Ashesh Shah (The London Fund): Be Brave!
20 Jan, 2022
David Millar is TechX Accelerator of The Oil & Gas Technology Centre. He brings over 15 years’ experience across start-ups, operators and service companies such as ABB, Shell, BP, ENI and Wood, developing and delivering organizational learning, improvement and technology innovation programs with great success. He joined TOGTC in 2017 from Wood where he held several senior operational contract roles, was awarded their Global Innovation Core Value Award in 2016 and set up and the company’s global ‘Innovation for Growth function’ which pioneered their digital-focused eWorking program.
First of all, TechX at Oil and Gas Technology Centre in Aberdeen has been running accelerator programs for just over 3 years. Now we’re starting our third cohort. We are relatively new as an organization and were set up and funded by the UK and Scottish governments. We are focused purely on new technologies for the UK oil and gas sector with the predominant focus on unlocking the full potential of a net-zero north sea.
We get quite a diverse group of startups every year. We pick 12 companies from a global application pool, and we see lots of different types of technology companies and startups. This year we’ve got a really interesting company developing an enzyme that is suited to degrade plastics and using that to recycle the plastic back into raw materials that can then be processed again into new plastic products. That’s a really exciting organization we’re working with this year. We have another one which is a spin-out from Oxford University which develops a really exciting new engine, multi-fuel ceramic-based, much more efficient than normal engines. We also have a couple of others that are focused on hydrogen production, like seawater electrolysis technologies. There are fascinating technologies all over the place.
In our program for the startups we look at over 150 companies to choose just 12. We go through a very rigorous process of selection. In the wider OGTC they support with more mature technology which is at field trial stage. They have around 250 projects chosen from over 1000.
We do a bit of both. We have a few different mechanisms of people getting involved in the accelerator. We have an open application round, which we promote through social media and various other mechanisms through our partners. And we pay for some scouting services and get some good results from those. We do roadshow activities: last year we visited 14 UK universities to promote the program. We have a couple of feeder programs that we support and fund which creates new companies focused around our net zero – and then we select the best of those to join the program as well. So, we have a variety of different pipelines feeding us. The wider Centre run Open Innovation Calls around the key industry challenges: basically, they run a competition, set the challenge, and expect people to apply, and then they go down through the competition process to select. People can also apply directly to OGTC outwith open calls. There is a wide variety of mechanisms.
Again, it is very rigorous, with 2 phases. We have the first phase of assessment which happens to the big application pools. We take 150 applications and we bring in entrepreneurs, investors, oil and gas experts to review the videos. The application is video-based: we asked for a 2-minute video on the team, a 2-minute video on the technology, and a 2-minute video articulating how they fit with our strategic intent of the Centre. We scored them 1 to 10 for each video – against key criteria, against the team, technology, and strategic fit for impact. Based on that score we filter the list and take the top 15 to a final pitch. They have to do a 5-minute pitch in front of a panel of about 10 people, who also score them on the team, technology, impact, and strategic fit. Based on the outcome of that panel we choose 10 to 12 companies to join the program.
When you see such a variety, it is difficult to call one out over another. Definitely, some of them are much better than others. You tend to find those that have been trained or coached in pitching, they tend to have a better flow, they are better in getting the message across, surely better in terms of the material that they use and what sort of information they should include into a pitch deck. The others, who have been excellent, are usually bringing in props, or examples, or 3D-printed versions of their products. We provide them with key questions to cover in their pitches but not everyone follows the brief. Those that score high are those that answer the questions well, are visual, impactful, back up their claims with data or evidence, to build up a convincing case to be picked up to join our program.
We are very focused on the UK energy sector; our job is to find and accelerate new technologies that will solve the challenges faced by that industry. Those challenges cover a wide range of areas. We are focused on asset integrity, digital, wells, decommissioning, subsurface, marginal fields and net zero. We find technologies from all walks of life, not all of them will come originally from this industry – we have examples of when technologies come from other Industries and have them pivoted into Oil and Gas because they see an opportunity to tackle one of the challenges with their technology. There are quite a few examples of companies that have come out of Aerospace or other areas.
In terms of our deployment – yes: the technology must be deployable into the UK. We are funded by UK taxpayer money and have to demonstrate impact on the UK energy sector and the North-East of Scotland in terms of the region. However, we source companies from all over the world. Our application pool, those 150 applications, come from 30+ countries. We can support companies from other countries to come to the UK to work on the technology and get it commercialized and deployed.
Beyond idea, but pre-seed and, usually, pre-revenue – prototype or pre-prototype stage. We do take quite early-stage companies. We have a couple of venture builder programs that we support and the companies are coming in a very early stage, but we accelerate them very quickly through the different technology stage gates. Our sweet spot is quite an early stage.
The assessment process takes about 2 months, during which we whittle the number of applicants down to the final 15. After they come to the in-person pitch, we notify them the following day about the results, so that’s relatively quick. From that point, when we know who the final companies are, our finance and commercial teams do the diligence process: they do background checks on the founders, check company details, and any other information that they can gather both on company and founders. We request information from them – if they have existing accounts or anything like that as well as personal information like passports and things like that, and visa if they are not from this country. Usually, it can be done in a couple of weeks. Then we have a process whereby we have to get the funding approved, that we’ll drawdown to use for the startups. Each company on the program will get £100,000 of funding from us, which has no equity take and no payback. Because it’s public money, we have to go through an approval process – we have to submit some documentation for each company and get that approved from our funding body. That can take a week or two weeks. Once that’s complete, assuming all the other documentation we requested is in place, we issue terms and conditions for participation in the program, and it’s really up to how long do companies take to return the document signed. Once it’s signed, we can usually deposit the initial tranche of money in the bank account within a week or two. This is a relatively quick process considering we’re a public funding body.
Each company gets £100,000. They don’t get all of that at once, but they have 16 months to utilize the funding. They usually tend to focus the majority of that on product development work, some of it will be spent on marketing and legal services, getting patents, etc., and they can use the funding for a variety of things. The majority of it is spent on product development work. Also, we match fund those projects with industry partners: we provide half of the money and we expect any other half to be meet up with industry contribution.
It’s a difficult question. It really depends on the stage. I think, for really early-stage companies like ours, at the prototype stage, when a company isn’t generating any revenue, it’s almost impossible to put a value on a company. It’s very arbitrary in terms of the percentage that they should be asked for, in terms of giving up equity. I think, things like convertible notes tend to work much better in these early stages, where pre-seed investment can be made, and then the decision was made later on to whether or not that needs to be converted in equity. I don’t think it’s right that early-stage companies should be giving equity at all. I think that other mechanisms need to be looked at.
It’s one of the most important areas for us and sometimes it can be the hardest one to determine. When we look at the founding team, we look at their skill sets, previous experiences, capabilities. We’re looking for diversity as well as balance in the team in terms of personality types and the skills they are bringing – technical side of things, commercial side of things. We also want to make sure that they’re coachable, that they are willing to listen to feedback and take that on, and are willing to work with other people, particularly mentors that we provide to them. They need to be really clear on whether gaps are, what their strengths are, and play to those while being very clear where they need support and help. The challenge sometimes is that we take on single-founder teams as well so that it can be a challenge both in terms of intensity of workload on a program, but needing that diversity of thought as well and being able to bring people on to help with the process of moving the business forward. That’s very very difficult for single founders. We do work very closely with them and some of our partners, then find the appropriate people to bring on board. There’s a wide variety of things, it’s no real one size fits all – we’re looking for the balance, making sure that they are credible, driven, and able to take hard knocks that they’re going to face. Obviously, a proven track record in startup previously is helpful, but not all of them will come with that, so it’s just being aware that they are willing to work through the challenges they have and bring the right people on board to make the team a success.
We have a couple of red flags according to our funding requirements, we are bound by European State Aid regulations. If any of the company directors have been made bankrupt previously, we can’t fund them. If they’ve released any profit from the business, such as dividends, we can’t fund them. If there are any past discrepancies around the handling of money, that, obviously, would raise a red flag. Attitude can be a big red flag in terms of behaviours that we sometimes see. Again, it comes back to the team element: is this team listening, is it going to try hard, will it follow the program and meet the milestones and get on with everybody else – all these can be behavioural red flags. But it just depends on what comes up in the background and whether or not there is something we need to be concerned about.
We cover quite a lot of verticals in Oil and Gas – upstream, downstream, midstream. We don’t do retail much, don’t do lubricants as much – that doesn’t mean we wouldn’t if a technology came through that was meeting a particular challenge in that area. We cover a lot of the value streams and that’s only increasing. As I gave an example earlier, one of the companies we have in this year develops a plastic-eating enzyme, which is way down the value chain of oil and gas, it’s end product use. I only see us broadening the horizons that we’re looking at.
Yes, absolutely. We are very much still in a semi lockdown here, in Scotland, although things are starting to release a little bit. We are still unsure what the world’s going look like in a few months. Our program is usually delivered physically at the center in Aberdeen; obviously, we can’t do that this year. We have to run our program virtually which is the first time we’ve done that. We do have plans for a more flexible virtual offering next year. It is a good thing because we’re forced to have to test out some of the ideas that were going to look at next year. But we have had to change the program makeup, how we deliver it, and the technologies that we use, how you support the companies. So, that’s been a challenge, but we’ve embraced it. It actually gives us a bigger opportunity in terms of our audience switch, particularly for things like the mentions that we can bring on board, especially international mentors because it doesn’t really matter where they’re based now. Also things like our investors and the demo day we do at the end of the program – we can open up to a broader audience without being limited by the capacity of the center. So, it brings us a lot of challenges, but opportunities as well.
We have examples of that right now: we have startups from the previous cohort that are engaging with the companies that have come through the center and have a joint project. They’re bringing their two technologies together to solve some subsea power challenges the industry has. That’s really exciting to see. We have quite a few that have come together to join forces in other projects as well. Where is an opportunity to collaborate, it’s all forward because we have such a broad technology offering at the center. We tend to find 12 new technologies for each cohort to cover different areas. They very quickly find opportunities and, generally, support each other, but sometimes they find an opportunity to actually collaborate with their technologies. It is very exciting!
We have a quite broad reading list, that we give out to our startups. We are big fans of Steve Blank and lean startup methodology, so there are a number of playbooks in that space. Peter Thiel’s Zero to One is really good. Things like social networks are very good to get a feel for what it’s like to run a tech startup and the challenge you may face. We like The Mum Test book by Rob Fitzpatrick, which discusses how to question your customers to get the insights that you need, particularly as an early-stage startup when you are trying to validate and value your proposition and business model – it’s important to know how to ask the right questions. We have a large reading list.
First: Clearly know the problem you’re solving and be able to quantify this problem in terms of impact. Be clear on your solution and the impact it has, but try to understand what your customers want. Your value proposition needs to be great. If you don’t have a good value proposition, then your business is screwed. Second: You should be clear about what your competition is doing. We, as a center, looking for a blue ocean – for absolutely new technologies, when there is nobody there, and that helps our companies to have a big market share very quickly. If you’re trying to operate in a red ocean, where there’s lots of competition, it’s very difficult to get traction and to grow; it’s possible, just very difficult. Third: If you have one opportunity to get in front of the customer, you need to be able to drive that home, and away from that they’re not going to forget you. It can be quite difficult to do, but it’s, certainly, very important.
It is a lot in the joint space: things like directional horizontal drilling have been hugely beneficial for the industry. There is a lot of technology in that space. Some data acquisition technologies, particularly that received now in terms of the subsurface seismic, being able to interpret, being able to see what’s in the seabed, where things are, being able to make better judgment calls on where to drill holes – it has been a huge step changing in that space. The way that we design and build the equipment these days has moved on as well. There is a lot going on in terms of digital transformation, like using AI or data analytics, which, I think, will be a huge transformation of the industry: we have a huge amount of data and don’t utilize it as well as we could. There is still a lot of “black arts” in how we interpret data and make decisions upon that. I think, there’s a huge transformation coming in that space, and we’re starting to see some early signs of that. Digital is going to have a huge impact on the industry going forward.
I probably go golf here. You can clearly see where you’re starting and where you want to get to, you’re teeing off and trying to get the ball in the hole at the other end. Some holes are long, some holes are short. And I think, the market that you’re in and the type of technology that your developing will determine whether it’s a short hole or long hole. For example, if you’re digital, the holes are likely to be a bit shorter; if it’s an industrial technology, that needs a lot more money, the holes, probably, going to be a par 5 rather than par 3. But how you play that holes is also really important, your tactics – making sure you’re staying safe, but being clear that you’re trying to get that ball in the hole, being focused on that. That’s really all about being very clear of who your investors are, what they’re looking for, their investment philosophy, companies they invested in previously, at what stage – doing your homework, getting your pitch ready. I’m a practicing golfer – you’ve got to practice multiple times a week to be able to play a decent game. And the same is here: you should practice, practice, practice. If you’ve got one hole to win the game, you need to make sure that you can hit that ball clean and straight when you need to.
I love my job. Who wouldn’t want to work with startups day after day? They’re a really exciting group of people who want to change the world in different ways, and we can help them during a small part of the journey. There is a lot of interesting challenges you’re dealing with, amazing people that want to move forward and we’re here trying to support that movement, trying to connect these people with a huge industry and people that are very busy, that’s difficult as well. But the outcome, when you see them flourish and grow and raise money and open the first office, take on the first warehouse, get the first product to market, knowing you’ve played a small part in that – it’s an amazing feeling! I thoroughly enjoy it. I just wish we could do more, and we try to see what more we can do as an ecosystem here, in Aberdeen, to provide even more support, filling the gaps. I’m very very satisfied, I love the job and will continue to do what I can to support these companies in doing what they do.
No, I don’t think so. It’s the way the world and human society is moving. I think society expects our industry to change alongside that. Fossil fuels, oil and gas will be around for many decades to come, it is a feedstock for many everyday items we don’t have suitable replacements yet. Yes, we will see a decline in the use of fossil fuels for transportation, we’ll see a transition to hydrogen and electric cars, for sure. But we’re still going to need oil and gas for other things: there are predominant electricity power stations in the UK, they are either gas-fired or nuclear. China and India – we’re only going to see an increase in requirements for oil and gas in those countries. I think it’s here to stay for a while. So, it’s not a worry, but about finding complementary use that works. We, as a Technology Centre, are working hard to support the transition in the technology needed in that space.
The first favorite is definitely Aberdeen. For the second, I would probably say London.