What is the overall investment thesis of (STI) ?
Our primary driver for making our venture investments in startups is strategic. As a company, we have identified key technologies and themes or sectors that we are focused on in the medium term. Our remit, both in terms of technologies and sectors, is quite broad-ranging, from industrial internet of things to energy in the broadest sense and from automation to materials. This strategic rationale drives the arenas in which we are looking for dealflow.
In addition to the strategic rationale, at a portfolio level we have a threshold financial target level of return, to keep our teams focused on the right deals and to be accretive to the corporation over the long term.
What makes a good investment opportunity for Schlumberger? What do you seek in a company before committing capital?
A great investment opportunity for Schlumberger will typically have most of the following ingredients – a truly differentiating well-protected technology in at least one vertical with some potential applications to oil and gas, a company that matches our areas of focus in terms of technology or sectors, a management team in the startup and a Schlumberger product line that is engaged and working together to either develop or deploy a technology or product. We also look at the culture and quality of the management team in the startup.
It is important for us that the company be willing to accept a reasonably sized stake and Schlumberger engagement on the board. For later-stage deals, we typically look for a strong and engaged syndicate of institutional and corporate investors.
A portfolio company must complement our overall CVC portfolio in terms of strategy, risk profile, size and financial return. We like rationalised business plans that truly understand their target markets. We can then add our understanding of the oil and gas sector to it.
What type of resources and expertise do portfolio companies receive from the corporate parent?
We believe we can provide a strong partnership to our portfolio companies. This partnership can take a variety of different forms depending on the startup. Some examples are joint technology development, access to a broad highly-skilled technology organisation, extremely competent in technology commercialisation, developing joint distribution channels to market, active management input and guidance at the board level.
We also give them a customer perspective by being their clients and make them part of a broad external network of potential co-investors for future rounds. Thanks to our asset base, we provide them with opportunities to carry out prototyping and testing of their products under realistic field conditions.
What trends have you been observing in rising enterprises from the oil and gas area in recent years, particularly in light of dropping oil prices?
We are seeing an increasing number of customers – oil and gas companies – creating active venturing units. The oil and gas industry is reaching out to other sectors for disrupting technology. This is especially true in the areas of software, artificial intelligence, machine learning and analytics and the industrial internet of things, to name a few.
Given the staffing reductions in oil and gas companies that are commensurate with the downturn, we have seen many of those talented people developing startup companies targeting specific technology areas. Small oil and gas innovation hubs are developing in places like Houston, Calgary and Denver.
With the recent reduction in oil prices, the corporate venturing units of some of the smaller independents have become defunct. The current list of CVC groups in oil and gas are essentially large international or national oil companies. Despite the downturn in the industry, these CVCs continue to be very active, as are we. There is also greater willingness to collaborate across operator and service sectors at earlier stages, and more CVC units are willing to look at oil and gas investment opportunities, or rather technologies that could have application in the oil and gas space.
Schlumberger’s venturing unit also invests in other areas, such as advanced materials, automation and robotics, electronics and even autonomous transport – for example Peloton’s deal from earlier this year.
What trends have you seen in these areas most recently?
Schlumberger’s CVC unit is investing in a very broad range of companies. The areas of software, artificial intelligence and machine learning, analytics, automation, robotics, the internet of things and autonomous transport have been very busy. In the last two years, in addition to refocusing our internal efforts, we have made several robotics and automation-related investments and are actively looking at additional companies in this space as we speak.
In general, we would not like potential portfolio companies to have any preconceptions about the Schlumberger CVC group. So I would say to them: “You will be surprised at what we find interesting and how we could potentially use it. If in doubt, let us have a look at your technology or offering, and let us decide whether it is of interest.”
What is Schlumberger’s stance on emerging renewable energy enterprises?
Evaluating and looking at technology and companies in the renewable space is very much part of our remit. We have made three investments around renewables, energy efficiency and greenhouse gas emissions over the last two years. We also completed an in-depth review of the solar space earlier this year. So renewables are very much an area of interest.
STI’s most recent publicly-disclosed deal was in chemical analysis device developer 908 Devices, in which you co-invested with Saudi Aramco’s venturing unit, Saudi Aramco Energy Ventures. Are there any new deals in the pipeline?
We actually invested in 908D several years ago and then also participated in the recent round of capital-raise. To date we have closed three new transactions in 2017 and are actively evaluating several additional transactions in the arena ranging from machine learning and analytics through additive manufacturing to power generation.
What do you usually look for in co-investors?
In prior transactions, we have co-invested with some of the oil and gas CVC units as well as other industrial CVCs in addition to traditional VC firms. Several of our partners often bring transactions and opportunities to us and we reciprocate in a similar fashion. Having good corporate and financial partners in a transaction is always a positive and leads to increased collaboration.
We look for win-win-win relationships when looking at investment syndicates, where all partners can bring something to support, energise and assist in the growth and adoption of the startup’s technology and business. We like to think that we are good investment partners and will bring dealflow to other CVC groups even if we are not investing in the particular startup.
