Oil Price’s Dip Challenges Energy Entrepreneurs to Rise

Houston — Amid the fallout of Surge Ventures’ failure to thrive are the 32 portfolio companies that remain.

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 … Next Page »

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Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah

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