(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.