SAUDI ARAMCO'S VENTURE ARM PUMPS CASH INTO STARTUPS SEEKING TO RESHAPE THE ENERGY INDUSTRY
As managing director of the North American arm of Saudi Aramco Energy Ventures, Saudi Aramco’s venture capital subsidiary, Sledzik’s mission is to help ensure the company is at the forefront of the one of the biggest transformations of the energy industry to date. Saudi Aramco Energy Ventures acts as a gatekeeper of between dozens of eager tech startups and the ears of executives at the one of the biggest companies in the world.
While Saudi Aramco, Saudi Arabia’s state-owned oil company, has long poured millions of dollars into research and development, it’s also been building a lesser-known strategy over the past six years focused on identifying startups with potentially lucrative technologies to be applied to the energy industry and related fields. Saudi Aramco Energy Ventures is focused on finding promising technologies that can be used in the oil, gas, chemicals, water renewable energies and nonmetallic composites.
Formed in 2012, SAEV generates returns to Aramco as it provides a platform for startups to see their products adopted on a mass scale by a company whose profits outpace giants like Apple, JP Morgan Chase and Exxon Mobil, according to estimates from Bloomberg.
“This platform for venture capital is the most unique on the planet, and I love that,” Sledzik said. “Aramco has the appetite for making investments, and this spans the downturns.”
Aramco is part of a group of majors who are increasingly turning to the startup community for ways to hasten the speed of innovation in their companies, tapping into digital technologies such as Internet-of-Things, artificial intelligence, machine learning and cloud-based applications. Chevron, Equinor, Shell, Total and Repsol, BP are also using corporate venture capital subsidiaries to dip into the fourth industrial revolution.
"Corporate venture capital has come in and out of vogue a couple times, but in its current iteration it seems to be more popular and bigger than before,” said Jordan Herman, partner in the Austin office of law firm Baker Botts, which works with venture capital firms. “This latest round of growth has seen a lot more companies participate.”
Energy corporate venture capital companies backed 96 investments in emerging companies last year, up from 77 in 2012, according to the Silcom Valley-based research firm Global Corporate Venturing. Although the total dollar volume decreased from about to $1.8 billion from $2 billion, the numbers of deals jumped 25 percent, according to GCV.
Diversifying and digitizing
Sledzik joined SAEV as managing director eight months ago to lead the subsidiary through a shift that parallels that of its parent company to focus on digital strategies and diversification beyond just oil production.
The University of Pittsburgh graduate arrived at the firm after a 30-year career in the energy industry that took him around the globe in various roles at Schlumberger and its geophysical services subsidiary Western GeCo. He learned the ins and outs of technology in the oilfield while working in nine countries, including in Nigeria, where he met his wife Shelli. He’s spent most of the last decade at Energy Ventures (now EV Private Equity), a Norwegian venture capital firm, where he learned the world of venture capital and its applications to the energy industry. Most recently he acted as Houston-based adviser for tech incubator Hall Labs, where he assisted startups with product development, patents and monetizing technologies.
Sledzik is now turning that venture capital and energy experience into a hybrid to expand the reach of Saudi Aramco Energy Ventures. The company has made 20 investments in North America since its inception six years ago. It has a presence in Europe and Asia, but its growing its team in Houston.
“The appetite (for investment) is certainly not going down,” Sledzik said. “That’s really the reason why we’re growing our team, to deploy capital.
”Backed by a $500 million fund, SAEV’s North American arm selects three to four energy-focused tech startups to invest in every year, along with co-investors. SAEV invests across all stages, from Angel to Series C. And just as with any other venture capital firm, the startup can use that investment to grow its business, advance its technological platforms and spread its reach into energy markets, even serving Aramco’s competitors.
If one of the startups in which it invests takes off, Aramco can both earn a return and choose to adopt the technology in its own operations. That’s a big deal for small startups that may find impossible to land in the hands of a super major otherwise, Sledzik said. Saudi Aramco’s investments also help to grow the startups themselves so they can eventually serve a company the scale of the oil giant.
One of SAEV’s early investments in a Massachusetts-based 3D printing company, Desktop Metal, could prove to be particularly successful exit as the unicorn has raised a total of $438 million and has a valuation of about $1.5 billion.
“It’s not an easy process to sell to Aramco,” he said. “We help … them penetrate the wider Aramco much faster than they would otherwise.”
