Russ:  Hi I’m Russ Capper and this is HXTV, the show that champions Houston innovators and entrepreneurs.  Our topic today is blockchain as a service and my guest, Andrew Bruce, Founder and CEO of Data Gumbo.  Andrew welcome to the show.

Andrew:  Thanks Russ, appreciate it.

Russ:  You bet.  Tell us about Data Gumbo.

Andrew:  Data Gumbo is an early stage company.  We have 5 paying customers today, providing blockchain as a service.  We have offices in Houston, Texas and Stavanger, Norway, has about 20 employees and we’re starting to grow like crazy.

Russ:  Okay, based on those two places I assume that means you’re focused on oil and gas.

Andrew:  We have our origins in oil and gas; we came from the drilling business.  So we started in oil and gas but we’re quickly getting into the shipping business, the marine business, trucking business; so we’re getting into the whole supply chain for oil and Gas.

Russ:  Tell us a little bit more about blockchain as a service; what does that mean?

Andrew:  That’s a really good question.  blockchain as a service is – if you think of software as a service it means that a company doesn’t have to implement the actual software that they use in-house, so there’s a lot of people experimenting with blockchain today.  We did prototypes with most of the mainstream blockchain technologies that you would expect to see but most of them did not work; in fact all of them did not work for what we were trying to do in an industrial setting.  So we need large blocks for large pieces of data that you would need in an industrial setting.

We do private permission blockchains; there’s no cryptocurrencies, there’s no CryptoKitties, there’s no Gumbo Bucks, there’s no mining.  We execute the blocks based on a configurable timeframe to match triggers of what happens in the industrial setting.  And we provide it as a service so a company doesn’t have to do a big, expensive implementation of the blockchain.  They can say I’d like to set up a ledger this afternoon, I see this network of people who are already using it who are my customers or my vendors and I would like to start running contracts with them to drive down my expenses.  It significantly reduces the expense and time and complexity and risk of getting involved in blockchain.

Russ:  So we’re talking about two companies, probably big companies, doing business with each other and by implementing Data Gumbo’s blockchain as a service you’re saying there’s benefits for both sides of the transaction in the supply chain between them?

Andrew:  That’s exactly correct.

Russ:  Okay, how is that?

Andrew:  Well that’s the crux of the question, right?  Because there is a huge amount of inefficiency in transactions between 2 or more companies today.  I can explain how we got into blockchain, maybe that will give you a little bit of background.  I think it’s an interesting story because we didn’t start out as a blockchain company, we started out as a data platform.  A lot of us came from the drilling equipment business where we got multiple different sources of data which are not compatible with each other and trying to get a single source of clean data that you can manage who has access to that data is really, really tough.

So we started out Data Gumbo to be a data platform to solve that problem and we still use our data platform today which has unique advantages with the blockchain as I’ll describe in a minute.  So we were involved in some discussions for benchmarking of some rigs in the Gulf and the amazing statistic came out that this one oil company – large oil company – made 21 million drill pipe connections per year.  So if you’re connecting 90 foot pieces of pipe to drill a well – a deep well – the average drill pipe connection time is at around 6 minutes depending on which company you’re talking about.  And if they can save a minute per drill pipe connection globally across their fleet it’s worth $250 million a year.

Russ:  So that’s the challenge that you went after.  But 21 million – so this is multiple platforms, multiple wells.

Andrew:  Yes.

Russ:  But they just calculated wow, we’re doing that all day, every day; we do 21 million a year.

Andrew:  It’s the global biggest product.

Russ:  Wow, okay.

Andrew:  Not that they sell it, but it’s their global biggest product.

Russ:  So how did you actually save them a minute on every one of those connections?

Andrew:  The obvious question is why are they not solving it already, right?  And the answer is that they can’t get the contractors – so they hire a drilling contractor to drill a well for them and they can’t get the drilling contractors to work with them to reduce that minute or save that minute.  And so then you go and ask the drilling contractor why on Earth are you not helping save this minute?  And the answer is because they don’t necessarily trust that they’re going to be paid any performance component of an incentive contract.  The oil companies have a history of enforcing the penalties, not necessarily paying the bonus.

Russ:  So they often have tried a bonus today to get them to speed up and that just hasn’t worked.

Andrew:  Yeah because it’s typically a manual process; you send somebody out with a clipboard and a stopwatch and say okay, here is the best practice, now do it like this.  And then they go and concentrate on something else once the times come down and human nature, it goes back.  But what we’re doing with blockchain is they’re saying okay, we can measure electronically what is happening on the rig; we know for fact.  We can electronically capture the terms of the incentive contract; if you can reduce it by a minute then pay a bonus of X or incur a penalty of Y.  With a distributed ledger everybody’s got visibility into exactly what’s happening in the transaction and with the smart contract aspect of the blockchain you can automate the payment of a bonus or you can automate the incurrence of a penalty.

Russ:  Wow.  And it’s also secure data?

Andrew:  It’s absolutely secure.

Russ:  That’s real interesting.  So if it’s that automated that means that do you go down to this level of detail: you pay the bonus on certain pipes that they did do with less a minute and other pipes you don’t and some pipes even incur a penalty?  Is it per pipe or do you just not do that yet; you just look at it collectively?

Andrew:  It is entirely up to the counter parties how they want to write the contract.  So they could say we will measure the average over 24 hours or they’re per pipe – Data Gumbo doesn’t take a position in that, it’s entirely up to the counter parties what the terms are.

Russ:  So you’re kind of appealing both to the owner of the property and the contractor and they both should be able to look at it and go wow, it’s to our advantage to do this.

Andrew:  $250 million and that’s one KPI on a rig and there’s at least 47 KPIs on a rig.

Russ:  So that example – you said you had five paying customers today – is anybody doing that exact thing or is it similar?

Andrew:  We are measuring in KPIs and we are getting ready to be able to execute a small contract, so that’s the next step.  So we’re talking to several companies about automating long term incentive contracts go be able to actually do it.  Because those incentive contracts and performance contracts have been around forever but they’re expensive to administer.  You’ve still got the situation where do I trust my system or do I trust your system?  Whose system do I trust?  As opposed to saying okay, we’re going to measure it electronically, we’re going to give you both a copy of exactly what happened and we are going to automate the payment for the actual transaction itself.

Russ:  Sounds like you’re really soling a problem.

Andrew:  We believe so and actually the customers seem to believe so too because it’s really taking off like wildfire.

Russ: Is this a bootstrapped operation or have you raised some money?

Andrew:  It was bootstrapped by the three founders.  We’ve raised $1.4 million in a convertible note and we are in the process of raising venture capital which we will close in the fall.

Russ:  So before I let you go I know you’re not from Houston but you’ve been in Houston for a while.

Andrew:  What was your first clue?

Russ:  I don’t know what it was about you.  What do you think of Houston and why are you here?

Andrew:  Houston to me is an amazing city.  The amount of generosity people have got with time has been really humbling.  It’s a place where if you’ve got a bit of get up and go you can really make anything happen so it’s an amazing city.

Russ:  So you’re going to keep Data Gumbo right here in Houston?

Andrew:  Absolutely.

Russ:  Well I wish you good luck, real interesting, and thank you for sharing your story with us.

Andrew:  Well thank you very much.

Russ:  You bet.  And that wraps up my discussion with Andrew Bruce, Co-founder and CEO of Data Gumbo.  And this is HXTV.