Surge Focusing on More Mature Energy Companies, Raising Bigger Fund
The change of one word can signify a lot.
Surge Accelerator has become Surge Ventures, a name change that reflects the maturing mission of the cleantech accelerator in Houston. The shift comes amid a downturn in the oil and gas industry as a whole: Oil prices are down to about half of their peak of $100-plus a barrel a year ago.
Both the economic times as well as Surge’s new focus were apparent recently at the accelerator’s annual demo day for its fourth class of startups. As usual, the event was held at the House of Blues in Houston. But, unlike previous years, the “graduation” of its latest class had a decidedly subdued flavor.
Rock music clips still accompanied the entrepreneurs before they gave their pitches, but the onstage DJ was gone, the lights were less flashy, and coffee was the beverage of choice.
In previous Surge demo days, the atmosphere had a rock-concert feel, with House of Blues employees handing out mimosas, bloody marys, and breakfast tacos for morning attendees. RedLabs founder and University of Houston business professor Hesam Panahi manned a turntable on stage, spinning tunes as DJ Surge.
There was apparently enough grumbling from the audience to bartenders, because Surge founder Kirk Coburn announced from the stage that the absence of alcohol was his decision. For Blair Garrou, co-founder and managing director of the Mercury Fund in Houston and a mentor to Surge companies, Surge’s shift in approach reflects the culture of its biggest customers: oil and gas companies.
“Many corporates have given the feedback that they’d like to see a ‘tighter’ and more professional demo day, and to save the celebratory atmosphere for later,” he says. “It may not be the ‘rah-rah’ event that the tech community was looking for but … Surge responded with its most cohesive group of presentations ever.”
Coburn founded Surge four years ago. A serial entrepreneur in Austin, he saw an opportunity in his hometown of Houston to boost energy innovation. Coburn raised $1 million from members of the Houston Angel Network and the Mercury Fund—he also invested $100,000 personally—to serve as the seed funding for the accelerator while bringing on key oil and gas partners such as Shell and Schlumberger.
Sam Long, a U.S. Naval Academy and the University of Cambridge graduate who is also a Houston native, came on board to run the day-to-day operations at the accelerator in January. “Surge initially was an experiment: Can you do early stage energy technology in Houston?” he says. “If the answer is yes, then what?”
Clearly to Long and Coburn, the answer is yes—and now they are on to the next stage. “This is a little bit of a rebranding, from accelerator to ventures,” Long says.
Long’s appointment frees up Coburn to focus on other long-term strategy, namely the raising of a $30 to $50 million fund to enable Surge not only to provide initial seed funding to energy startups, but to make follow-up investments as the companies mature.
Long says he also wants to expand Surge’s mission to be a producer of energy innovation information. “We want to fully embrace our partnership with McKinsey and do some thought leadership in this space,” he says. “We want to produce white papers with profound thoughts that are ours and originate from this building. It’s a way to be more proactive when it comes to supporting innovation.”
Along those lines, the companies that made their debut at this year’s Surge Day were much further along than those in previous classes. Though young, most of the startups already had revenue prior to joining the accelerator. “Almost all had revenue—showing that Surge is looking harder at product-market fit being established prior to accepting the company into the accelerator,” Garrou says. “This is a trend that you are seeing across the country.”
And the entrepreneurs, save for one team, are targeting the oil and gas industry as customers. (The exception, Vert, is a software platform for acquisition and financing of solar projects.) Previous classes had a broader mix of industry segments, from oil and gas and solar to wind and water.
“Our investment thesis is being refined toward tech innovation in oil and gas specifically,” Long says.