(Since writing this on Friday, I updated a few ideas to provide more context)
I want to officially and publicly inform you that SURGE is officially not moving forward with future investment/accelerator classes. I received an email from a senior executive at one of the largest oil & gas companies a few months ago stating: “There is noise from some that Surge is ‘dead.'” I have given into the noise.
First, for some good news…SURGE was once again ranked as one of the top accelerator programs! The alumni, investors, former team members, and mentors all deserve credit. Why did we stop when we continue to climb our way to the top? There are 3 reasons we are closing the doors:
- Lack of Industry Support
- Man vs. Himself
- I failed
Lack of Industry Support
I have already spent a considerable amount of text on the micro issues (our business model is not sustainable) surrounding SURGE. In September, during the Rice Alliance Energy Forum, I wrote a blog about why we were taking a pause. A month ago, I published my experience raising a venture capital fund in Houston. A few weeks ago, I talked about how Houston has fallen further behind and how many of SURGE’s alumni have left our city for places that offer better resources (primarily talent). To summarize, we were not thinking big enough and need a better business model. Despite our progress and stature in the rankings, there is a huge difference between building a top 10 program and being Techstars and/or Y-Combinator. Both of them are sustainable due to generating enough revenue to support their overhead as well as producing substantial exits. In our current model, SURGE never made enough money to cover its overhead and have yet to show a substantial exit.
I explored changing SURGE’s model. I thought the best path was to partner with a much better accelerator. These partners can lower our costs (already have a back office), increase our exposure and density with successful tech entrepreneurs that have been from idea to IPO, and give us a larger footprint. However, we still needed to raise money. And I have always believed that the best model is for the industry to invest into us in order to (1) pay the bills, (2) gain access to customers, and (3) create an important consortium that shares industry problems and opportunities.
Unfortunately, the industry just did not buy into our model, idea, team, and/or innovation. And while there were corporations that were interested, we needed C-level access. Because I was unable to raise support from the industry and find C-level champions, it is time to move on.
Man vs. Himself
I have been working at SURGE for over 5 years. When alone with my thoughts…I kept questioning whether we were really solving the world’s energy problems.
When I posted this blog on Friday, I was simultaneously watching SpaceX land a rocket on a moving target (how cool is that?), reading about how Tesla sold over 325k electric cars in the first week of sales (& collected $325M in cash for down payments), watching Sam Altman on Bloomberg talk about Y-Com’s recent billion dollar driverless car exit, discuss why DropBox deserved its multi-billion dollar valuation (I agree), and how AirBnB would most likely have failed without going through his accelerator.
As I looked in the mirror and at SURGE, I realized that until the industry was faced with a real threat from an electron entrepreneur, the technologies that I am peddling (which are awesome by the way) will never be appreciated, nor valued appropriately. In other words, instead of helping entrepreneurs build technologies to incrementally improve the energy industry, someone (including myself) needs to create an operating energy company that has a real purpose (democratize clean energy), gigantic BHAG, is built from the ground up from a lean, agile, and Information Age perspective, and is bold beyond belief. While we gained amazing industry access, I experienced a few painful lessons and experiences.
- First, our business model is broken.
- Second, if we were truly creating value, we would be paid for it (wait a minute…in other words, SURGE and I lost our value proposition: something that we are good and passionate at that solves a customer problem that they are willing to pay for in the quantity necessary to make money that is different from everyone else). We clearly were not solving a customer problem in the eyes of the old guard.
- And third, in my desire to succeed, I continued to think smaller and smaller and smaller to fit the industry need du jour and failed to be bold. We lost our purpose.
As Jim Collins discussed in Good to Great, “[They] look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly.”
SURGE cannot sustain itself. I am responsible. I have failed to recruit and lead an awesome team, raise the necessary support, cast a large enough vision, and make it happen.
A close friend of mine loves to echo a few of my entrepreneur platitudes including: “fail fast!” Can I count 5 years as fast? CB Insights recently wrote a funny blog about favorite startup advice cliches. I laughed really hard. My favorite is 5/ “If you’re looking for D players, you’re doing it wrong it seems.” I modified this saying by stating that there can only be one B teamer, and that it me.
So what is next? If you are entrepreneur that wants to solve the big energy and environmental problems facing our planet, DON’T STOP. I have decided that the industry has never been more ripe for disruptive innovation. I have never seen a climate more ripe for reformation due to the following powerful factors both good, bad, and ugly:
- No one owns the future of energy, yet.
- Houston is the Industrial Age Capital of energy and has not yet embraced the future and cleaner vision of what energy will become.
- 50% of the workforce is set to retire in the next 5 – 7 years.
- Houston has the highest density of Millennials…and they will leave their current job in a heartbeat for one that promises a big purpose!
- The future of energy will be built by Electron Entrepreneurs not Molecular Men.
- Venture Capital is a key leading indicator of the future growth and health of an ecosystem. Since 1979, 43% of all public companies are venture backed. These companies make up 57% of the market capitalization and 82% of R&D. Surprisingly, these companies only employ 38%…which means that they are more productive. And if Alan Greenspan says that it is all about productivity, how can I argue?
- Houston has lost critical tools required to build the future (tech density and venture capital) and needs someone to start something big, disruptive, renewable, sustainable, technology driven, and awesome.
If you are part of the amazing mentor network of SURGE, please reach out to our portfolio and help them. Get involved in the Station. And start something really awesome and hire a bunch of inspired, A+’ers.
As for me, I have an obligation and fortuitous responsibility to manage SURGE 1, 2, 3, and 4 funds for the next 10 years. I made a 10 year commitment and am bullish about these awesome entrepreneurs building the future of energy. When they call, I will always be available to warn them about the mistakes that I have made.
As for what is next for me career wise…your guess is as good as mine…I am too young and poor to retire, too inexperienced and disinterested to serve on boards, too scarred to mentor entrepreneurs except on what not to do, and too ordinary to start something really big (on my own). The good news is that my resting heart rate is right at 50 and my blood pressure is consistently 114 over 70…so, I am ready to work hard again…And I acknowledge that the boogeyman is always out there waiting to run me over but until then…
I have also been watching a lot of foreign martial arts films lately (love them…ever since watching Bruce Lee as a child). I think that I am going to try to master the flying technique.
It would sure help my ultra-running. Speaking of, maybe I will add a race to my quiver. But my real desire has been to swim the English Channel (fewer people have done it than climbed Mt. Everest). And the flying technique would work even better when crossing the busiest shipping channel in the world, without a wetsuit, in which tides change every 6 hours, and the water temperature is a balmy 57 – 60 degrees.
See you around….and thank you for the awesome memories.
Shine on you crazy diamond… you built something beautiful, no one can take that from you, and hundreds of us benefited for your peculiar brand of genius.
“Peculiar brand of genius”…I will take that!
To win the battle usually you have to give away some things, this time was the turn for SURGE. However the battle is still outside, there are some “Khal Drogo” growing and due the conservative space of utilities is too soon to claim to fail… Good years will come after the winter goes and the sun rise, thanks to your “peculiar brand of genius” we can see the other side of the river were the grass is green, we just need to keep rowing….
Way to work in Game of Thrones
Ok, so the experiment didn’t work out the way we all wanted. Lots of reasons, many out of our control. What do entrepreneurs do? Learn and go on to the next thing. I seriously doubt one Kirk Coburn will disappear into the sunset. On the bright side, I learned a lot from Surge and I believe there are a lot of others who are much better off because of the Surge experience. Thanks for making that all possible.
Mike, love it! Reminds me of what Gary Vaynerchuk said to a Houston entrepreneur: “Nobody gives a f*ck about your feelings and you need to stop crying and adjust” https://www.facebook.com/gary/videos/10153988204943350/
What you have been through is a badge of honor. Few have the courage to learn what you have experienced. Best, Kapil
Hi Kirk –
It takes moral courage to say what you said here – moral courage is the animating virtue, it makes all other virtues possible – it is in short supply in life and in the corporate mysticism that we all in encounter in business and start ups in particular. The hagiography of the start up and innovation world seldom has time or patience for this type of deep candor. Typically it is only in retrospect couched in an eventual victory – only then is the “candid retrospective” and self-critique revealed. I respect this type of unsafe statement far more. This day failure is not an orphan. I for one – I’m sure – could have done more. We are young yet and at least one of us has good vital signs – there may be more chances to succeed and in that world no doubt success will have a thousand fathers (that is not meant to be sexist comment – that is just how the saying goes)…
All the best and keep in touch – Rob
On Friday, I simultaneously watched Elon’s dream of landing a rocket on a barge come true (and loved the screaming employees), read about creating a true electric drive train nation with 325k of Tesla’s sold in the 1st week ($325M in upfront cash and $14B+ of sales), and Sam Altman speak on Bloomberg alongside Y-Com’s portfolio co’s: Dropbox’s Drew Houston and AirBnB’s Brian Chesky. These guys are changing the world…for SURGE to make a dent, we need to invest into an information age driven energy company that removes 50% of the cost, is carbon-neutral, and for every barrel of oil and/or gas produced, gives a barrel of clean power away (coming soon…)
I am in awe. To stand and deliver your own indictment and own every syllable and fault. That is what the best of the best do. Frank Sinatra, John Wayne, Ghandi and Deming are smiling upon you. No excuses, no regrets, it is what it is and moving on. You will rise again and prosper like never before.
@Geoff…thank you. I wonder if Frank is telling me to go to Vegas for a metamorphic rebirth like he did in the 50’s. We would not have the Rat Pack without it. And Wayne would never have been the film star w/o his body surfing accident (which I kind of admire but also wonder…). Ghandi…wow. I will fast in memory of him. And Deming someday will lecture me on his concept of “appreciating a system” since I missed that one.
Kirk is the real deal. Always straight up and generous regardless of SURGE’s position.
Hi , this is Francisco ( surge 1st batch), even I was in bad startups…, I learned a lot at surge and got good advice from you Kirk.
With that said, I funded a company in the Industrial IOT business in San Francisco, which now work in the main industrial vertical . We got strong support from industrial key business companies.
I know you will start something big again. I learned to fail, this experience helped me start something new, which now is growing very fast ( even with not venture fund , which are now started to look ).
Will be nice to talk again and I have the best impression from you Kirk .
Kirk – this is sad news, but not unexpected. Many of us in the Houston ecosystem owe you a debt of gratitude for what you created. I was fortunate enough to help along the way, and was proud of what you and your team accomplished. Surge was a Top 10 Accelerator at its height, and one of the first to take the tact of being a vertically-focused accelerator. The Surge team did an amazing job of attracting hundreds of mentors, bringing dozens of VCs to town for Surge’s annual Demo Days, and raising awareness of the need for true innovation within the overall energy industry.
I think the issue here is not with Surge per se, but with how Accelerators are funded and how they can survive long-term. Many accelerator programs that are based outside of core tech ecosystems and are long-running programs have received major support from state/city governments or from corporations. Surge was backed by individuals (angels) and fund investors (Mercury, Trailblazer, etc.) who ultimately want to see a return on their investment to “re-up” and invest in future funds. Its difficult to drive early exits from seed investments in startups that are selling into enterprises – it takes 2-3 years alone to get these startups enterprise-level customers.
Over the last few months, Kirk attempted to partner Surge with an established Accelerator ecosystem, and then raise capital from corporations. However, local city organizations, corporations, etc. were apathetic when it came to stepping up and providing financial support for the program. This was probably due to a combination of the downturn in commodity prices (understandable), and Houston’s overall apathy in growing and supporting an innovation economy (worrisome). Houston has survived for years on the Energy Economy, and hasn’t seen a need to invest outside its core. Other cities and states have seen the writing on the wall and have invested heavily in innovation platforms/accelerators/etc. that would help transform their stagnant local economies into growth/innovation economies. This is not the case in Houston. I for one believe the Surge project should be looked upon by Houston organizations as a blueprint for “what worked/what didn’t work” and should act accordingly. I know I’ll keep fighting the good fight to help educate Houston on best practices from other cities, and helping local entrepreneurs in building additional infrastructure to help local startups and the overall Houston innovation economy. Kirk – I hope you keep fighting/educating/mentoring/helping as well. We need you.
Keep your head up, my friend. There are many terrific companies in the Surge portfolio, and over the years these companies will mature, exit, and hopefully drive positive returns for the Surge investors. In the meantime, many of us are excited to see what you do next…
Blair, you have been an amazing partner and co-founder in SURGE from the beginning. Thank you! And you are the light of hope in Houston and serve as a critical key leading indicator of the future success of this ecosystem. Venture Capital is the fuel that builds the Unicorns and has consistently been the bank for the entrepreneurs building the new Information Age Titans. Unfortunately, even Mercury Fund cannot solve the problem until Houston has a robust ecosystem that encourages and supports awesome entrepreneurs doing really big things. As we have discussed and I have written, Houston needs a few Elon Musk’s. Without Tesla, Apple and Google chasing transportation, would Detroit have made these billion dollar acquisitions like Y-Com’s Cruise Automation?
When we started 5 years ago, Texas was a leader in Distributed Energy Resources. Since then, we have basically let go. And as for oil & gas, more of the same…stay tuned. Big things are coming.
Kirk – Much respect for all of the work you put in, the people you brought together, the companies that were created, and the honesty in reflection. It seems to me that you are living the ideals of Good to Great. I know that even greater things are in store.
You might appreciate these quick comeback stories – http://www.wyoti.com/2016/03/05/stories/
I was fortunate to have the opportunity of working with the Surge community for only a short time (for a few months supporting Seeforge after leaving Exxon), but I credit those months with completely revolutionizing my understanding of how a business actually works. It was easy for me to have role blinders on playing a commodity part in a huge organization like Exxon; working at a startup supported by veteran entrepreneurs was eye opening.
For what it’s worth, the experience has already generated real returns for me — I don’t think there’s any way I would have converted my former Houston residence to a profitable full time AirBnB without first appreciating MRR, cashflow, and growth — and I’m confident those lessons will offer more substantial benefits in the future. It may be difficult to measure the combined positive financial impact Surge had on all those it influenced without a direct equity stake, but it’s significant (and quite meaningful for those impacted!).
Much like the Surge Shack happy hours.
I love reading this!!! Awesome Joey. And yes, the happy hours were fantastic. Thank you Melanie Jones!!!
You & SURGE inspired us to leave the Silicon Valley by delivering an ecosystem of entrepreneurs, capital, mentors, media and energy customers. As a portfolio company, SEE Forge and I continue to receive value out of what you and SURGE created. I am excited to see what you create next!
– “You miss 100% of the shots you don’t take” Wayne Gretzky.
Kirk, great article. Wile I am not a part of the oil and gas industry your assessment of the Houston mindset is spot on. Unfortunately, our great city is more focused on protecting the old guard and not innovation. If you are not discussing government contracts, you may as well be in a forest by yourself shouting. Thank you for posting a piece of yourself here for other to read. I have definitely learned a thing or two.
Kirk, I am a new entrepreneur in the city with PE background. Coming out of a big major and have seen even corporate VCs, with big cash in hand, are failing in investment. Part of the reason, as you said, is the lack of internal support and communication. But in my mind the major challenge is adopting a new cool, exciting technology to an industry that give almost zero motivation to the young, bright, pro-green entrepreneurs in an age that Tesla, with no profit and only promise, raises so much capital. Oil industry is a closed system with no public feedback and very few customers who are hard to impress and think almost in a same line.
Thank you for the comment. There needs to be a catalyst. OPEC (the largest holder of assets by far), the lowest cost producer (OPEC), and renewables are not enough. This still amazes me.
The future of the industry, the millennials, are still not influential enough to change within and I am not sure it can be done from within. And the current leadership acknowledges the issues of losing a massive amount of talent during the downturn; however, they continue to edify to me that they are waiting for the oil price to go back up and that this is just part of the business. Unlike Silicon Valley that purposely tears down itself every few years and builds itself back up again better, this industry continues to use antiquated mindsets, methodologies, and processes. In all fairness, we cannot break down a 100 year refinery and build it back up again…wait…interesting…
It is clear to me that until there is a catalyst, as discussed in Laughing Happy Fish Heads blog, that directly threatens the current industry players, technology will continue to be undervalued, operators will keep their Industrial Age minded testing cycles (years not months) for new ideas (remember that Fracking as we know it took decades to develop), and any environmental concern will be a cost of doing business versus an asset.
You built something amazing Kirk. I wish other entrepreneurs were as passionate, driven and committed to an effort. You are not bruised and you are not injured. The industry failed you. This was the reason why I walked away from Clean tech. It isn’t ready for prime time. Hopefully, healthcare is. Can’t wait to see what other bold move you make and will find a way to support you. Enjoy the surf time!
Kirk, keep the faith. We’re doin’ it.. Working to combine gasoline delivery with fully automated carbon-offsets. We need to find the best available wholesale gas rate cards so we can price accordingly. Any idea where to go?.
An operator as well as a service provider have produced a number of great ideas with the majority of these sitting in the dust. The disconnect between operators and services is heavily pronounced in the majority of cases. Some work towards their reserves, strategized to sell to whom field development is a business. When you drill and complete 30+ wells on a monthly basis by the time you look back for possible re-iteration it is too late and yet why? When you have services covering your back on the field without budget because cost control is a dominant player in a game. Service providers work under a disclaimer of no responsibility for production of your wells and if it wasn’t that great it is the operator who didn’t spend more for better quality. But all that starts with a sufficient commitment in funds yet when the innovator is bootstrapping a product out of their garage to where he/she starts selling and eats up the cost of the risk on his/her own, will in most cases eventually suffocate from luck of free money in his(er) working capital… and here we are private equity investors…. let us now lead you to your exit, wasn’t that your strategy?
Each player in this global exercise is working towards their individual goal and that creates the industrial disconnect….the logic here is you could envisage that if an operator amalgamates with services, will that eliminate this gap and all shall have one ultimate goal to work towards success?
[…] to argue, but data and history are still on my side…and need I remind you that I too have fallen prey to the irrational […]
[…] model (covering our overhead), we needed to capture the financial support of the energy industry. Houston alone is untenable (strong local competition, need to have larger footprint, closer presence to check […]
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