Downturns tend to make the financial environment for innovation difficult. When it’s partnered with a global pandemic, the road gets even tougher for new technologies and the startup community. However, investors that develop and support technologies that can address multiple problems will succeed in the current market conditions, according to Chevron Technology Ventures (CTV) President Barbara Burger.

“I think the startup ecosystem is vibrant and it’s needed,” Burger said. “But each startup company has to assess its own situation, employees and operations, and really understand the impact of COVID and the market conditions on their business plan. Then, do some self-help, look to their investors for whether or not they’re going to support them through that, and then make the changes that they need to.”

During a recent Society of Petroleum Engineers webinar, Burger discussed how the venture capitalist (VC) firm is directing its investments toward technologies that can lower cost, increase cycle time and lower emissions. In addition, Burger provided guidance on how investors and startups should position themselves during this time.

For CTV, one of the industry’s oldest venture groups, Burger said the focus is still on its current portfolio but “we also have dry powder for new investments and there’s a lot of opportunities.” She said the company’s primary interest when seeking new areas to invest boils down to whether it gives Chevron a competitive edge.

Chevron is looking to invest in “cheaper and reliable” solutions for the subsurface that provide more information about the reservoir, drilling operations and better data, Burger said. On the surface, the company is focused on asset integrity technology.

Though the company has been investing in the energy transition for a while, Burger said Chevron is placing a huge scope on companies that play in that space.

“In 2018 we launched our Future Energy Fund to really concentrate in this area; investing in energy efficiency technologies, capturing and storing CO2—and possibly using it—reducing and detecting methane emissions and mitigating it,” she said.

So far, Chevron has used the Future Energy Fund’s initial commitment of $100 million to make nine investments toward a low-carbon footprint.

“We know that the energy mix is going to be more diverse as we go forward and by 2040, most estimates are that 50% of total primary energy demand is going to be oil and gas and so 50% will not. The system is going to be an integration of all of that so we’re also placing bets in non-oil and gas,” she said.

Rather than just storing it in the ground, Burger said Chevron is exploring the avenues for utilization of CO2 for purposes of a “circular economy.” Additionally, she said the company has focused on mobility since “transportation and oil are so much tied together” but lacks any real improvement, lowering the emissions from hydrogen and making it cheaper, and a power value chain that sees Chevron get more decentralized and adopt different energy sources.

“We’re investing in all and some have a direct linkage currently into Chevron’s operations and some have no linkage but we see them as important in the energy system of the future and we want to make sure we understand what it takes to be successful and make sure Chevron is positioned to be able to capitalize on them,” Burger said.

Navigating a ‘New Normal’

“Hopefully, all of us are not thinking back to when it is going to get back to normal, but rather we’re envisioning the new normal,” she said.

Despite the impact current challenges have had on startups, Burger said the time has created opportunities for investors and startups.

“Some valuations went down and that’s always good as an investor particularly a new investor,” she said. “Most investors are staying the course but there are some that have flown so that gives us opportunities.”

From the vantage point of a VC, Burger said investing is necessary but not sufficient in connecting what happens at a company’s headquarters to the wellhead.

“We learned that we had to take things through what we call ‘use,’” she said. “We needed to collaborate with our business units and our functions to really ask the questions like ‘Does it work and will it add value to Chevron?’ It could work but not really add any value because it doesn’t either take costs away or produce more, so we’ve worked on that over time and we’ve had a fair amount of success. It’s not a slam dunk, but you have to do that.”

When this is achieved, she said investors should be cognizant of the results to provide startups with adequate feedback. “Sure they want investment dollars and revenue, but they also want to know does it work before they go and scale it up.”

Burger said Chevron’s sweet spot for investments is typically in the A and B seed round where the company feels it has the most influence and where startups need support. However, she warns startups against thinking unilaterally about the solution.

“First of all, don’t fall in love with the solution; fall in love with the problem,” she said. “We try to guard against that even upfront. If you bring me a solution I’m going to see what’s around it, what’s the landscape, who are the competitors and all that type of stuff.”

Chevron hosts “bake-offs” to combat this where it trials one company’s technology against its incumbent “because we want to pick the winner.”

“People think innovation is all about technology but it is about people, your willingness to try new things, collaboration and credibility,” Burger said.

It is a good time for big companies that are trying to embrace external technologies to better the relationship with small companies by giving them the financial runway and practical experience to grow in a risk-averse business, according to Burger.

“Houston has been able to distinguish itself relative to the startup ecosystem from the connection with the corporates,” she said. “There is a very high concentration of corporates here and corporates bring experience in understanding the problems, scale, and ultimately they bring their supplier dollars. If you can get the little guys and the big guys to work together, I think that really is a good recipe for success.”

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