[Editor’s Note: Xconomy reported Thursday that Houston’s Surge Ventures would not host a fifth consecutive accelerator class. ]
Surge founder Kirk Coburn surprised many in the audience at a recent Rice University conference by saying the four-year-old accelerator program would be put on hold.
But in an interview Friday, Coburn says the decision makes sense in light of weak market conditions in the oil and gas industry, the fact that no Surge startup has yet had a successful exit, and his belief that the current Surge management didn’t have the key expertise to handle both a fifth startup class and a potentially $50 million fund—not to mention the need to nurture 37 existing portfolio companies.
While Surge has built a reputation as the go-to place for energy innovation deal flow and boosted the overall cleantech community, Coburn says adding a new startup class wouldn’t be fair to existing investors. “People that haven’t invested their own cash, they want to see it, it benefits them,” Coburn says of those in the energy innovation community at-large. “Those who have cash in are completely on the same page with me.”
Surge held its most recent demo day in May, graduating its fourth crop of cleantech startups that aimed to use software, data analytics, and other technology to make the energy industry more efficient. The group had re-christened itself Surge Ventures—instead of Surge Accelerator—to reflect a broader mission that included raising a fund as large as $50 million and the genesis of an energy information service.
That’s all been scrapped, Coburn says, in order to focus attention on Surge’s existing 37 portfolio companies. “We believe we have the best deal flow globally [of] anyone else,” he says. “We see hundreds and hundreds of deals every year.”
In addition, Coburn says Surge has developed “incredible” relationships with energy industry giants, and counts entities such as Shell, Schlumberger, Baker Hughes, Saudi Aramco, and others as sponsors and investors.
He does acknowledge that pulling the plug on a fifth Surge class is “tough” because of a loss of momentum and a possible hit to its place in startup rankings. “For Surge 5, we have 400 companies that have applied,” Coburn says, “and we haven’t launched the application process.”
He did say that he would be open to changing his mind on a fifth class but “someone has to foot the bill and I’m not going to ask the current investors to do that.”
As of late afternoon Friday, the Surge website was still accepting startup applications.
Here is an edited version of our conversation:
Xconomy: What prompted this thinking?
Kirk Coburn: In the spring, I started thinking through it. We have been executing on the same business model that we had from the beginning, which is fine, but all that will give us in five years is a whole lot more companies. We were changing from being an accelerator to being a larger fund. That’s a different set of skills. We’re trying to create extraordinary returns, especially because we’re risky. As an entrepreneur, trying to sell others (on a new fund) is one thing, but
