Validere, A New System of Record for Oil and Gas

| March 12, 2020
Validere, A New System of Record for Oil and Gas

In August 2016, I met two smart, tenacious founders as they finished up at YC. They were building a new handheld device for workers in the oil and gas industry, to test oil and determine its physical properties. I suggested they locate the company in Texas and raise money from the energy community.

Three years later, I met them again, and the business was unrecognizable. They had switched from hardware to software, focused on a specific problem area (product quality), and generated seven-figures of new revenue in the prior few months. But the biggest difference was in the founders themselves. The intelligence and tenacity were still there, but they were now coupled with deep domain expertise. The founders showed a nuanced understanding of how to apply technology to an industry largely untouched by modern software. This time, we invested, leading Validere's Series A which the company is announcing today.

In the three years between our two meetings, Ian and Nouman, the founders of Validere, homed in on two key insights. First, product quality is really important in oil and gas, and not easily measured. Second, we can now solve that problem with software in way that was not possible before. Let’s unpack each of those insights:

Product Quality Is Important

Oil and gas is the world’s largest supply chain: about $2.5 trillion-worth of oil and gas gets pulled out of the ground each year. That then passes through a complex supply chain, moving from wells, to batteries (storage), through trucks and pipelines to gathering centers, trading hubs, VLCCs and refineries, on its way to consumers. At each stage, companies need to measure product quality to figure out how much the oil or gas is worth. Today, that happens with occasional sensor readings, expensive lab tests, and teams of production accountants piecing spreadsheets together by hand. At best, it’s imprecise. Talking to customers, several told me they just make their best guess and go with that.

Software Can Help

Validere takes in all existing sensor and sample data and creates a consistent quality measure of all products flowing in and out of each link in the supply chain. It recommends how often to sample, determines which samples to use and which to discard, and identifies anomalies that can skew results. When data is inconsistent or unavailable, its “virtual analyzers” (predictive models) fill in the blanks. It’s not creating new data, but rather using machine learning to make sense of the data that already exists. The result: a single, consistent ledger of product quality, available in real time to inform decision-making.

In summary, Validere is creating a new "system of record” for product quality in the oil and gas industry, just as Veeva has done for sales information in the pharmaceutical industry or Procore has done for plans in construction. It’s part of a wave of new industry-specific or “vertical” SaaS companies that are permeating traditional industries. But to fully understand the company’s potential, I think it’s helpful to look closer to home.

Analog: Carta

The value provided by Validere in oil and gas is analogous to the value many tech companies get from Carta, the cap table software familiar to many founders and startup employees. Before Carta, cap table information was recorded in paper certificates and aggregated in spreadsheets. Every financing or liquidity event, people were wrestling with Excel to make the numbers add up, and searching their filing cabinets for dusty stock certificates. Painful. Now imagine doing that every month, with a cap table that’s constantly changing. That’s the more acute pain that Validere solves.

Today, Carta and Validere both sell software applications. Over time, both can layer on marketplaces — Carta for stock in private companies, Validere for oil and gas. They can do that because they have unique data assets — cap tables for Carta, detailed inventory information for Validere.

Finally, beyond helping their customers, Carta and Validere can have broader social benefits. As the old saying goes, you can’t manage what you can’t measure. Equally, you can’t demonstrate progress without aggregated data to show it. In Carta’s case, that might be sharing equity and inclusion data across private companies; for Validere, it might be tracking reduced leakage and waste across the supply chain, to help manage the industry’s environmental footprint.

Wing Partnership

All of us at Wing are thrilled to partner with the Validere team, and our friends David Wadwani at Greylock, Kyle Bethancourt at Sallyport, Pierre Magnan at Parkland, and Ammar Hanafi at Moment Ventures. In spending time at Validere, we have come to realize that Nouman and Ian have hidden talents -- Nouman combining hardcore travel with a love of chiropractors, and Ian living his life in accordance with the Second Law of Thermodynamics. Both of them have built a cohesive, diverse team that spans Toronto, Calgary and now Houston.

We are excited to add a little dose of Silicon Valley into the mix.

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