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Global accelerator gener8tor's early-stage program, gBETA, plans to begin its first cohort out of the Downtown Launch Pad in April. Courtesy of Downtown Launch Pad

The second of two top accelerator programs that have taken a bet on Houston has announced its new program director and opened applications for its spring 2020 cohort.

Wisconsin-based gener8tor announced in September that its pre-accelerator program, gBETA, would be launching in Houston. The program follows MassChallenge, another top accelerator, premiering in Houston last year. Both accelerator programs launched in Houston thanks to a $1.25 million grant approved by the Downtown Redevelopment Authority.

Eléonore Cluzel will lead the gBETA Houston program as director, and will be the point person for the program in the region for the two annual cohorts. Previously, Cluzel worked for Business France mentoring French startups and small businesses. In her new position, she says she's excited to support founders across all industries and foster innovation.

"We're adding another resource for local founders to grow their startups and to raise money, and not have to move to Silicon Valley to do it," she says. "We will also serve as a connector, introducing founders to mentors and investors within the community and across gener8tor broader network."

Ele\u0301onore Cluzel Eléonore Cluzel will lead the Houston gBETA Houston program as director. Courtesy of gBETA Houston

Currently, Cluzel has regular office hours out of The Cannon's space in the Downtown Launch Pad in Amegy Tower. gBETA will co-locate with MassChallenge on a separate floor of the building, and that space is expected to be ready ahead of the start of the first cohort in April.

"It's like having a one-stop shop of resources for the whole community in a central location," Cluzel says. "Since The Cannon is going to be among several coworking spaces in the community, we'll reach all areas of Houston, including Sugar Land, The Woodlands and Stratford and other neighborhoods"

Interested early-stage startups can apply online for the program until April 10, and the cohort begins on April 30. Only five companies are selected for the cohort, insuring individualized support and programming from gBETA. The free program is designed to equip its participating startups with early customer traction and preparation for later stage accelerators.

"I'm looking for a diverse cohort, encompassing underserved communities such as women, veterans and minorities," Cluzel tells InnovationMap. "I'm seeking highly unique, highly scalable businesses based in Houston. In Houston, we have a lot of venture capital firms that write huge checks, but we don't have a lot of investors that help with early seed-stage funding. We're looking for very early stage startups whose company we can help grow and connect with our local and national network of investors."

gBETA aims to act as a funnel to other accelerator programs, Cluzel says.

"We're looking forward to working cooperatively with other resources in town, such as Plug and Play, MassChallenge, The Founder Institute, Capital Factory, The Cannon, and other incubators, accelerators and resources."

The Cannon Houston's third location is planned to open on December 9. Photo courtesy of The Cannon

Photos: The Cannon Houston's downtown space expects to open its doors early next month

ready for liftoff

A Houston entrepreneurial hub plans to open its third coworking space location only a few weeks after its main campus debuted in West Houston.

The Cannon Houston's newest location will be a 17,000-square-foot space on the top floor of The Cannon Tower at Amegy on Main in Downtown Houston. The opening date for the new space is Monday, December 9.

The announcement follows the grand opening of The Cannon's 120,000-square-foot flagship space, which is now close to being completely leased by startups and small businesses, and represents another step in the company's ambitious expansion plan.

"We've long known that we will need multiple locations across Houston in order to serve our mission of supporting Houston's entrepreneurs, and we are thrilled to work with an incredibly forward-thinking organization like Amegy to continue to fulfill this mission," says Cannon founder and president, Lawson Gow, in a news release. "The Cannon Tower at Amegy on Main will be unlike any other space in the city, in which we will be developing a 'vertical village' of innovation, programs, and resources, transforming Amegy on Main into a hub for Downtown Houston's entrepreneurs."

Gow — who is the son of David Gow, owner of InnovationMap's parent company, Gow Media — recently transitioned into his position as The Cannon named Jon Lambert as CEO earlier this month.

The Cannon's space is just one part of the equation that is the Downtown Launch Pad — a joint project between Central Houston, Downtown Redevelopment Authority, The Cannon, and Amegy Bank. The Amegy building will also house MassChallenge and gener8or, as well as event and common space for programming on the 11th floor.

"Amegy Bank is thrilled to be a part of the expansion of the innovation community by offering space, amenities, and business development support," says Kelly Foreman, Amegy Bank's senior vice president and manager of corporate real estate and facilities, in a news release. "We have a long track record of helping businesses grow, and creating this space for a hub of start-ups and accelerators is yet another way to do just that."

Moving forward, The Cannon will play a role in expanding workspace, resources, and programming in the building. The space is now open for leasing, and the first 100 members to join the new space will receive free parking for the course of their membership.

Plans for growth

Photo courtesy of The Cannon

The Cannon Houston will be a major player as the Downtown Launch Pad expands throughout the building.

At The Houston Innovation Summit's first panel of the week, representatives from The Cannon, Amergy Bank, and Central Houston discussed game-changing plans for the Downtown Launch Pad. Image courtesy of The Cannon

3 takeaways from The Houston Innovation Summit's first panel

ICYMI

The Houston Innovation Summit is in full swing, and the first panel of the week's events started strong. Representatives from The Cannon Houston, Amegy Bank, and MassChallenge took the stage at Amegy Bank's downtown office — soon to be converted into the Downtown Launch Pad — to discuss big picture topics within Houston Innovation.

Grace Rodriguez hosted the panel that covered diversity and inclusion efforts, the growth of The Cannon, and what you can expect from Launch Pad. Here's what you may have missed from the event.

The Downtown Launchpad will shake up the innovation ecosystem

Robert Pieroni, director of economic development for Central Houston and an advisory board member for MassChallenge, set the scene for Houston innovation a few year ago. Houston was overlooked for the Amazon headquarters, and it was the wakeup call Houston needed.

Now, the city, with the help of organizations like Central Houston, has attracted major top 10 accelerators in the world to town and plans to house them in the same space — the Downtown Launch Pad, which is a joint venture project between Central Houston, Downtown Redevelopment Authority, The Cannon, and Amegy Bank.

The Launch Pad will occupy a few floors in the Amegy building to start. There will be coworking and event space, as well as a floor dedicated to MassChallenge and gener8tor — the two new-to-Houston accelerators.

"We'll be the only place in the United States that has co-located two top 10 accelerators," Pieroni says.

The project also is working with an incubator yet to be announced to help bring into the fold undeserved startups and entrepreneurs in Houston, and there will also be a bootcamp targeted directly at the disadvantaged within the innovation ecosystem.

From Amegy's perspective, the bank is committed to growing the building to being something unique and effective for startups, says Andy Buchmann, vice president of corporate real estate and property management at Amegy Bank.

"We are hopeful that this is only the first two floors that we have figured out, and we hope there are other three or four that come behind it as it grows into a real hub for startups in the years to come," Buchmann says.

The Cannon's new CEO has global growth on the mind

Earlier this month, The Cannon Houston brought on Jon Lambert to serve as CEO as the company plans to grow and scale. Lambert, who joined the panel, says that the Downtown Launch Pad was well timed for The Cannon as it's looking to find the optimal areas of the city to grow.

"The distribution of the city is unlike any other in terms of the pockets of where people live and work," Lambert says, adding that The Cannon has an opportunity to reach these pockets.

Looking beyond Houston — and even Texas, the company is poised for growth by taking its model to cities — nationally and even globally — that are underserved when it comes to coworking and incubation space.

"You'd be astonished at some of the people reaching out to us," Lambert says on the panel. Some of this interest, Lambert adds, is setting up The Cannon as a global entry point for international companies looking to do business in Houston.

Inclusivity is the priority

With global initiatives and with Houston being the most diverse city in America, the city's innovation ecosystem has a great responsibility to provide inclusion, and each of the panelists maintains that their organizations have that as a top priority.

The Launch Pad is being developed with this in mind, and Pieroni says it's in the perfect place to do that. Amegy Bank has long been committed to small businesses and the building's location — across the street from METRO's Downtown Transit Center — makes it so that anyone in Houston can get to the hub.

Gener8tor and MassChallenge are also committed to providing programming at no cost, which will open doors to the entire community to get involved.

"As a part of our agreement with gener8tor, the will host free lunch and learns with the community monthly," Pieroni says. "We are working with MassChallenge to make them even more frequent."

Houston startup development organizations have banded together for the third annual Houston Innovation Summit. Getty Images

Here's what events to attend each day during The Houston Innovation Summit

Where to be

For the third year, The Houston Innovation Summit is taking over the town to promote entrepreneurship and innovation within the city.

THIS begins today and runs through the weekend. Each day represents a theme — all pertinent to Houston. Impact Hub Houston has worked with other local startup development organizations to curate the programming for the week. Grace Rodriguez, CEO and executive director for Impact Hub Houston, says Houston has the innovation infrastructure by now, and now it's about execution.

"For 2019, the goal is now how do we go from inclusion to integration," Rodriguez says on a recent episode of the Houston Innovators Podcast. "I think we're at that step now of becoming more inclusive as a community."

THIS, just like last year, runs on the same week of Global Entrepreneurship Week, which is why today's programming starts with a global focus. Follow along on a global scale with #GEWecosystems.

For a complete list of THIS events (most of which are free and all over town), head to the website. Here are the events you should make sure not to miss.

Monday — Houston: We're Global

Starting strong, the first can't-miss event is the kickoff party. The free event is in the Amegy Building downtown (1801 Main Street), which is currently being transformed into The Cannon Houston's new Launch Pad. The event runs from 4 to 5:45 pm, and you can expect networking and interactive discussions on Houston's innovation ecosystem's growth and potential. Click here to register.

Tuesday: This Is Houston

While GotSpot's Female Founder Luncheon at MassChallenge is a good one to make if you can, the big event this day is Houston Exponential's 2020 Vision event. Basically an open house-style event, attendees at this free event can learn how to engage with HX and what the organization has planned for 2020. InnovationMap and Accenture are teaming up for a fireside chat about the diversity and potential in Houston. Click here to register.

Wednesday: Fresh Perspectives

The fight for technology and innovation is on. The first Houston Digital Fight Club is on Wednesday, November 20, and will feature five fights between industry experts on topics like cybersecurity, sustainable energy, primary care, and more. Audience members get to decide on a winner, and there will be tons of opportunities for networking. The event is $30 per person and will be at White Oak Music Hall. InnovationMap and Accenture are the lead sponsors. Click here to register.

If you can't make this evening event, WeWork Food Labs is cooking up a special event to discuss food innovation in Houston. Click here to register.

Thursday: The Next Generation

While the week so far has been centered around the future of Houston, Thursday focuses specifically on the next generation of people who will be powering the ecosystem. And, of course, money is essential to that equation. Join for a panel from top investor leaders at an event focused on next generation investing at HCC SouthEast Felix Fraga Academic Campus - East End. The panel itself is $5, but for $15 you can also catch two other discussions on campus that day. Click here to register.

For an early bird alternative, Mercury Fund is hosting a Female Founders breakfast at 7:30 am at their office (3737 Buffalo Speedway, Suite 1750). This one is free to attend. Click here to register.

Friday: Integrating Innovation

Friday's events all take place at The Cannon Houston (1334 Brittmoore Road), and there's a specific focus on military technology and military-affiliated entrepreneurs. The Southwest Muster Across America Tour in Houston is from 1 to 6 pm and will consist of an expo, pitch competition, expert talks, and more. The WeWork Veterans in Residence Program Powered by Bunker Labs will show off their companies, and Bunker Labs has teamed up with Ford Fund to host pitch competitions for veteran and military spouse entrepreneurs. Houston is one of seven stops for the competition, and the top two showcase pitches will win $5,000 and $3,500 from the Ford Fund to help support their businesses. Click here to register.

Following this event is Impact Hub's monthly Fuckup Night, where entrepreneurs share their stories of success, struggle, and failure. Click here to register.

Weekend: Innovation Education

The week wraps up with events focusing on education. One not to miss is on Saturday: The HCC IDEAS Pitch Competition. The competition begins at 1 pm and there is $2,500 on the line. Any HCC student is able to apply to pitch. Click here to register.

The Downtown Launch Pad will house accelerator programs MassChallenge and gener8tor and coworking space from The Cannon. Photo courtesy of Downtown Launch Pa

New innovation ‘vertical village’ announced for downtown Houston

Coming soon

The Cannon Houston, a startup incubator and coworking space, and Houston-based Amegy Bank announced a partnership to create a 17,000-square-foot innovation space in downtown.

The Downtown Launch Pad is expected to open on a few floors of the Amegy Bank building at 1801 Main St. in the spring. Along with coworking space, the new hub will house MassChallenge Texas, which had its inaugural cohort earlier this year, and gener8tor, an early acceleration program announced in last month.

Mayor Sylvester Turner announced the project at Central Houston Inc.'s annual meeting on October 24. Both the accelerators that will be in the new hub received a combined combined $4 million in economic development grants from the Downtown Redevelopment Authority to be distributed over the next five years.

"Central Houston and the Downtown Redevelopment Authority are committed to establishing Downtown Houston as a nexus for innovation and a leader in urban entrepreneurship," says Bob Eury, president of both entities, in a news release. "We've found strong, strategic partners in Amegy Bank and The Cannon, both of which are committed to fostering and sustaining a vibrant innovation culture in Houston, from startup to production."

Amegy Bank has tapped Gensler for the redesign. The 13th floor of the building will house the coworking space powered by The Cannon. This space is expected to open before the end of the year.

"We originally created The Cannon to be the missing piece in Houston's startup ecosystem," says Lawson Gow, founder and CEO of The Cannon and Cannon Ventures. Gow is the son of David Gow, owner of InnovationMap's parent company, Gow Media. "Through the Cannon Tower and The Downtown Launch Pad, we are excited to join up with Central Houston, the Downtown Redevelopment Authority and Amegy Bank to create an entire 'vertical village' of innovation—a system of floors at Amegy on Main that will provide Houston's entrepreneurs with all the programs and resources they need to thrive."

The building's 10th and 11th floors will also be a part of the Downtown Launch Pad. The 10th floor will house the two accelerators, and the 11th floor will be a dedicated event space. The lobby of the building will be a common space for all members of the Cannon Tower and will have meeting rooms, a game room, work stations, a coffee bar, and a deli.

"Amegy Bank has a long history of reinvesting in the local community and supporting Texas families and businesses," says Kelly Foreman, senior vice president and corporate real estate and facilities manager for Amegy. "Now, through our partnerships with The Cannon and The Launch Pad, we are taking our commitment to small businesses to the next level by converting a part of Amegy on Main into a hub for emerging technology and start-up companies that aligns all the players across the entrepreneurial spectrum—corporations, mentors, investors, service providers and the startups themselves. This combination of offerings and capabilities will unlock significant value for Downtown, helping to attract and retain companies from not only Houston, but from around the country."

From credit to crowdfunding, startups have more cash flow options now than ever before. Getty Images

Houston small business finance panel lays out funding options for startups

Follow the money

When it comes to raising money for your startup, there's plenty of fish in the sea, however, navigating the rough waters can be difficult.

Houston Community College put on a Small Business Summit on June 13 and gathered a group of financial professionals to represent several types of funding options, from venture capital to microlending.

Crowdfunding

The crowdfunding game has changed, says Rhian Davies, business development manager for LetsLaunch, an equity-based crowdfunding tool.

While most people think that donation-based crowdfunding — like GoFundMe or Kickstarter that give you the product or thank-you gift when you give — are the only options, that's not the case. And, investing using these platforms doesn't mean anything to you if the company sees success.

"If it makes it big, you're not going to get anything back," says Davies of these types of platforms.

But the JOBS Act in 2012 changed everything. Now, companies fundraising on crowdfunding sites can trade in equity for funds.

"Previously, investments were reserved for wealthy individuals — accredited individuals — who had a certain amount of money could invest in businesses," says Davies. "Equity crowdfunding opened that up."

With crowdfunding, you can also run other types of fundraising efforts at the same time, spreading out your options.

"It allows (the community) to invest in your business and it allows you to pass the hat and have people come on board," Davies says.

The other benefit to using the LetsLaunch platform is the team assists the startups every step of the way, from uploading a digital pitch deck onto the LetsLaunch platform and preparing paperwork to filing with the SEC.

However, one of the major challenges for startups is deciding what their funding goal is. Davies says you do have to hit a certain funding goal to be able to take that cash home, and for LetsLaunch, they look for that figure to be $10,000 minimum. Anything less than that isn't worth it — from both the LetsLaunch and the startup's perspective. The maximum value for equity crowdfunding is capped at just over $1 million — per the SEC.

Venture capital

VC funding is where most people's minds go when it comes to startup funding. And this type of funding is in an evolution phase too, says Remington Tonar, managing director at The Cannon Houston. While traditional VCs want a three-times return in five to seven years, some firms have more on their minds then just the money.

"There's a new phenomenon in venture where a lot of early stage investors and angel investors are looking at social impact investing," Tonar says. "They want to invest in women- or minority-owned businesses or companies that have a sustainability or social impact component to them. For those investors, the return demands are much more flexible."

Not only are they more flexible on returns, but VCs want more hands-on roles at the companies they invest in. Tonar says venture capitalists don't want to give passive capital.

Another way VCs differ from other types of funding is they are looking for something different in the companies they invest in — they want the next big thing.

"What venture capitalists really look for is disruptive business that are creating value in news ways," Tonar says.

And investments can be industry agnostic — VCs aren't reserved to just tech and computing industries.

"Most people would not have thought the hotel industry was a great industry for venture capital until Airbnb came along," says Tonar. "Most people would not have thought that taxis were a great industry for venture capital until Uber came along."

Fundraising through VC firms is a very personal process — they are investing in you, the founder, just as much as they are investing in the company or idea, Tonar says. You can have a horrible credit history or have declared bankrupt in the past, and while they will find that out, it's not a dealbreaker like it would be for a bank or traditional loan process.

"But if the investor feels that the idea has value and can create value and meets their risk profile, they will look at your startup and go through their due diligence process."

Microlending

A new trend in funding options is microlending — a type of loan process that caps out at $50,000. Lisa Riley is Houston market president for LiftFund, one of the largest microlenders in the United States.

Since the amount is smaller, the risk is smaller too. The type of customer LiftFund looks for is the person or company that's been denied by other banks.

"It's not always because of something negative with the customer," Riley says. "There are certain industries where it's very difficult to get finance right now."

Just like the trend in VCs, these types of lenders want to be hands on too to help secure success and a return.

"The last thing we want to be is another monthly obligation or a debt — the noose around someone's neck suffocating their small business," Riley says. "We want to make sure and walk with you and hold your hand as long as you'll hold mine so that when we give you your loan it's the right amount for your business and the right time."

Traditional loans and factoring

Of course, conventional loans is still an option, as is factoring — the process in which a business sells its accounts receivables to a third-party entity, called a factor.

Peter Ellen, senior vice president at Amegy Bank, explains the process as being pretty traditional. His bank wants to see a secure and profitable business on trach for growth.

"Typically, we look for a business that's been established for two years, that has generated a profit, and can show a clear path of repayment," Ellen says.

Again, like other funding options, Ellen says a relationship with the company is important.

"That's really what we look to do, is to form a relationship at an early stage with a company, really understand what they do, and help assist in the growth and success of their company," he says.

SBA loans

SBA loans are another lending option for startups to consider, Aziz Rahim, senior vice president at Wallis Bank, explains.

Different from a traditional loan process, SBA loans are guaranteed by the Small Business Association up to 85 percent, which lowers the risk for then lending partner.

Other benefits to SBA loans are lower down payments, generous term lengths, and caps on interest rates.

"The good thing about SBA loans compared to conventional loans is SBA loans do not balloon," Rahim says.

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East Houston development launches smart city initiative with new hire

smart city

A 4,200-acre master-planned development that's rising on the east side of town has created a new role within their executive suite to drive innovation and a new smart city initiative.

Houston-based real estate developer, McCord, has hired Nick Cardwell as vice president of digital innovation. In the newly created role, Cardwell will be tasked with bringing data-driven solutions, digital transformation, and other smart city innovation to Generation Park.

"Sensor technology, machine learning, and big data capabilities have exploded in the last decade and are rapidly outpacing the built world," says Ryan McCord, president of McCord, in a press release. "Bolting this digital future onto aging cities is no easy task. With Generation Park, we have a once-in-a-lifetime opportunity to start from the beginning and rapidly prove up hardware and software technology solutions, at a massive scale."

Both the size of the development — which is larger than Google's Sidewalk Labs project in Canada and Toyota's Woven City in Japan, according to the release — and location are what provides Generation Park with this opportunity for smart city technology.

"Generation Park, while being physically many times larger than most smart city projects, also benefits from being located in a more physically, socially, and economically diverse test bed of a notoriously low-regulation part of the United States — Houston, Texas," McCord continues.

As the development is currently still being worked on, McCord's current focus right now is tapping into data to drive project and design decisions.

Cardwell has a background in technology and was previously overseeing operations and engineering at Austin-based construction software company, Bractlet.

"McCord's vision for Generation Park is the future of commercial development, pushing digital innovation into the forefront and leveraging cutting-edge technologies throughout their portfolio. I am beyond thrilled to join the McCord team and help make that vision a reality," says Cardwell, in the release. "Through the use of experiences, data, and collaborations, we will accelerate learnings and, in turn, advance resources that will truly improve people's lives."

Nick Cardwell has been hired as vice president of digital innovation at McCord. Photo courtesy of McCord

Houston lab develops game-changing supplement for cell heath

miracle worker

Rajan Shah, an MIT-trained chemical engineer, brought his patented manufacturing process 20 years in the making and from an ocean away to Houston with one goal in mind: to take what he calls the body's "master antioxidant" to market.

Known as Continual G, Shah's product packs the supplement known as Glyteine into a powder form that when mixed with water can be consumed as a citrus-flavored beverage. Glyteine is known to increase cellular glutathione levels in the body, which can boost immunity, support sports activity and recovery, and address a variety of oxidative stressors that impact the body and brain as humans age.

Shah and a team of four at his INID Research Lab in Cypress are the only company in the world producing the dipeptide in this accessible format.

"The fact that the only way to increase cellular glutathione is with Glyteine has been known for almost 40 years," Shah says. "The problem is how to make it in a way which becomes cost effective so that it can be sold and people can afford to buy it."

It was this problem that Shah and a team at the University of New South Wales in Australia spent about 13 years tackling, as the creation the Glyteine — which requires the rare catalyzation of enzymes — would leave researchers with expensive byproduct that would result in high costs for little product. But in 2005, the university was awarded a patent for the manufacturing process the group developed that essentially eliminated waste. Instead, they were able to recycle the by product to create even more of the powerful protein.

"Only when we could solve these problems did it become affordable. Then you are using your raw materials to produce your product and nothing else. We were able to recycle," Shah explains. "That is what took the time and that is what made it affordable cost wise."

Next the group spent years scaling the production of the compound and learning how to best deploy it to a customer base. Initially, the group hoped to simply sell the protein to large supplement companies, such as GNC. But when they were met with reservations due to the product's newness, they pivoted.

Houston's large pool of chemical manufacturing workers and easy access to water (a key ingredient in Continual G's production) attracted the Aussie-based scientist. And in 2017, Shah took the practices from down under to the Bayou City just days before Hurricane Harvey hit.

Today the group is producing about a quarter of a million packets of Continual G each month with the help of an outsourced, Texas-based manufacturer who assists the group of engineers in transposing the compound into a drinkable powder. They operate out of a state-of-the-art, 14,000-square-foot manufacturing facility and hope to scale up again.

"Everyone involved with this endeavor has a heartfelt commitment," Shah adds in a statement. "Glyteine has profound implications for human health. That alone has made it well worth the effort to overcome every challenge we have faced and continue to face."

Energy and the election: What the 2020 outcome means for the future of oil and gas

guest column

The United States Presidential election is at our doorstep. The fossil fuel industry is under significant pressure and the outcome of the election could impact the speed at which exploration and production is impacted. This pressure is financial in nature, but also is operational, technological and all wrapped in physics. A mere 12 to 18 months ago, environmental, social and governance influences and overlays on E&P began and are only accelerating.

My company, Riverbend Oil and Gas, is beginning to see the industry rebound from a significant downturn in revenues, activity, and confidence in 2020 due to the impacts of COVID-19 and the OPEC price war earlier this year. The industry is battling with headwinds, including, lack of access to debt/equity capital, transaction valuations, commodity prices, shale well spacing, and other issues, all impairing market conditions.

At present, there is little to no lubrication in the system. With most talking about an oil and gas market cycle that is driven by supply and demand fundamentals over previous decades, now there is more discussion of a contrarian view of those confident of a demand recovery for oil and gas.

Since the start of energy private equity, funds were raised by general partners to support the small cap E&P space, in the late '80s, private equity became a significant participant in the oil and gas upstream space. Private equity firms became great in number as institutions desired exposure to a growing segment of the market outside of merely investing in the oil and gas public equities. This role, 30 to 35 years later, remains essential, but is currently stifled with thoughts of a declining fossil fuel world and with energy representing only about 2 percent of the S&P 500.

Hydrocarbon outlook

Looming headwinds in the fossil fuel industry include The Green New Deal, an accelerating consciousness of the carbon footprint, the Paris Climate Accord, ESG importance, and the growth of renewables. Additionally, the advent of electric vehicles presents a significant new entrant that is causing a substantial threat to oil's monopoly on the transportation sector. A collision of possible futures exists. Currently, around 1 billion vehicles today are using around 30 percent of the world's oil supply with an estimate of 4 million electric vehicles on the roads globally. Some forecasters predict around 400 million electric vehicles in 2040, decreasing oil supply demand by an estimated 6 percent.

These forecasts of human mobility are driven by the nature of human ambition and worldwide population growth. Africa, China, and India are expected to grow significantly through 2100. Moreover, all persons worldwide strive for a better life for themselves and their families — energy drives these ambitions.

Meanwhile, the capital markets for public fossil fuel companies has declined by over 90 percent from 2016 to 2019 with a continued dismal outcome year-to-date in 2020. The lack of cash flow and capital markets will likely drive less U.S. and non-nationalized produced oil and gas volumes and fewer sustainable companies. Many confident analysts predict a looming oil supply shortage in 2021 driven by these factors along with a federal lands development ban and the possible slowdown of fracking. However, others predict that peak oil demand is now and the need for fossil fuels has already reached a peak.

Assessing the candidates

The results of the election are anticipated to have significantly differing implications (should campaigning be a real signal) for the oil and gas industry. While a Donald Trump win would largely represent a status quo for the environment, a Joe Biden triumph could drive towards changes. Implications are wide ranging across the equity, credit and commodities market energy value chain.

It is important to evaluate who will have control of the House and Senate to pass said legislation. The House is expected to remain with the Democrats, comfortably winning at least 224 of the 435 seats. Recent polls have pointed toward a competitive Senate election cycle. The Republicans currently have a 53-47 Senate majority, but a Democrat favored majority of 51-49 is currently predicted.

The next question is whether the filibuster would be eliminated to push legislation through without a super majority needed; meaning Democrats could drive approvals with a 50-50 tie and Kamala Harris's vote. Although polls are pointing toward a "blue wave" for the Democrats, certain moderate democrats in oil and gas states such as Colorado, New Mexico and Pennsylvania may be swayed against major regulatory or legislative threats to oil and gas exploration and production. Additionally, elected authorities in anticipated Republican states such as Texas, Oklahoma, North Dakota, Utah, and Ohio who are home to industry trade groups and fossil fuel companies will play a significant role.

The Biden Administration has discussed several energy-related policies. These include support for climate-friendly legislation, a ban on federal lands and water permits that represented 21 percent of U.S. oil output in 2019, and an increased investment of $2 trillion over four years in clean energy technologies. To put this investment into perspective, total global energy investment from 2017 to 2019 averaged $2 trillion, and Biden's plan would add $500 billion per year. Biden would target roughly two thirds of U.S. carbon emissions focusing on transportation (40 percent) and electricity production (31 percent).

Broadly, the goal is a nationwide carbon reduction to achieve net-zero emission no later than 2050 and transition to a carbon pollution-free power sector by 2035. In order to achieve the 2050 net zero emissions goal, the world requires 2020 COVID-19 sized reductions (8 percent) every other year for the next 25 years. Throughout this energy transition, energy prices are likely to increase, and as a result, the pace of the energy transition will likely reflect the balance of societal demand to reduce fossil fuel usage and the costs (economic, convenience, speed, satisfaction) of doing so.

Renewables and hydrocarbons

In 2019, the U.S. accounted for 15 percent of global CO2 emissions (5,130 MM metric tons of CO2), down 873 MM metric tons since the U.S. peaked in 2007. The large decrease can be attributed to coal-to-gas switching, while wind generation and solar power installations also aided the decline. From 2018 to 2019 alone, coal-to-gas switching decreased U.S. emissions by 140 MM metric tons, driving the largest decrease for the year. While shifting from one end of the carbon-emitting energy spectrum to another, it is imperative to balance costs, plausibility and expectations.

Hydrocarbons can be stored for less than $1 per barrel of oil equivalent, or BOE, while renewables cost $200 per BOE. Total U.S. renewable storage capabilities can provide two hours of national electricity demand which is stored in the utility-scale batteries on the grid and in the about 1 million electric vehicles on U.S. roads. Storage, physics and costs are major drivers for a hydrocarbon partnership as the U.S. transitions to a less carbon-heavy source of fuel. While costs of wind and solar have been driven down by around 70 percent and 89 percent, respectively since 2009, the Betz Limit and Shockley-Queisser Limit do have a governor on further improvements of the current technology and materials. Similarly, subsurface oil and gas reservoirs have similar boundary conditions of physics involving ultimate recovery of resources through natural production, fracking and/or enhanced recovery techniques.

The goal of providing low cost, reliable energy to consumers, enhancing lives and providing better futures can be reached through utilizing hydrocarbon technologies in tandem with renewable sources. A vast amount of investment, research and development is still required in the renewable world, including battery storage, solar/wind efficiency, electric grid expansion and electric vehicle technology/charging stations.

According to the 2020 IEA Energy Outlook, oil and gas represented 55 percent of global energy demand in 2019 and the agency predicts that oil and gas will comprise 46 percent to 54 percent of the energy stack in 2040. This is a relatively flat market share. Coal, on the other hand, cedes market share to renewables and nuclear power, decreasing from 30 percent to 10 percent. While renewables are vital to reaching the U.S. goals of net-zero emissions, hydrocarbons are essential in backstopping U.S. energy needs and ambitions throughout this energy transition. Additionally, on a global scale, cheaply sourced and stored hydrocarbons are essential for emerging economies to advance through existing carbon-emitting infrastructure, eventually leading to renewable alternatives and global carbon reduction.

We remain encouraged for the next decade of growth and performance as we look to identify unique opportunities in the space. In a dynamic oil and gas market, Riverbend has a high degree of confidence to sustain and thrive due to our culture, performance-based team and systems. Riverbend is anchored by vigorous technical subsurface reserve assessments as well as land, accounting and commercial diligence. Additionally, Riverbend, as an energy company, is investing in the alternatives segment, concentrating on materials and services in the wind, solar and battery portions of the value chain. In a world full of human ambition, we see a need for all energy to support undeveloped nations and economies to access the opportunity of the American Dream, pursuing elimination of a "have" and "have not" world.

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Randy Newcomer is president and CEO of Houston-based Riverbend Oil and Gas, a private equity investment group specializing in the energy industry.