.
Uplight (which acquired AutoGrid in 2023) focuses on demand response and distributed energy resource management in North America. It is backed by Schneider Electric and has deep relationships with US utilities.
The legacy players remain formidable. Salesforce, Oracle, and SAP all have utility-focused products. But they were not built for the energy transition. Their platforms were designed for a world of centralised generation and passive consumers. They struggle with the real-time complexity of managing millions of distributed energy resources.
What separates Kraken is scale and proof. No other platform has completed 40+ large-scale migrations. No other platform manages half of the UK's grid-scale battery sites. The question is whether competitors can catch up before Kraken's network effects become insurmountable.
The Bigger Picture: Energy Software Is the Next Frontier
Here is the perspective missing from most coverage of this deal: the energy transition is fundamentally a software problem.
The old grid was simple. Large power plants generated electricity. It flowed one way to consumers. Demand was predictable. The new grid is chaotic. Solar panels on rooftops generate power at midday. Wind farms produce unpredictably. Electric vehicles charge when their owners plug them in. Heat pumps draw power for heating. Batteries store and discharge energy based on price signals.
Managing this complexity requires software that can process billions of data points in real time, balance supply and demand across millions of distributed assets, and optimise for cost, carbon, and grid stability simultaneously. This is not a nice-to-have. It is existential. Without platforms like Kraken, the energy transition stalls.
The market opportunity is staggering. The UK smart grid market is projected to grow from $2.4 billion in 2024 to $8.8 billion by 2033, a CAGR of 15.5%. Globally, the virtual power plant market is expected to reach $39.5 billion by 2035. The building-to-grid technology market is forecast to hit $147.8 billion by 2034. Kraken's $8.65 billion valuation suddenly looks conservative.
Kraken is positioned at the centre of all of this. It manages utility-scale assets and residential flexibility. It handles customer billing and grid optimisation. It operates across electricity, gas, water, and telecoms. In a fragmented market, it offers the only proven end-to-end platform.
What Comes Next
Kraken's CEO, Amir Orad, has signalled that the US is the priority market. A New York-based CEO, a growing US-based executive team, and recent deals with National Grid US and Champion Energy Services point to an aggressive push into North America.
Orad brings 25 years of experience scaling software companies, most recently as CEO of Sisense, where he grew revenue 17x. He is a technologist first, not a salesperson. By his own count, Kraken has 1,400 engineers and fewer than 10 salespeople. The product sells itself.
The IPO timeline is mid-2026. If Kraken continues its current growth trajectory, the Wall Street Journal has suggested a valuation of $15 billion or more is plausible. That would make Kraken one of the largest UK-founded tech companies to go public in years.
The UK Angle: Building a Global Tech Champion at Home
Greg Jackson's story is a reminder that you do not need to move to Silicon Valley to build a world-class technology company. Jackson grew up in Halifax and Saltburn-by-the-Sea. He started his career coding video games. He remembers having the electricity cut off as a child.
That experience shaped Octopus. The company was founded on the premise that energy suppliers had failed consumers for decades. Kraken was the tool to fix it. Today, Octopus is the UK's largest domestic electricity supplier, having overtaken British Gas. Kraken powers that success and is now licensing the same advantage to utilities worldwide.
The Kraken deal is part of a broader pattern. As detailed in our analysis of how the UK became tech's most wanted destination, Britain has attracted over £45 billion in committed AI investment in 2025 alone. Microsoft, Google, and NVIDIA have all made record commitments. The infrastructure is being built. The talent is here. The regulatory environment supports innovation.
For founders watching from the sidelines, the message is clear. The UK can produce globally significant software companies. Kraken is proof. The question is whether more founders will follow Jackson's lead and build here rather than relocating to chase American capital.
The Bottom Line
This is not just a funding round. It is a signal that energy software has arrived as a category. The $8.65 billion valuation reflects what sophisticated investors see: a platform business with recurring revenue, massive market tailwinds, and a defensible competitive position.
The deal also reinforces a theme we have tracked across our coverage of the top 100 UK AI startup investments: British companies are building genuinely differentiated technology, not just following Silicon Valley playbooks. Kraken did not copy AWS. It applied the same principles to a different industry and created something new.
For tech founders, the Kraken playbook is worth studying. Build for yourself first. License when the product is proven. Spin out when the conflict becomes a constraint. And remember that the best enterprise software often starts as an internal tool that got too good to keep to yourself.
The energy transition is a multi-trillion-dollar opportunity. Software will be at its centre. And right now, a company born in the UK is leading the way.
