Q: What is Xpansiv?
(WS): Xpansiv is the Amazon of commodities—all commodities. We’re the digital disruptor of a multi-trillion dollar global marketplace. Commodities are more than natural gas and palm oil and agriculture; they’re also the cumulative impact on climate, water and land use, and myriad other factors that, until now, were not factored into their value. The entire sector is past due for an overhaul based on science and data. We’re making commodities intelligent in order to transform markets from the source, using a wealth of existing data that offers incredible insight and value.
The chart below reveals how incumbents in every market have struggled to maintain market share—or even survive. Technology has enabled new, data-driven business models that will continue to crush incumbents that don’t evolve. Just look at Amazon. In the retail sector alone, Amazon continues to conquer all incumbents. Andas a digital platform, Amazon continues to expand into other markets; it’s competing with Netflix, iTunes, Google, and many others. It’s even taking on McKesson for pharmaceutical distribution! How can Amazon pull this off?Because it’s built on the premise that all physical markets must eventually go digital. McKesson’s corporate DNA is physical pharma distribution. Amazon’s DNA is a digital file. Amazon is set up to win because all pharma will eventually be a digital file in the palm of every consumer. In that digital transition, Amazon ingested, analyzed, and leveraged all relevant data, and will continue to do so. Xpansiv is positioned to do the same thing for global commodities.
We built our platform on the premise that a barrel of oil yesterday is a digital file today, and we call that revolutionary file Digital Feedstock™. Like Amazon, our corporate DNA is built on a comprehensive digital file format, loaded with data. We’re taking a digital fingerprint of every molecule of every commodity to create Intelligent Commodities™. Our goal is the digitization of the entire commodities sector.
Q: What do you mean when you say, “It’s all about the data”?
(JM): Like Amazon, Xpansiv embraces the fact that data is the new oil. We believe commodity-production data is the new Permian Basin, and 2018 is the new 2006. The bulk of Permian Basin oil and gas reserves were not cost effective to extract prior to the introduction of hydraulic fracturing and horizontal drilling technologies that developed around 2006. Similarly, raw production data has not been cost effective to extract, refine, and deliver to market, prior to recent advances in information technology. If we use another analog, commodity-production data is the equivalent of gasoline at the turn of the 20th century—a mere byproduct of production. The data that is currently generated in the process of producing raw materials contains a wealth of information about the internal constituents (higher value components) and external risk factors (GHG intensity, water intensity, safety, compliance, certifications, etc.). This information enables a more intelligent assessment and valuation of global commodities in near real time.
This is a visual representation of the wealth of information about natural gas recorded in a Digital Feedstock file—the basis for Intelligent Commodities.
Xpansiv combines emerging technologies with leading data science, extensive knowledge of commodity production, and a deep understanding of market behaviors to capture and transform commodity-production data into Digital Feedstock. This new file format fundamentally transforms commodity markets through data insight, product differentiation, and increased liquidity. Essentially, Digital Feedstock is to commodities what the MP3 was to music, or the RSA was to cyber security.
Q: How did Xpansiv get started?
(JM): Our company is the result of a three-year collaboration between global experts in data science, quantitative standards, distributed ledger technology (DLT), enterprise software, and commodity markets (trade shops and exchanges). Common among Xpansiv collaborators are two things: a “Systems Approach” to problem solving, and a common belief that the next generation of business solutions—regardless of sector—will be science-based and data-driven. Since late 2014, we’ve been obsessed with the idea that commodity markets are functioning with incomplete information. Our platform simply uses data science and technology to help the market better understand itself. We’re a bridge between commodity production systems and global markets, harnessing the information that matters to create Intelligent Commodities.
Before writing a single line of code, we spent more than two years aggregating and integrating information from producers, exchanges, traders, buyers, industry associations, technologists, policy makers, NGO’s, and other participants in order to define a technology architecture that enables the scalable digitization of commodities. In the process, we published two peer reviewed papers, one outlining the original concept and the other defining the basis for the Xpansiv architecture. In mid-2017, we proved the concept technologically, successfully refining raw production data into Digital Feedstock—a unique, immutable record and transactable title for every unit of production—from more than 4,000 natural gas wells. We have since witnessed universal interest in our platform in target markets: natural gas and renewable fuels. Simultaneously, we have built a world-class team and board of directors, and recently closed a $10M Strategic Series A Preferred Investment Round. The momentum has been incredible, and we’re just getting started.
Q: Will, why did you invest in Xpansiv, and where do you see the company headed?
(WS): First off, it’s a global, multi-trillion dollar analog market ripe for disruption. If you look across industries—like advertising, retail, transportation, communication, banking, and manufacturing—they’re all being transformed from traditional business environments, supported by technology, to new, multi-sided business platforms driven by digitization. Nowhere is the impact of digitization more apparent than in commodities. As Joe mentioned, there is a tremendous amount of IP, trade secrets, and experience being applied here at Xpansiv.
As an early-stage investor, I’m always looking for entrepreneurs and proven teams with domain expertise, which only comes with deep industry insight, a track record of success (or failure, at times) in that industry, a history of building successful products/solutions, industry-specific innovations, and constant self-education. Domain expertise separates the strong from the weak in any industry because it’s fundamental to survival and involves constant evolution and adaptation. It requires one to think, learn, work, and evolve. The digital transformation taking place in the global commodities market creates an enormous opportunity for entrepreneurs like Joe and his team, who have deep domain expertise and know how to innovate, adapt, and scale a business in a cost-effective manner.
Personally, I have been impressed with both the speed and strategic base of global investors who have participated in the $10M Xpansiv Series A capital round. BP Ventures led the Series A with participation by S&P Global, Avista Energy, and Energy Innovation Capital. These investors combined have access to nearly every commodity segment on the planet, which is just tremendous for Xpansiv.
In my 25 years as a venture capitalist, this is the first time I’ve agreed to be Executive Chairman. I’m honored to be taking on this role at Xpansiv, and I’m leveraging my knowledge, experience, and global contacts for the company. I’m also convinced my investing in this digital platform, and assisting in launching it commercially, will change the world. It’s inspiring to take on this challenge to create a better future for us all.
Q: Joe, what are some of the market hurdles that Xpansiv has faced?
(JM): One major hurdle—not just for Xpansiv, but for the entire global commodity industry—is that when any industry is digitized, you have to leave behind traditional ways of thinking and implementing. You have to embrace the fact that it’s all about survival, so you must evolve quickly and adapt. The intelligence, speed, and efficiency of digitization flips traditional business models upside down, and provides the opportunity to create new business models. At Xpansiv, we embrace Darwinism.
I’m often challenged in discussions about commodities when someone asks me if the oil industry will pay Xpansiv three cents a barrel. Whether it’s three cents or five cents or one cent—that’s an old-world question. The new-world question is What is the cost to Xpansiv to produce the data? The answer is the same as the cost of publishing a song on iTunes, which is close to nothing today, compared to the cost of manufacturing and distributing a CD yesterday. What Spotify is to the music industry is exactly what Xpansiv is to the commodity industry.
Q: Will, can you share your view on the progress Xpansiv has made to date?
(WS): As an early-stage investor, I firmly believe that people are the most valuable asset in any company. I do not simply invest in ideas—I invest in brilliant, capable people who can implement new ideas. Frankly, ideas are cheap; real value is in the execution. The co-founder of another one of my portfolio companies, Ted Tanner, Jr., captured it best when he said, “We invent the future by executing on brilliant ideas.” My investment decisions have always been wrapped around that quote.
ABOUT XPANSIV Xpansiv is a team of global experts and industry leaders dedicated to improving the way commodities are produced, managed, and traded worldwide. By extracting and refining real-time production data into Digital Feedstock, Xpansiv is creating a common system of intelligence for the commodity sector to better quantify risk, drive liquidity, and enable the differentiation of products. Xpansiv.com
Contact: Rob Dalton, Xpansiv VP Marketing & Communications—rdalton@xpansiv.com