Thread by @FracSlap

A NASA engineer lost Silicon Valley $500 million while searching for oil with Soviet fighter jets.

Here's the wild story you have probably never heard 🧵

Erlend Olson spent 14 years working at the NASA Jet Propulsion Laboratory before cofounding his first company in 1998.

Pivotal Technologies made chips for small electronics and in the dot-com era, they were able to sell out for $605 million after two short years.

After selling, Olson got back together with a couple of his JPL buddies to tinker around with some tech.

Using satellite data and remote-sensing technology, they had one mission:

Find subsurface water.

While testing the tech, the team became frustrated because they kept encountering oilfields instead of water.

But as the discovery of oil kept occurring, they realized something:

There were no pumpjacks — oil companies weren't producing these fields.

Olson then starts studying the oil and gas industry to learn everything he can.

That's when Terralliance was born.

He puts up his own capital to fund the company and spends years developing a model to predict oil trends.

With the tech ready to go, Olson locked down $45 million from Kleiner Perkins and Goldman Sachs to start finding oil in 2004.

Through those firms, he was introduced to oil executive and founder of Newfield Exploration, Joe Foster.

Foster thought it was too good to be true, but took a meeting with Olson.

"He sort of knocked my socks off. It didn't make sense to me that you could acquire that kind of data with a satellite. But I left the meeting saying, 'Shit, I'd better think about this." - Joe Foster

Foster joined Terralliance's board in 2004.

The company then set out to drill some test wells with relative success in oil-rich locations such as Oklahoma and Alberta.

This set the stage for the company to raise an additional $248 million in 2006 to pursue bigger projects.

Olson claimed to have exploration rights across 4 different continents including 8 African countries.

But after a couple of dry holes and big losses, Olson went back to the drawing board.

He didn't want to rely on purchasing satellite data any longer and wanted Terralliance to produce its own maps.

To do this, they needed survey equipment.

So Olson spent $22 million buying two surplus Sukhoi SU-27 fighter jets from the Ukrainian government.

"It was like a NASA platform but better. I got the blue-collar version of the U2." - Erlend Olson

Despite the company's claim that they had 500 million acres in "oily places" under its control, more than Exxon Mobil, the company hit financial trouble in 2007.

With Olson at the helm, a $150 million bridge loan was secured from Passport Capital.

Soon, Terralliance's spending became a topic of focus.

Howard Selzer, formerly at Enron, was hired as Chief Accounting Officer.

Accounting for travel expenses was weak.

It was discovered that Olson the company $4.4 million in travel expenses

Auditors also found potentially illegal payments to government representatives in the Congo.

At this point, the board had enough of Olson and demoted him to Chief Scientist.

In 2008, with the company in turmoil and oil falling to $60 a barrel, interest from investors faded away.

Olson was fired and Kleiner Perkins attempted to salvage their biggest investment to date.

They raised an additional $54 million in 2009 and famed partner, John Doerr, took a more active role.

But it wasn't enough.

The wildcattin dreams of Terralliance were over.

It's still unknown if the technology was valid.

But people believed.

Let this be a lesson for venture capitalists moving into the energy space.