Venture fills gaps in connecting tech startups and big energy players [Houston Chronicle]
Jan. 23–Sidd Gupta used to lie awake at night wondering how he would get his technology, which he describes as Alexa for the energy sector, into the hands of an oil and gas company. He needed feedback and money to expand his startup.
“With us being in Texas, the venture capital market is sort of conservative compared to California or New York,” said Gupta, co-founder and CEO of Nesh. “They want to see hard numbers rather than just the promise of the technology.”
A company that launched last week, Eunike Ventures, is helping him with both of his needs. Eunike, pronounced “unique,” aids startups in testing their technology with exploration and production companies Anadarko Petroleum Corp., Equinor and Hess Corp. It plans to add two more companies this year.
Eunike says it’s filling a gap in the tech ecosystem by guaranteeing startups a pilot program. Others provide coworking space, financing or structured curricula, but Eunike saw a need for startups to work directly with potential customers in testing and using their products.
“There are a lot of accelerators focused on raising money for startups, but nobody is really helping them to get the pilot,” said Abhijeet Inamdar, investment manager for Equinor’s venture capital arm. “And that’s the big gap.”
Nesh is Eunike’s first startup. It allows employees to ask questions out loud — How many rigs did Equinor run in the Eagle Ford last quarter? What is the average depth of wells drilled in Martin County? — and then receive an answer from publicly available sources and that company’s internal applications and software.
This would be helpful in morning meetings where employees are often asked questions that require leaving the room and digging through spreadsheets to answer. Gupta said it can also help C-suite executives answer questions without waiting for someone else to dig up the data.
In exchange for equity, Eunike helped Nesh refine its pitch and identify its strengths and weaknesses. It also introduced Nesh to the energy companies and helped frame the scope of its pilot programs. This promise of upcoming pilots has helped Gupta receive venture capital financing.
But this isn’t the first Houston organization to focus on energy startups. Energy accelerator Surge was prominent for a while, but it closed partly due to the oil-price bust, the longer time frame required to develop energy technologies and the longer period in which investors wait to see their returns.
Amy Henry, co-founder and CEO of Eunike, said the new organization is poised to overcome such hurdles. Its venture capital arm, separate from launching startups’ pilot programs, is seeking investors who understand the longer life cycle of energy technologies.
Eunike only accepts startups for which it can guarantee at least one pilot program, and its team members have an extensive network and decades of experience with international oil and gas companies. In other words, Eunike has access to C-suite energy executives.
While some entrepreneurial experts claim startup programs can falter if they rely on corporate experience rather than entrepreneurial know-how, Henry said energy experience is crucial to expedite getting the startups’ technology inside these big companies. Eunike will have entrepreneurial mentors as well.
“You can have people with startup experience,” Henry said, “… but if they haven’t worked within an oil and gas company and understand the mindset, the risk, the decision-making, all the things that have to be covered, that just stalls the process.”
Henry used to work with Shell Ventures, helping analyze the commercial and financial potential of technologies to see if the venture capital arm of Royal Dutch Shell should make an investment.
To select companies for Eunike, Henry and her team evaluate applicants based on the health of their companies, the strength of their employees, the plausibility of their technologies and how they could improve the energy companies’ profit margins. Inamdar said this eases some of the energy companies’ worries about deploying technologies from smaller firms.
And to ensure everyone benefits from the startups, Norway-based Equinor, The Woodlands-based Anadarko and New York-based Hess have agreed to share certain non-proprietary data that measures a pilot program’s success or failure. The energy companies can also become startups’ future customers, with Eunike helping all the way through commercialization.
Eunike is a for-profit funded by taking equity, between 4 percent and 8 percent, or arranging some other revenue-sharing agreement with startups accepted into the program. Energy companies pay a management fee for participating in Eunike, and the organization will also seek out corporate sponsors. Its venture capital arm will be open to institutional investors.
Ed Egan, the former director for Rice University’sMcNair Center for Entrepreneurship and Innovation, likes that Eunike is chasing an opportunity to better leverage the energy sector. He also likes that Eunike is taking equity in the companies, meaning its success will be tied to the success of its startups.
“Anything we can do to break down the boundaries to make oil and gas firms less of a closed innovation model, more of an open innovation model, is good,” he said.
andrea leinfelder @ chron com
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