Soul-searching in Houston on Energy Innovation as Surge Closes

Houston — Since Surge Ventures closed its cleantech/energy venture accelerator last week, the question lingering has been, If a Surge can’t succeed in Houston—the energy capital of the world—then where?

Houston’s prowess in energy turned out to be Surge’s Achilles heel: a lack of buy-in from incumbent oil and gas companies and electric utilities, says Surge founder Kirk Coburn. “It’s a cultural problem: ‘Drill, baby. Drill.’ is the culture,” he says. “This is the way we’ve always done it.”

“Industries don’t like to disrupt themselves until they’re being disrupted,” he added.

Surge, which began five years ago, hosted four classes of startups, each seeking to innovate in some facet of the energy industry.

When oil prices soared, topping $100 a barrel two and three years ago, Surge was an easy sell. Energy companies “were intrigued by what we were doing,” Coburn says. “They saw it as a cool Silicon Valley-type of thing.” But the ensuing price drop-off, by more than half in two years, cooled the industry’s ardor.

Seeing this, Coburn says he tried to pivot the makeup of the last class. Whereas the first classes featured startups with more of a cleantech pedigree in wind and solar, the last class was more targeted to bringing incremental efficiencies to existing operations of traditional oil-and-gas operations. “Surge continued to get pulled more and more into oil-and-gas related projects, and I didn’t like that,” he says.

By last fall, in the middle of raising a $30 million fund, Coburn says he saw the writing on the wall. “I thought, ‘we’re not going to do the fund. It wasn’t big enough; it wasn’t bold enough,” he says.

He almost off-handedly announced his decision that the accelerator program was hitting “a pause button” and not taking on a fifth class during a panel discussion at a Rice University energy forum.

Coburn now says he looked at offers from industry partners and accelerators, including an energy-focused Techstars—“Absolutely did explore that,” he says. “They’re the best at what they do.”—to find a way for Surge to survive.

Nothing panned out. “At the end of the day, the industry said, we don’t believe in it; it’s … Next Page »

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