The global energy business is dominated by multinational corporations and state-owned conglomerates. But the wildcatters of the oil age’s early days are still out there exploring holes and hoping for a big strike.
Two Houston attorneys say they have developed a 21st-century way to help those smaller operators raise money. The pair has founded Energy Funders, a crowdfunding website aimed at drilling projects worth $2 million or less.
“These projects are too small for institutional investors, the majors and super majors,” says Philip Racusin, a co-founder of Energy Funders. “But there are lots of reputable operators out there with good track records and projects.”
Racusin says the site will serve as a matchmaker, linking independent explorers with accredited investors interested in putting money into energy projects. The site, which Racusin says will be launched next month, is starting with just two drilling projects, a multi-well project in Pennsylvania that needs $1 million to develop and a 12,000-foot well in Central Texas that needs $1.5 million.
Racusin says Energy Funders wants to start slowly, build up credibility project-by-project with both operators and investors, and then scale up the number of projects. “We want Energy Funders to be a platform for good operators to advertise their deals,” he added. “We want to provide insider access to deals.”
Crowdfunding as a tool to help startups get investment capital has become increasingly popular, especially for ventures in their earliest stages. Since provisions in the JOBS act allowing online solicitation of accredited investors became law in 2012, these Web-based platforms have enabled many otherwise unknown entrepreneurs to tap audiences beyond what traditional fundraising could reach.
So far, crowdfunding has typically been used for more retail-level endeavors such as Jan Goetgeluk’s Virtuix gaming device or a method to help teachers solicit funds to pay for classroom materials or student field trips.
Racusin and his partner, Roger Gingell, a specialist in energy law, say the energy sector—which is increasingly using advances in technology to more efficiently find and deliver oil and gas—should take advantage of the crowdfunding platform as well. But Energy Funders won’t be a Kickstarter-style site where anyone can contribute: it will be closed to all but accredited investors (basically, those who have enough wealth, in the eyes of the Securities and Exchange Commission, that they can afford to lose their whole investment).
Crowdfunding platforms are agnostic to the technologies being funded and so could work for energy projects, argues Sherwood Neiss, principal of Crowdfund Capital Advisors in Washington, D.C., and a co-author of crowdfunding
