GCV’s Tom Whitehouse and Kaloyan Andonov spoke to Kemal Anbarci, vice-president and managing executive of Chevron Technology Ventures, the Houston-based venturing unit of oil and gas major Chevron, about the efforts to rebuild Houston after hurricane Harvey and attract more capital to the city, the financial and industrial centre of the US “third coast”. Anbarci also revealed more details about the recently announced Catalyst program to make early-stage companies more investable for corporate and traditional venturers.
How were you, your family and colleagues affected by hurricane Harvey? Is life and work getting back to normal?
My family is shaken but dry and all right. Most of the schools in Houston are open again, and we are on our way to full recovery. The tale of two cities is still playing out in Houston. We have sections of the city that look normal, and people there working hard to help in recovery, and other sections visible in recovery and people there trying to reach normalcy. We believe that Houston will come out of this even stronger. The spirit of Houstonians is very important in the recovery. It shows the resilience of Houstonians, Texans and our colleagues everywhere. This spirit creates the kind of energy which, I think, will take Houston even further.
What has been Harvey’s impact on the venturing world and the oil and gas world? Does it mean that you are now more focused on things like resilient infrastructure, flood damage control? Will it have an impact on the oil and gas industry’s view of the type of resilient technology it needs?
From our point of view, what has enabled Chevron Technology Ventures (CTV) to be a successful venturing group and the longest-lasting continuously operating oil and gas venturing arm is our focus on resilient infrastructure. This unfortunate event confirms the validity of our long-term strategy and what we have to focus on as a company and as a venturing group. In the short term, we have a slightly different focus revolving around helping the local entrepreneur ecosystem. The conference we are organising with Shell and Global Corporate Venturing on November 1 is one of our initiatives to energise local entrepreneurs and accelerate their business activities into growth.
What does the Houston and Texan VC industry have that is unique?
Several months ago at the Global Corporate Venturing & Innovation summit in Sonoma, you came up to me with the idea of organising an energy-related conference in Europe and I suggested we do it in Houston. And I am really happy we are putting it up in Houston. This is where we have the resources, the oil and gas energy workforce. Houston is also where you have potential customers for startup companies and we have a vibrant startup ecosystem, which we would like the rest of the corporate venturing community to see. Also, the thing we have in Houston, which makes us unique, is the convergence of energy, health and space industry. What we possibly need help in is corporate venture capital funds from both coasts of the US to look into our local ecosystem more closely. In addition to east and west coasts, we have the third coast, and Houston is the leader here. We want the venture capital from the other two coasts to come to Houston and widen the pool of capital. And anything we can do to make that happen is useful.
As far as the oil price is concerned, it looks like we may be in a “lower for longer” situation. With that in mind, how can venturing ensure the competitiveness of the local oil and gas industry in Texas on a global scale?
Texas is a very welcoming place to innovative ideas from all around the world because this is where we have a lot of industry talent. This is also where the end customers are, this is where purchase decisions are made. For the companies coming into this system, we would help them be more competitive on a global scale.
You are in your fifth year of leading the venture efforts at Chevron. How has the venturing strategy evolved over this period?
Our strategy of supplying technology solutions to Chevron has not changed, neither during my term nor before. We try to help solve Chevron’s technology needs. However, we recently added a new program to help companies at seed stage to move to round A. We call it the Chevron Technology Ventures Catalyst program.
The program’s goal is to help entrepreneurs who are already past seed-stage but have not yet raised sizeable round A capital. We target companies that have developed products or prototypes ready for field trial and are looking to attract venture funding to make it happen, but do not have the required structure yet.
The idea started when I was having a discussion with Cory Steffek, head of Saudi Aramco Energy Ventures in Houston. We both noted a need for more local companies ready for series A investment. We established the CTV Catalyst program to help guide the selected companies via established business milestones and help them develop in a direction that will enable them to attract and secure venture funding. Two Catalyst companies have been announced to date – -Rheidiant, a Houston-based company that applies industrial internet-of-things and machine-learning technologies to help identify small leaks on pipelines, and Ingu Solutions, which develops miniaturised inline sensors to detect leaks, geometric defects and deposits that impact pipeline performance.
What is the strategic relevance to Chevron of your most recent investments – Lux Assure, Airborne, Panzura and Maana?
All these companies actually reflect the convergence of digital technology, data science and other impactful innovation in oil and gas. In our quest to reduce costs, they are able to provide creative solutions. Some enhance our ability to extend the lifetime of our facilities and assets, while others focus on reducing the cost of new development. Others move our massive amounts of data effectively, or extract intelligence from it.
What type of resources and expertise can portfolio companies typically receive from Chevron?
In addition to funding, we bring insights about the industry. We help facilitate field trials and introductions to our supply chain. Among all the companies we have invested in across our venture portfolio, over 80% have done field trials with Chevron and over 60% have become suppliers to Chevron. Ultimately this business model has been a great success story for them and for us.
What are the current and future investment priorities?
Our fundamental strategy has not changed over the years. We are looking at companies that can be suppliers to Chevron and technologies that will improve our business. All of this supports the transition into the emerging “Industry 4.0”.
CTV also holds limited partner stakes in VC and other funds. What do you look for in a fund when taking LP stakes?
When we were new to the venturing space almost 20 years ago, we invested in funds in order to gain insights. We still have a number of LPs in our portfolio that we continue to support. However, our focus these days is on our direct investments.
The Chevron Technology Ventures Catalyst program
In order to help emerging companies developing oil and gas-related technologies grow beyond seed-stage level, Chevron’s venturing subsidiary has added a new tool to the corporate innovation toolkit – an acceleration initiative – the Chevron Technology Ventures Catalyst program. This 12-month program provides promising startups with funding on completion of set milestones. The graduation and ultimate goal of the program is to help such startups raise a series A funding round. So far three companies have been selected to participate, only two of which have been announced – Rheidiant and Ingu Solution.
Rheidiant develops a leak detection system called The Smart Sign, which is a solution to new and old hazardous liquid pipelines, monitoring such assets for small and large leaks before they result in big environmental spills. Rheidiant’s technology relies on proprietary acoustic sensors that are deployed near the pipeline without excavation or trenching.
Ingu Solutions develops its Pipers technology, which gives oil and gas companies a fast and affordable way to access pipeline assets that are currently out of reach. Its technology uses miniaturised inline sensors to detect leaks, geometric defects and deposits that threaten pipeline performance and safety, thus eliminating the need for human intervention, reducing inspection costs, strengthening preventive maintenance, and lowering repair and replacement expenditures.