Tech startups are taking on the oil business

Silicon Valley is a long way from Houston. Hackathon denizens seem to exist in a different universe than rough-and-ready oilfield crews. But tech startups are invading the oil business. Not only that, they’re succeeding despite the price rout.

Oil prices plunged in 2014 because of a supply glut spurred by the American fracking renaissance and OPEC’s decision not to reduce exports. As a result, exploration and production companies have cut budgets, laid off thousands of employees, and are fighting to rescue their balance sheets. Large oilfield services firms are in similar, or worse, positions. But a new generation of high-technology companies are stepping in to fill the gap, and investors are lining up to finance them.

Tachyus is developing a data analytics platform, which is already in use on 6,000 domestic wells. They recently closed a $13 million Series A, led by Founders Fund. The venture firm, famous for its investments in Facebook, Palantir, and Airbnb, also invested in RigUp, another oil services startup.

GroundMetrics (disclosure: I’m an investor) surveys oilfields using its proprietary sensor systems that act almost like an MRI for geology, allowing operators to drill 10% fewer wells without reducing production. In a recent joint project with the US Department of Energy and Encana, the company revealed it can directly map frack fluid floods in addition to production optimization applications. GroundMetrics quadrupled in size over the past year, recruited some big name industry experts, and has client base of blue chip customers.

Neos specializes in remote geoscience monitoring and data interpretation, trying to tease signal from multiple sources filled with geophysical noise. Last month, Jonathan Faiman, the British online grocery pioneer, invested $150 million to become chairman of the board. Other investors include Goldman Sachs and Bill Gates.

All three companies leverage technology to provide operators with the data to improve decision-making. New sensors improve measurement capabilities. New analytical models distill raw data into actionable advice. Ayala, FracKnowledge, and Blade Energy Partners provide even more examples of the same trend.

That’s why these startups are doing well despite stormy macro conditions. When oil is cheap, operators have to figure out how to produce it more efficiently. New technologies like these help them do just that. Silicon Valley brains and Houston brawn make for a powerful combination.

Eliot Peper is a writer and consultant based in Oakland, Calif. When he’s not writing, he works with entrepreneurs and investors to build new technology businesses as a drop-in operator and adviser. He has been a founder and early employee at multiple startups and an entrepreneur-in-residence at a venture capital firm..