A venture capital firm based in New York City invested into a startup developing new technology based on the cavitation phenomenon. Historically, all of the startup’s development efforts had gone into the subterranean drilling application, specifically into increasing drilling rate. The technology demonstration concept and value proposition were built around the assumption that increased drilling rate and reduced drilling time and expense would compel oil and gas service companies to adopt the technology. However, much to the surprise of the venture firm, not a single service company was willing to test the technology on their wells.
Incupoint’s research suggested that while drilling companies would love to drill faster, it was much more important to them to drill to plan. With drilling plans coordinated across multiple industry stakeholders and approved 12-24 months in advance, the inevitable risks of integrating new technology far outweighed any potential gains. No matter how many risk mitigation strategies our client had proposed, not a single service company had agreed to test the product.
During our research, Incupoint found that the very same service companies who declined to test the product for the purpose of increasing drilling rate also had a big problem: they needed to extend the reach of their horizontal wells. This was very important to them because drilling longer horizontal sections increased revenue and made them more competitive against their peers. Incupoint suggested that the client modify their technology value proposition to reflect these new findings and adapt technology demonstrator to the needs of horizontal drilling application. Tweaking the target application had the desired effect, catapulting the technology to the top of the priority list of several service companies. The very same people who a year ago could not justify testing were now treating testing as high priority and finding time and money for it. Recasting the value proposition around a strong need of service companies allowed our client to catch the prosperous wave which took them all the way to the technology licensing agreement.
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