Russ: Hi there, I’m Russ Capper and this is The BusinessMakers Show. Our guests today, the co-founders of Darcy Partners, Hossein Rokhsari and Jeremy Sweek. We enter the discussion where I just asked them to tell us about Darcy Partners.
Hossein: So Darcy is a technology scouting and research firm working exclusively in the oil and gas industry and serving oil companies finding technologies that solves their business problems.
Russ: Okay, wow. So do they come to you and say I want you to go find solutions to these problems or do you sort of already know what the problems are?
Hossein: So we actually want them to define the problem, so it’s a pool model versus a push model. Which means a selection of oil and gas companies come together on a quarterly basis, they set the agenda for the pain points they are trying to solve and every quarter we bring to them the solutions that we find for those particular problems; so we sort of deliver to them three things at every quarterly event. One is the event itself which is a top selectied technologies, 1 – 5% of what we look at, that present live to this group. The second is a broader database of every technology that we’ve found that solves that pain point and third is an actual white paper, the research publication that provides the landscape of available solutions and how the industry is evolving and solutions that are emerging.
Russ: Okay, now I know you’ve already had forum number one. I got to be there, it was real interesting, well attended; how did you think it went?
Hossein: So we had three objectives going into that meeting; one was are we bringing something innovative and novel to these oil companies or had they seen it before? Second was are they going to end up working with these startups and the third was are entrepreneurs going to win by the mere fact of having this?
Russ: By participating?
Hossein: That’s right, so about 90% of the 7 companies that we selected for presenting to the group of 15 oil and gas companies in the room – 90% of them were completely unknown to them.
Russ: So you were bringing something new to them?
Hossein: Very new, which is always risky because new things usually don’t get picked up.
Hossein: So the second statistics that were how successful this cross section is; every oil company left with at least 2 to 3 startups out of 7 that they wanted to work with, that they wanted to back their premise to work with them.
Russ: So you put a check by that one.
Hossein: That’s right. And every entrepreneur left with about three and a half potential customers.
Russ: Oh wow. So one point of clarification, the company people were both E&P and service companies right? Yeah, okay, and did you appeal to one group more than the other?
Jeremy: So the topic for this forum was Advanced Analytics in Oil and Gas. The purpose was to take a theme that the industry agreed was addressing different pain points but it tends to be over-hyped or marketed and there’s a lot of noise in this analytics or digital space. So our approach was to first go to the E&P operators; the end users. So we went to the operators we had around 15 of them in the room that these guys range from large NOCs to small, play-specific independents and we did have 2 service companies.
Russ: So this whole thing with analytics and big data I think is a hot topic. We’ve addressed it several times on The EnergyMakers Show; my favorite time was with Dr. Mark Mills that wrote Shale 2.0 so there has to be a lot of interest right now in being able to lower the cost of good soul, right?
Hossein: That’s right, that’s right it is and we think it’s just done a bit inefficiently. An example of that is the area of artificial lift; a lot of solutions are being developed for being able to predict when these pumps are going to fail and not go through production shut down. We’ve looked at at least 20 companies in this space that are trying to develop solutions and almost the top independents have worked with 2 or 3 of them at a time so you can imagine that there has been different combinations of the operators and these startups resulting in at least a hundred proof of concepts and pilots. We think that’s just inefficient. It takes a forum like this to say these are the solutions that have been successful, let’s just implement them.
Russ: Okay, so it’s kind of interesting knowing a bit about both of your backgrounds, you kind of seem to have gotten here with quite a few different model experiences under your belts, kind of iteratively, and do you feel like this is the right one at this point in time?
Hossein: The only testament is if the customers like it and the forum in March sort proved that the model works, but in terms of how we got here if you’re an oil company looking for technology solutions right now almost all of the apertures to that world is through the world of investments; not every oil company is interested in making venture capital investments and they’re not even set up to do that. So Jeremey and I from early on decided to focus on the service side versus necessarily the investment side. And from an entrepreneur’s perspective it’s very hard to dilute your company for investment or even for customer access and the model that we have in mind is a model that allows every startup, regardless of its maturity level – either it’s at seed stage or CUA stage or doesn’t even need capital – to get in front of these customers and say this is the solution that I have without necessarily needing to give up any equity which is what allows us to work with later stage companies such as private equity backed firms.
Russ: And I’ve heard you refer to it – I heard in that day – it’s kind of like innovation as a service; that’s a pretty cool statement, is that what you do?
Jeremy: So right now we focus on three things and we try to do them really well; we focus on our market research, we focus on our deal flow – our actual scouting exercise – and we focus on our forums for validation. As long as we can deliver on that model across different topics that the industry is driving we think this is something that will spur faster sales cycles for entrepreneurs and we think this will enable operators to have a sustainable technological advantage in the future.
Russ: you mentioned the topics already and analytics was just real obvious because everybody is kind of talking about that and lowering the cost, but how do you select topic and is there a next topic; is there a next forum scheduled?
Jeremy: So the next forum is going to be on water management and what we have done is we’ve created sort of a buffet of topics and we keep this evergreen, high-graded list of technical pain points that the industry has identified or that we have identified and discussed with different corporate partners of ours and each quarter we come to a consensus on what we’re going to focus on. And right now we are looking at specifically drone applications to oil and gas as well for something later in Q2 or Q3.
Russ: And how did you arrive at water management for this next one?
Jeremy: So our corporate customers consistently came to us and said this digital stuff is great but solve our water problems. And so we’re not just digital, we’re not just hardware; we are coming from the industry versus outside in.
Russ: Interesting. Okay, so we’re all business people here so how does your business model work? Is this like an association? Do they join; do they subscribe?
Hossein: Good question. So our business model is working – our revenue model is basically based on the corporate participation.
Hossein: There are two types of participants in our forums; one are the group that are signing up for an annual membership and they’re signing up to the buffet of options that Jeremy was talking about. And then there are other groups that are coming in just to hear our perspective and the set of technologies that we’ve identified in those particular topics such as water management.
Hossein: So there is a variety of topics that you could sign up for.
Russ: You can have season tickets or can just go to the games you want to.
Hossein: Exactly, yes.
Russ: Okay, that’s interesting. So before I let you go how does it look to you if it is successful 3 or 5 years from now? Does the price of membership go up because everybody wants in because they know it’s successful? Are you participating in deals? How does it work?
Hossein: Jeremy you go first.
Jeremy: I think one element success for me is I won’t see the same slide at every conference about how slow the industry’s adoption cycle is.
Russ: Meaning it sped up.
Jeremy: Meaning we had something to do with it.
Russ: Cool, cool; all right, that could be cool.
Hossein: I think instead of increasing the price we just believe that we have only scratched the surface. If you look at our advanced analytics workshop that you participated in it was a full room but it really only had 8 independents in the room and about 3 to 5 IOCs and NOCs. The universe of oil and gas companies that look at technologies, that need it, is much broader than that so I think our vision is that this becomes a tool in every oil and gas company’s toolbox to look for technologies.
Russ: Really cool. All right, well guys I really appreciate you having me.
Hossein: Thank you.
Russ: And I think it’s an interesting model and I want to stay in touch and hear about the progress.
Hossein: Please do, thank you.
Russ: All right, and that wraps up my discussion with Hossein Rokhsari and with Jeremy Sweek of Darcy Partners.
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