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Ian Burgess, left, and Nouman Ahmad, co-founders of Validere, at the company's office in Toronto on March 11.Galit Rodan/The Globe and Mail

Ian Burgess wanted to build a business around technology he co-invented while earning his PhD in applied physics at Harvard University: a colour-changing strip that identified the contents of unknown liquids based on their surface tension.

His Toronto startup Validere Technologies Inc. worked with Chanel to uncover knockoffs of its No. 5 perfume, did a pilot project with a sportswear giant to make words appear on shoes and shirts when they got wet, and explored using the technology to identify hazardous waste and detect urinary infections in adult diapers.

None of those efforts interested potential investors. When Mr. Burgess and co-founder Nouman Ahmad went through the Creative Destruction Lab accelerator six year ago, its mentors loved the technology and team but hated their ideas. Their advice: Pick one big market. The pair found it when CDL mentor Chen Fong flew them to Calgary, thinking energy companies would like to know the exact contents of their barrels and pipelines. He was right. And Validere didn’t even need the Harvard technology to do it.

“We have always pledged loyalty to solving the problem,” not to the underlying technology, said Mr. Burgess, Validere president and chief technology officer. “At some point we realized we could make a successful business just making sense of what [customers had] already have built.”

Validere is announcing Tuesday it has raised US$43-million from Swiss commodities trader Mercuria Energy Group Ltd. and funds and accounts managed by investment giant BlackRock Inc. Other backers include Nova Fleet, Pioneer Fund, NGIF Cleantech Ventures and past investors Greylock Partners and Wing VC.

Validere, now a pure software and analytics provider, counts 45 energy companies – including Canada’s Vermilion Energy Inc. and two supermajor producers – as clients. It monitors the contents of more than six million barrels of oil daily as it positions itself to become a leading data provider and “system of record” for energy products through the global supply chain.

Validere has also partnered with Xpansiv, a marketplace for renewable energy products, including carbon offsets, to validate the attributes of what is bought and sold on the platform. Revenue is now in the millions of dollars and set to grow by 300 per cent in 2022 for the third year, said Mr. Ahmad, the chief executive officer.

“We think Validere represents so much of what is important” as the industry moves to cut its carbon footprint, said Brian Falik, chief investment officer with Mercuria. Underlying those efforts “is data, and having a good, set provenance about that data to be able to make those decisions and communicate your changes and reductions and validate and authenticate that [requires] having a partner that you trust. Validere is that.”

Validere’s move into oil and gas originated from an early pilot project after the co-founders met at a networking event in Toronto in 2014. The U.S. Department of Transportation asked them to use their Harvard-licensed technology to detect gas content and vapour pressure in rail cars that carried crude oil, after determining many tankers were ill-suited to safely carry their contents, a finding stemming from the 2013 Lac-Mégantic, Que., disaster.

From that contract and meetings with Mr. Fong’s oil patch contacts, Mr. Ahmad said he and Mr. Burgess realized there was a big problem: “Over $40-trillion of physical oil and gas changes hands every year and these guys are flying blind. They don’t have a good sense of what they are buying, selling or mixing along the way.”

As the pair travelled to oil and gas operations across Alberta, they looked to deploy their Harvard technology widely to measure product that was moving in and out. They soon realized these operations didn’t need another sensor – they had plenty – but rather to make sense of the data they already collected, which was often recorded manually and stayed on-site. Industry executives told them if they could provide a real-time, intelligent data stream about the products they handled, they would pay handsomely for that, said Mr. Fong, an early investor.

So Validere dropped plans to deploy its technology and instead built an internet-based platform that could upload information from existing sensors at energy operations to the cloud, clean up the data, and present it to central operators and decision makers telling them the contents of what passed through the system.

That opened up revenue-generating opportunities, such as enabling buyers and sellers throughout the supply chain to pinpoint which batches of product had lower-emissions characteristics – product that a growing number of players are willing to pay up for. Validere, whose staff is split between Toronto, Calgary and Texas, says some customers have cut operating costs or overpayment for products by hundreds of thousands of dollars monthly.

“I think they can dominate the environmental, social and governance component” of the industry, Mr. Fong said. “If they can create a platform that everybody uses, they’re golden. They’re still very early but they have a clear advantage.”

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