Powering Up Texas

A good friend recently recommended I switch my electric service over to Stream Energy. The published rates for my area are substantially lower than what I am paying with my current provider, and it took just a few minutes to sign up.

Stream has adopted a Network Marketing Model through its Ignite Inc marketing team. A recent article in the Dallas Morning News quotes Stream's Managing Director Alex Rodriguez, "As long as we can create a unique environment where we are offering our services, customers will switch. They just need someone to hold their hand during the process."

Stream Energy/Ignite are one of those rare cases where rapid growth became a big problem for them. According to a press release on their site, it was a $10 million dollar cash infusion from an outside investor that kept the "lights on."

The reason for the capital infusion was that Dallas-based Stream was becoming a victim of its own marketing success. The company buys power from utility companies and then sells that power to retail consumers. The issue, for Stream, is that it has to buy power in advance of getting the initial payment from its customers.

That lag between Stream's power purchase and the payment from its own customers would have been manageable if Stream hadn't signed up so many people (150,000 in the 11 months that the company has been in business), Snyder said. And he projects that Stream's revenue could reach $350 million by the end of the year.

The company has been able to gain ground quickly by relying on a multi-level marketing platform similar to that used by Avon Products Inc. and Mary Kay Inc. Instead of cosmetics, Stream sells power.

The company set up a marketing subsidiary, Ignite Inc., and for $329 and a crash-course in the Texas energy market after deregulation, anyone can begin selling Stream's power services.

It's a model that generates a lot of skepticism from the public and from potential investors. A lot of network marketing firms (where they make money) stick their associates with inventory that the associate has trouble selling, said Snyder. However, energy, by contrast, is the perfect network marketing product, he said. All our associates are really doing is educating.

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