This article by Andrea Leinfelder first appeared in the Houston Chronicle on September 3, 2016. Photo Credit: Jon Shapley.
Some lost energy jobs, others saw opportunities, but Houston’s newest entrepreneurs know the value of hard work as they take control of their futures.
Time to take a risk
Selling drill pipe was never his passion, and Billy Gibbons was reluctant to seek another energy job after his lay off. He wanted to enjoy his work and make his children proud.
So, the Marine Corps veteran took a risk he probably wouldn’t have taken before those steady paychecks stopped. He started a company with a former colleague and Army veteran, Mike Hlozek. Their company, Veterans MFG, creates bulletproof vests to protect law enforcement officers and first responders. The titanium core plates make them lightweight and durable.
“It really is the American dream. We picked something we like and that we thought was important, that we think has value to society.”Billy Gibbons of Veterans MFG
With unemployment a growing concern in this oil downturn, many Houstonians are reinventing themselves as entrepreneurs. Some, like Gibbons, are leaving the boom-bust industry to start unrelated companies. Others are capitalizing on years of experience to develop new energy-related products. Many are going the consultant route to market their skills, possibly biding their time until hiring picks back up.
“There’s a lot of people who have given up the golden handcuffs,” said Walter Ulrich, president and CEO of the Houston Technology Center.
Thus far in 2016, Houston-area lenders have issued fewer Small Business Administration-guaranteed loans to energy-related companies than during the same period in 2015. Overall, SBA-backed lending is up locally.
- 2016, year to date: About $4.5 million has gone to energy loans.
- 2015, same period: $11.5 million went to energy companies.
Source: U.S. Small Business Administration, Houston district
“It’s a little bit terrifying,” he said. “I’ll be perfectly honest.”
But it feels good telling his children that “Daddy protects police officers.” One day, he’d like to pass the business to them.
This entrepreneurial burst has followed past oil busts, said Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston C.T. Bauer College of Business.
There’s an initial surge in self-employment, and a number of the new companies will catch on. Income from self-employed individuals will have a noticeable increase a few years later. More income means more jobs, and employees will buy homes, pay property taxes and go shopping.
The effect is similar to a forest fire leaving behind seeds for its own regeneration. “It’s an important piece of the healing process,” Gilmer said.
A business of opportunity
Still, the majority of entrepreneurs in Houston and Texas are starting businesses out of opportunity rather than necessity.
The 2016 Kauffman Index of Startup Activity found that 79.45 percent of new entrepreneurs in the Houston area and 80.95 percent in Texas started a business out of opportunity.
The report defines opportunity entrepreneurs as people who weren’t unemployed before starting a company.
“Entrepreneurs who were previously unemployed seem to be more likely to start businesses with lower growth potential, out of necessity,” the report reads.
In the energy sector locally, John “JR” Reale, co-founder and managing director of the software-focused, co-working accelerator Station Houston, says the majority of people he sees creating startups quit their jobs voluntarily.
Pierre Jean Daniel is an exception. After layoffs in September 2015, he used his severance package to co-found Antaeus Technologies.
“I had the feeling that the moment was right,” he said. “I had the right team with me, and I was in the right financial position.”
Daniel sold software for a large oil and gas company, but he believed energy companies needed better software to use big analytic data. Antaeus Technologies is developing a cloud-based platform for energy companies. Customers can centralize their data and then process it with calculations from different sources by using a Web browser that doesn’t require installing software on a computer
Station Houston has helped several entrepreneurs with the business aspects of building a startup.
“The world of startups and the world of investors, it’s a different world for me”Pierre Jean Daniel, Antaeus Technologies
At the Houston Technology Center, Ulrich said many of its new innovators weren’t previously willing to give up well-paying jobs.
“It’s usually been something they’ve been thinking about, something on the back burner,” said Nick Tillmann, director of energy acceleration at the Houston Technology Center.
Losing those jobs gave them a push, and often a hefty severance package. Ulrich believes they will create meaningful technology to make the energy industry cleaner and more efficient.
It will also keep talent in Houston, Tillmann said.
The Houston Technology Center added nine new companies to its incubator or accelerator programs in July, to a record 75 clients. That includes talent that wasn’t available 18 months ago.
Other laid-off energy workers are flocking to the Small Business Administration’s webinars and seminars. Houston district director, Tim Jeffcoat, noticed an increase over the past six to nine months. He says many of them want to avoid the industry’s ups and downs.
Those who change industries often bring one crucial skill from their time in oil and gas: The ability to work hard, long hours.
“If you’re going to work that hard and that long, you might as well do it in your own business,” Jeffcoat said.
Nicole Derrick agrees, she was used to working long hours in human resources for an energy company. After the weird experience of laying herself off, she now works even longer hours preparing for the opening of her bridal boutique. It feels good being her own boss.
“I could have my future in someone else’s hands or my own,” she said.
Olivia’s Bridal House is will open in the energy corridor in October. She thought of the idea for the company while shopping for her own wedding dress. She noticed she couldn’t try on the same variety as smaller brides. Her boutique will specialize in helping curvy and plus-sized brides, though it will accommodate smaller brides, too.
“I’m very excited, but I’m also very nervous at the same time because it has to work,” she said.
The gloomy hiring outlook has prompted some Houstonians to start consulting companies. Entrepreneur, Denise Sanders, for instance, feels corporations will be more open to hiring contract workers than full-time employees.
She originally opened Sanders Consulting in 2009, but was recruited by a client. Now, she’s reopened the consulting company to help companies improve their business processes, technology, financial processes, etc.
Braulio Perdigao, chairman for the Society of Oil and Gas Entrepreneurs, said consulting often is a quicker road to entrepreneurship than developing new technology. The majority of attendees at the organization’s last meeting were going into consulting, calling it the “path of least resistance.” Consultants are usually hired back first when the market rebounds, he added.
Perdigao also owns Petrolessons, a crowd-sourced training website with online videos created by and for oil and gas workers. Professors get paid each time their lesson is sold, and they could meet clients for their consulting companies. Perdigao has seen a recent surge in people creating educational videos for the site.
Online communities and mentoring
Katie Mehnert likewise found opportunity in the oil price crash. She took a severance package and in March 2015 officially launched Pink Petro to connect and develop women in energy. The website provides social networking and learning and development opportunities. Mehnert wants to help the industry attract and retain women.
She said 40 percent of the members surveyed on Pink Petro have met new people or found new job opportunities. She’s working to create an official recruitment tool.
During a recent Pink Petro webinar, April Sharr discussed the importance of mentoring. Sharr launched MentHER.me a few weeks ago to help companies create mentoring programs to develop talent, particularly their female talent.
She started the company after her lay off in November. She was seven or eight months pregnant and her family’s sole earner.
After using up maternity leave, vacation time, severance package and bonus, Sharr finally collected unemployment, she said. She created MentHER.me both out of necessity and opportunity.
“You need to put yourself out there and take risks to have successes”April Sharr, MentHER.me