Gaule: Give a brief description of the purpose of your venture, when it was formed and how the process occurs in your organisation.
Van de Wouw: Shell Technology Ventures is probably the first cor-porate venture organisation in oil and gas. We started our activities in 1998. We have gone through several phases and formations of Shell Tech-nology Ventures. We set up a new fund last year of considerable size, probably making us the largest oil and gas corporate venturing fund. The purpose is to enhance the deployment of new technologies in Shell that are found externally. So we do two things – we invest in third-party technologies we believe are exciting and provide a competitive differentiation to our operations, and we invest in technologies that originate from our laboratories which we know we need to spin out and leverage the expertise available from external parties in order to commercialise.
Gaule: What are the key technologies or business models you are looking to develop?
Van de Wouw: It is a broad range. We focus on oil and gas renewables (75%) and future energy technologies (25%).
Oil and gas includes early-stage (rounds A and B) and late-stage (C, D, E growth capital) investments. Seed capi-tal is done through Gamechanger, our sister organisation, and one of the tools in our open innovation toolbox at Shell.
Within oil and gas, we look at investing in small and medi-ium-sized enterprises (SMEs) with technologies in areas such as geophysical imagining technologies and mobile fracking technologies to production enhancing technolo-gies such as multi-faced pumps and flow meters; or tech-nologies that will enhance our operations in the Arctic; also novel drilling techniques and well intervention techniques, materials and corrosion; but also things like water, espe-cially around desalination and doing something useful with fracked water.
In renewables we are looking specifically at things around offshore wind, geothermal, concentrated solar, biogas and everything around hydrogen – as an energy storage molecule and as a transportation fuel. Those are some of the highlights.
Gaule: Give us a brief overview of the people in the team and the partners you work with.
Van de Wouw: My team includes 15 investment manag-ers and financial analysts in Boston, Houston, London, Sta-vanger in Norway and the Netherlands. Their background is diverse – external venture capital experience, complex deal making experience, technical background, operational oil and gas research and development experience. We have also recruited an experienced entrepreneur and some folk with a stronger commercial-financial background. It is par-ticularly important that these people are connected to the Shell organisation because we are interested in making an investment only if one of the Shell businesses is seriously interested in partnering, testing or launching customers of the technology. It is an integral part of our value proposition, but that means our guys need to be very intimate with the internal organisation as well.
Gaule: When you sign off an investment, does one of the business units have to sign off as well?
Van de Wouw: No. That is not necessary but obviously we like to get a feel for how relevant this is for them, how seri-ous are they – this really moves the needle in terms of value to their business and then we make our own investment decision.
Gaule: In Shell there are a number of innovation and tech-nology programmes – for example Gamechanger – and external ideas programmes. Explain how you link with them. Van de Wouw: We have gone through a very deliberate exercise within Shell to design a toolbox for open innova-tion. We have had Gamechanger and Shell Technology Ventures for some time, but we have expanded that toolbox to include a couple more tools. If you consider open inno-vation space as the space between contracting and pro-curement, buying technologies from the market and, on the other side, proprietary research in-house, then that space in between, the grey zone, is where we are targeting our open innovation tools.
l Gamechanger: Seed-capital investments in a collaborative environment with the entrepreneur, providing coach-ing on technology and commercialisation. Has to have the potential to create a revolution in our industry in order to qualify – very early-stage and has not reached proof of concept yet.
l Shell Technology Ventures: More of a typical corpo-rate venturing organisation. Typically starting with an A or B round and going all the way to growth opportunities. We like to do that in syndication with other venture capital firms (VCs). We launched a new fund of several hundred million dollars in April this year, making us the largest corporate venturing fund among oil and gas peers. We invest in early-stage companies that have technolo-gies that could be a strategic fit with Shell. We support our entrepreneurs with technical expertise, supply chain know-how and connections, customer network – introduc-tions – market knowledge and funding. Our sweet spot is $1m to $15m for a 10% to 40% share in the company. We like to syndicate with strong financial partners, including VCs and other industry players.
l Shell Technology Works (STW): STW turns the VC model around by putting a couple of concrete challenges we face in our critical operations on the table of the innovators, entrepreneurs, research institutes, VCs, universities in the greater Boston and New York met-ropolitan area. Shell offers fund-ing, technical expertise, lab space and so on, and will be a launch-ing customer for those groups of people or consortia that can offer credible solutions for these problems.
l Strategic collaboration with universities: A very substantial col-laboration with strategic universities within the oil and gas domain, and we have future energy technologies or Path-finder, a group of people that deliberately focus on renewable energies and potential areas within renewables we believe could become a con-siderable business for Shell in the long term, and if they do an investment they do that through Shell Technology Ventures
Gaule: Is the oversight of those activities under one board member?
Van de Wouw: It all fits within our open innovation officer, which is part of our R&D operation.
Gaule: What has been your most interesting recent deal?
Van de Wouw: We led the Glasspoint round C in July 2013, a concentrated solar company from the [San Fran-cisco] Bay area. Through our joint venture with Petroleum Development Oman, Glasspoint has successfully started a pilot facility in the south of Oman, feeding steam to our oil fields for enhanced oil recovery – a nice hybridisation of fossil energy and renewable energy solution. We are cur-rently doing due diligence on a couple of new investments you will hear more about soon, and there are quite a few projects originating from Shell Research Laboratories, and we are looking at partners to spin out and co-develop and co-commercialise the technologies, setting up a purpose vehicle to do so.
Gaule: What is your view on the current market conditions for starting a new venture?
Van de Wouw: The time for corporate venturing is very good. Generally VCs go more later-stage and they like to see strategic investors like Shell on board earlier in order to increase the chances of successive. We see an increased push in the market to involve a strategic investor to reach commercial relevance sooner.
Gaule: How do you measure the financial and strategic per-formance of your venture unit?
Van de Wouw: Since we are a corporate investor, strategic benefits always outweigh financial returns on investment.
However, we recognise that indirect strategic value is diffi-cult to measure. My management is interested in us being able to point to assets and projects where Shell Technology Ventures has created a competitive advantage. They want to see proof that we have deployed some of these technolo-gies in our assets. However, we believe financial rigour and dis-cipline, like a health, safety and environmental culture, go hand in glove with a company’s commercial performance over the long run and make us an attractive partner to financial VCs. So both are important and this is another reason we like to work with reputable VCs, who bring expertise intightly running start-ups and creating a performance-oriented culture. Shell has been committed to this space for a long time now and takes a long-term view. We are looking at six to eight years at least, which is the timeframe you typically need in the energy space to commercialise things.
Gaule: What do you do to relax?
Van de Wouw: I go back-country hiking and backpack-ing in the Rockies of North America with my wife and three kids. In 2010 we hiked the Grand Canyon with them from South Rim to North Rim in a five day cross-canyon trip. This summer, among other things, we did the Skyline trail in Jasper National Park in Canada. Last winter we made several multi-day hikes with them in the Al-Hajar Mountain range in north-east Oman. Other than that, I read books and go cycling. The flat, rainy lands of the Netherlands can be beautiful at times.
You can get free previous audios of Gaule’s Question Time at the iTunes store – search Corven Group – and as audio downloads from Global Corporate Venturing or from www. corven.com/corven-networks. To contact Andrew Gaule and for future interview ideas email andrew.gaule@corven.com and tlewis@globalcor-porateventuring.com