How Phaze Ventures worked with Interface Fluidics to bring new oil optimisation solutions to market.
The disruptive idea
Innovative ideas are often born in the most unlikely of places. For Interface Fluidics, a technology-enabled oil and gas lab service company, that meant taking the technology most commonly found in pregnancy tests and diabetes strips and turning it into solutions that could dramatically improve decision-making in the oil and gas sector.
The start-up’s solutions have their roots in the lab of Dr David Sinton, Professor in Microfluidics and Energy at the University of Toronto, Interface founder, and the company’s CTO. Having completed his PhD in microfluidics and fluid dynamics he realised that the technology wasn’t just limited to the biomedical applications it has typically been used for.
He believed that microfluidics had the potential to address some of the world’s major energy problems, by enabling rapid and efficient screening of chemical interventions and operating characteristics for oil and gas operators around the globe. He focused his work on adapting microfluidics for the oil and gas industry by replicating in a lab what happens inside an oil well and visualising fluid behaviour to quantify performance and comparatively identify mechanisms that increase oil recovery.
Once it became clear that the idea had commercial potential, he joined forces with Stuart Kinnear (CEO) and Tom de Haas (COO). Interface Fluidics was born, with a simple goal: help clients evaluate various chemical interventions, improve decision-making with accurate data, and so optimise production.
A passion for change
That was in 2016. Since then, the founders’ confidence in their solutions has paid off. The company has doubled its revenues year on year and has grown to employ more than 25 people. It has attracted the support of accelerators and investors at both local and national level; and in 2018 was a member of the first class of TechStars Energy, the prestigious accelerator programme in association with Norwegian energy giant Equinor.
That was when the Interface team met representatives from Phaze Ventures who were acting as mentors to the TechStars programme – and hit it off immediately.
“I think we all realised that we had a common problem that needed to be solved in the oil and gas industry, and became pretty excited about working together really quickly,” says Kinnear of the initial meeting. “We really liked the Phaze team because they shared our passion for making the energy industry better. There’s still a lot of waste out there, and it just absorbs energy, time, effort, chemistry, and money. We wanted to change that, and so did Phaze. Our mission and our vision are pretty closely aligned.”
Selling the solution
At that time, Interface was preparing to raise its Series A funding, and knew that it wanted Phaze Ventures to participate. Kinnear explains the reality of start-up financing: “As an entrepreneur, everyone tells you to be choosy about investors. I’m not sure if that works when you just need cash to keep the lights on. But by this point in our development, we were able to take that advice on board. We wanted to be choosy, we could afford to be choosy, and we really wanted to work with the team at Phaze.”
Kinnear and the rest of the management team had grown Interface Fluidics to a position of strength. They believed strongly in partnering with customers to deliver timely and valuable information. The underlying technology could be adapted to any number of applications across various energy markets, making it exceptionally versatile, nimble and reactive to customer needs. It also gave the company a unique series of insights and experience that can be adapted and give context to its next project.
“That’s a big value-add – especially for an oil company,” explains Kinnear. “It makes what appear to be insurmountable problems far less daunting. We wanted to say we’ve tested every other non-standard oil out there and can give this unique visual mechanistic insight into what is going on. It has helped us reposition the company as a firm that can solve any kind of problem – regardless of the reservoir concerned.”
Those visuals also created a stand-out proposition. Although engineers and geologists are familiar with visual simulations of porous media and fluids moving through porous media, Interface’s visualisations offer far greater detail of what is happening hundreds of feet below ground. “We’re showing people something they have built their careers around – but never seen,” says Kinnear. “When we show people, we get quite an emotional reaction.”
Nonetheless, Kinnear and the team knew that raising money for Series A would be tough. The process itself has a lot of moving parts and keeping everything moving at the right time in the right place required a lot more effort than previous funding rounds. But there was another challenge: selling the idea of a technology-enabled services company to the oilfield services sector.
“It’s not a straightforward sell. We are providing data, not subscriptions. We’re offering better decision-making rather than a specific bit of software. The type of testing, the way we do analysis, it’s all new. It doesn’t necessarily fit into the classic model for investing that you see in oilfield services – and although we’re flexible, that can make it harder for potential customers to connect their challenge with our solution. Finding investors that have an appetite for all that was pretty hard – but Phaze got it, and we wanted them on board.”
Investment and more
Phaze Ventures, alongside Equinor Technology Ventures and Techstars Ventures, made a substantial investment in Interface and took an observer position on its board. But the relationship between the two companies went far beyond this basic VC model. Phaze Ventures became a real partner to Interface and introduced the company to significant opportunities in the Middle East.
Kinnear acknowledges that Interface Fluidics wouldn’t be in the Middle East without Phaze’s support. “We’re a Canadian company so it’s extremely expensive for us to be in those markets: we need boots on the ground and people who know who to talk to, people who understand the intricacies of business life in the Middle East, people who are prepared to champion our solutions – and the underlying principles that support them.”
Supported by Phaze, Interface found it had a strong advocate in the region that could make sure it was front of mind with the people that count. It also helped close the cultural gaps between westernised business models and the specifics of doing business in the Middle East.
Phaze also introduced the Interface team to Petroleum Development Oman (PDO), the country’s leading exploration and production company. Phaze itself had partnered with PDO to set up a new platform to boost local energy start-ups and attract companies from around the world.
It was this partnership that provided essential support, encouragement and, crucially, the first middle eastern customer for Interface Fluidics’ solutions. PDO gave Interface the space, time, encouragement and advice needed to develop two pilots and demonstrate the value of its proposition to the market. With PDO’s name and money behind it, Interface had the opportunity to pilot and improve its solutions and gained the invaluable support of a name that opens doors around the world.
The first of two pilots that Interface conducted with PDO support was of a testing and screening process to establish that its fluidics-based solutions could replicate traditional laboratory technology for conventional chemical flooding. Typically, this kind of test is carried out on an actual piece of rock from the reservoir, and although it produces accurate results it is destructive and can only be performed on a one-off basis. The goal of the pilot was to prove that microchips can replicate the rock, the temperature and the pressure involved in the form of a repeatable test.
The pilot focused specifically on polymer flooding, its impact on oil recovery, and whether it could produce the same data to the same quality as conventional testing at a much faster rate. It was a year-long exercise, punctuated by critical feedback and coaching from PDO at each stage to improve the product to the point where it was as good as or better than traditional lab testing.
Facing the future
With the first pilot completed and a second underway for a different part of PDO’s asset class, the future is looking positive for Interface Fluidics. Having focused heavily on shale oil and gas in North America, the company is now leveraging the learnings from working with PDO to work with partners to commercialise testing in other areas of the oil and gas industry. Working with Phaze and Equinor has enabled it to spin up two branded product lines in the past twelve months.
As to the relationship with Phaze Ventures and PDO, Kinnear and the team have nothing but praise. “As a start-up, you rely on the strength and willingness of people to come along on your journey. Having a financial and commercial partner we can trust and build a relationship with is all we need for our shot at the moon. Phaze Ventures isn’t our only financial backer and partner, but they are the people we have chosen to bring into our company and to get involved.”
About Phaze Ventures
Established in 2018, Phaze Ventures is an early-stage venture capital firm founded to fund disruptive technology companies and accelerate their missions to transform traditional industries.
Phaze Ventures’ ability to identify high-potential companies is supported by its expert advisory board and deep corporate partnerships within the energy and logistics sectors.
Phaze Ventures works closely with these companies to give them the best possible chance of success – and generate the best possible rate of return for investors. Through its network, Phaze Ventures provides portfolio companies not only expertise but with direct access to high-profile customers, including government bodies. Everything they need to deliver on their ambitions.