Oil Price’s Dip Challenges Energy Entrepreneurs to Rise
These startups, with which Surge founder Kirk Coburn has said he will continue to work, are innovating in a variety of energy fields, by leveraging new apps and software, and novel hardware.
They all face their biggest entrepreneurial challenge yet: Oil prices hovering around $40 a barrel and energy companies—these startups’ target customer—focused solely on staunching the bleeding.
“Our market has dropped off by two-thirds in the last 18 months,” says Kenley Clark, founder and CEO of Project Insiders, a startup that has an online database of large capital projects to help industrial suppliers find new sales opportunities. “The last two quarters have been pretty bad for us. We’ve basically had to go back and rethink our entire product and business model.”
The reason for that abrupt shift? The oilfield services companies that once used Project Insiders’ software are no longer buying. Now, the startup is trying to target the procurement offices at companies such as KBR or Bechtel. “If we can help them with their buying, help them lower their cost of procurement, that’s going to be a much easier sell,” Clark says.
The state of the energy industry, and its willingness to support tech innovation, found the spotlight recently as news broke last week that Surge Ventures, which had run a venture accelerator for four years, would be closing. Coburn cited a lack of industry support and not enough Houston-based tech talent (and his own failures) as reasons why he decided to close the accelerator program.
The Surge founders I spoke to are now grappling with lessons straight out of an Entrepreneurship 101 textbook: Re-testing the validity of their previous market assumptions vis-a-vis their product and learning on-the-fly how to respond to drastically changed industry conditions.
Clark says he learned a fundamental lesson. “We had very early traction and we thought that traction meant a good market fit,” he says.
Project Insiders had bootstrapped itself for about $30,000 and came to the Surge program in 2014 with about 30 customers. At the end of the program, the startup had doubled its customer roster. “We were capital positive right away,” Clark says.
He began to look at expanding the business, paying more attention to talking to investors than listening to what customers needed. “I realized we weren’t solving the problem well enough,” he says. “It was just for the bullish times and otherwise not something people would pay for.”
Still, one entrepreneur’s downturn is another’s opportunity. “Whenever everyone was going full steam, it was hard to get their attention,” says Dane Witbeck, founder and CEO of Meshify, which makes an Internet of Things device that connects typical industrial components such as sensors or tanks in order to better monitor them. “They were making money and there was not a lot of incentive to change.”
With companies in distress, Meshify is getting a lot more interest from managers looking for cost savings. Witbeck says the company is also selling to the environmental monitoring and insurance industries.
James McDonough founded another Surge startup, SEEForge, which makes an app that digitizes reporting paperwork for safety inspections and other reviews that take place at remote industrial sites such as oil and gas platforms. “We had multiple supermajor projects put on hold,” he says of the industry’s largest companies.
Bu, he added that they have so far been able to ride the tumult because their software can also be used by companies in other industries.
“We have the luxury because our platform was not just for oil and gas,” he says. “We’re thankful for that.”