By Jessica Whiteside, Contributor
Thomas Henry, COO of energy technology accelerator Eunike Ventures, puts the weight of his 33 years in the energy sector behind this advice for startups seeking funds to propel them from concept to commercialization: Avoid “death by ramen noodles.”
This is not dietary advice for startups and their investors. Rather, it cautions them that trying to make progress with insufficient funding is a recipe for failure. Just as instant noodles have a reputation for leaving you feeling hungry an hour or two later, eventually these startups are going to need more substantial resources, or their technology won’t take flight. To avoid death by ramen noodles, startups need capital that’s substantial enough so they can grow.
“Make sure you have the right mixture of funds, and look for opportunities where you can actually get those funds. It doesn’t always have to come from corporate venture capital (CVC),” Mr Henry said, citing grants and public ventures as other potential sources.
Speaking during a panel discussion on venture capital and offshore energy transition technologies at the 2022 OTC on 3 May, he outlined what startups must demonstrate to be successful when meeting with potential CVC investors.
value and uniqueness
Startups must make the case for their existence and understand the psyche of the decision makers, Mr Henry said. First, it is vital to be clear and focused about the company’s value proposition. Understand the pain points that the company’s technology can address for its clients, what needle it can move for them and what value can be added to their bottom line.
Also essential is a robust technology roadmap. This should be more than an activity plan or a Gantt chart showing the next milestone. One issue Mr Henry said he’s seen with some startups is that they don’t consider “what if” scenarios. “Very often they don’t know how to pivot from one business case to another, and then the roadmap becomes very stagnant.”
Another key element is a risk profile of both technical and non-technical risks that addresses not only the startup itself but also its competitors. “It’s having an understanding of your competitive landscape and where they are moving – because very often you might not know how fast they are moving, and they might overtake you,” Mr Henry said.
Potential investors will also want to learn about the startup’s readiness to pilot. Know what kind of pilot will be needed, estimate the timelines for execution, identify KPIs, consider third-party collaborators and plan for scalability.
“People tend to leave scalability to the end, but actually, early planning is critical,” Mr Henry said. He advised involving stakeholders in designing the pilot “because eventually they’re the ones that are going to be adopting the technology.”
He noted that CVC investors may pursue multiple pilots – small and fast – with different technologies before they pick the right partner for further investment: “You place your bets on a few companies and see which will fly.”
Planning for the startup’s future resource needs is also imperative. If it gets the funding and needs to scale up, the implications for workload must be understood so decisions can be made around whether more people need to be brought online. A strong financial plan will also need to be presented that includes key assumptions and scenarios. Startups must have a realistic perspective on commercialization prospects that includes an understanding of how the technology could apply to other verticals.
Among the most important considerations for potential CVC partners is whether a startup’s leadership has the competencies and capabilities to deliver the technology and whether they are coachable. “They need to be able to learn how to take advice,” Mr Henry said.
Create a runway
Mr Henry also addressed what companies with corporate venturing programs can do to build a runway for innovation within their own organizations. To create an organization that allows for cross-fertilization of ideas, learn what is happening outside your industry and establish a knowledge base that crosses many industry verticals. Internal structures should be assessed: Is your innovation program one person or do you need a CTO with a dedicated team of resources? Some companies set up internal incubators to cultivate innovation-nurturing behaviors. Organizations can also establish technology champions to help create internal buy-in for innovation programs. Whatever innovation ecosystem an organization creates, it should support the ability to learn from mistakes and not shame, Mr Henry said.
He also recommended that companies try to learn from other ecosystems. This includes looking for partners in innovation in other jurisdictions through involvement with trade organizations and initiatives that support international R&D collaboration.
He cited the BIRD Foundation as an example, which fosters cooperation between American and Israeli companies. Building such technology bridges across nations can create opportunities for venture fund cross-linking that improves access to pilots and funds. “To make the energy transition successful, collaboration is critical,” Mr Henry said.
Imagine the future
On the same OTC panel, David Reid, who carries the dual roles of Chief Technology Officer and Chief Marketing Officer for NOV, described the years-long evolution his company undertook to expand beyond oil and gas into the energy transition space. In addition to its ongoing work in oil and gas, NOV now also provides expertise and technological solutions for diverse initiatives involving hydrogen, geothermal, biogas, carbon capture utilization and storage, offshore wind, solar and more.
“Transition is really difficult to invest in and get it right,” Mr Reid said. What’s important is trying to “stretch your Star Trek thinking.” In other words, try to imagine the future by being aware of what’s happening in the market and extrapolating to determine if a particular approach could be feasible for your business in 10 or 20 years. If it is, then figure out how to make it happen, he said.
For NOV, the “how” is an innovation strategy that revolves around rejuvenating and repurposing what it already has in terms of products, services and expertise and then repositioning to areas where it can add value (e.g., repurposing jackup vessels for use in wind turbine installations).
Initially, the notion of expanding beyond its established specialization in oil and gas seemed like “a terrible idea,” Mr Reid said, but the amount of investments being made in the renewables space was something NOV couldn’t ignore. Its approach to innovation in the energy transition has included combining with smaller startups and using NOV’s strength to move into new spaces, such as biogas.
Speed up adoption
While the energy transition is a long game, the speed with which a novel technology can start paying off is one factor potential investors will consider. There are some startups that have great ideas, but the journey to cash is too far, Mr Reid said.
The longer cycles for offshore projects can make it particularly challenging to introduce innovations, particularly when technology is changing so quickly.
“It’s hard to wait for those long three-, four-, five-year cycles, and if you do, are there areas where there may be a little less risk where you’re not betting the farm on one thing for five or six years?” said fellow OTC panelist Randy Roberts, Manager, Technology Deployment and Adoption at Chevron Technology Ventures.
He added that it is important for startups seeking a CVC partner in oil and gas to understand a little bit about the industry and how to get into operations. “We’ve often seen where that experience isn’t there and there’s a lot of hand holding, especially with smaller startups,” he said.
On the operator side, there is still some resistance to change, and a cultural shift is needed “to be a little more innovative as we go forward,” Mr Roberts said. “We need to be able to think faster, at a higher pace, at a higher velocity to move things through. And that’s often not the case in operators, but we continue to need to change that mindset.”
One strategy startups could consider to accelerate the time to deployment is to monetize a portion of their technology without trying to solve everything at once, Mr Henry suggested.
“What’s my lowest-hanging fruit? Monetize that, then go for the next one,” he said. “That’s why it’s important to have that technology roadmap.” DC