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Expert: How recent inflation legislation could affect Texas energy startups, investors

Only time will tell, but this expert believes the Inflation Reduction Act of 2022 will be a boon to energy tech startups in Texas. Photo via Getty Images

The recently passed Inflation Reduction Act of 2022 includes $369 billion in investment in climate and energy policies, the largest investment in United States history to address climate change. The IRA could be a boon to Texas startups involved in clean energy, clean manufacturing and clean innovation.

Government policy and funding are critical to supporting the research and development for new technologies, which solve complex challenges and require significant upfront and long-term commitments of investment. Early government investment gives private investors more incentive to invest in the later commercialization and scaling of these businesses, and has a multiplier effect in accelerating the development, commercialization, and deployment of new technologies in the time needed in the market to capitalize on energy business opportunities and achieve climate goals.

The IRA’s biggest impact on climate tech businesses is through tax credits and direct investment. The IRA’s expanded tax credits will make it easier to fund and build projects, help reduce cost of construction, and help make renewable energy projects more competitive, encourage more funding and building of new projects, and bring new jobs and economic development. The IRA’s direct investments allow for companies developing new technologies to obtain grants and loans that help them develop their solutions while not diluting their investors, helping them build more value in their businesses and making them more attractive for later investment.

Texas is well positioned to be an energy transition and clean energy leader and beneficiary of the IRA. The state is home to major energy companies, and their technical expertise, know-how and experience in energy, and energy technology is unparalleled. There is huge momentum in innovation in energy transition and energy tech, and there is great research coming out of university and corporate R&D programs. For example, Texas is home to more than 20 energy-focused research and development centers and dozens of energy tech companies. And Texas is already the largest producer of wind power in the U.S.

Texas startups across industries were already attracting massive investment before the IRA became law. According to Pitchbook and the National Venture Capital Association, Texas startups overall raised a record-high $10.55 billion in venture capital in 2021, an increase of 123 percent from 2020’s $4.73 billion.

Early-stage investment in climate tech hit a record $53.7 billion in 2021. While the totals this year aren’t likely to reach 2021 levels, climate tech investors have said they aren’t seeing the size of pullbacks and slowdowns in other sectors. Despite the VC slowdown this year, clean tech and climate tech have remained attractive investments. This includes Texas. For example, the Rice Alliance Clean Energy Accelerator reported in August that 17 of its early- to mid-stage startups have already raised more than $54.5 million this year. Also in August, geothermal startup Fervo Energy, based in Houston, raised $138 million in new VC funding. Earlier in February, Houston’s Zeta Energy, which has developed a battery for the electric vehicle and energy storage markets, closed a $23 million financing round. We expect continued funding in this space.

Large corporates in Texas are building external innovation programs such as venture arms and accelerators. For instance, Houston’s Halliburton Company developed Halliburton Labs, an accelerator that has backed a number of startups in the carbon capture, clean hydrogen, and solar energy tech developers. Big energy companies are also joining Texas-based accelerator hubs such as The Ion in Houston. The Ion’s founding partners include Aramco Americas, Chevron Technology Ventures, and ExxonMobil.

It will require long term efforts to achieve results in climate tech and clean energy projects, but as the benefits of the IRA materialize, more startups in Texas will have the ability to obtain more long-term financial support and resources from all of the sources – government, universities, and research organizations, venture investors and corporations — that are required to develop solutions to the energy and climate challenges and capitalize on the business opportunities of today and tomorrow. Startups are creating transformative innovations that are key to the United States being a leader in clean energy and fighting climate change. And there’s no better place to do that than in Texas.

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Michael Torosian is a partner in the corporate practice in the San Francisco office of Baker Botts. He is outside general counsel to emerging companies and their investors and advisors at all stages.

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The Texas Medical Center Innovation Factory has named the 16 companies making up the inaugural cohort in the Innovate UK Global Incubator Programme. Photo via tmc.edu

Sixteen digital health and medical device startups founded in the United Kingdom have been selected for a customized accelerator at the Texas Medical Center's Innovation Factory.

In partnership with Innovate UK, TMCi created the Innovate UK Global Incubator Programme, a new accelerator that supports UK businesses as they build their United States go-to-market plan. The program builds the BioBridge relationship between TMC and the UK that was originally established five years ago.

“The TMC UK BioBridge program was launched with the UK Department for Business and Trade in 2018 to serve as a gateway for advancing life sciences and foster innovation and research between our two countries," says Ashley McPhail, chief external affairs and administration officer for TMC, in a news release. "We saw an opportunity to work with Innovate UK to develop a larger program with the UK after the success of the 11 companies that previously participated in our health tech accelerator."

The 16 companies will participate in the program from June to November. The cohort is expected to arrive in Houston on June 5 and have access to TMCi's facilities, network of mentors and potential clients, funding, potential customers, and curated programing — all while being a unique entry point into the US. The new offering joins three other globally recognized curriculums: Biodesign, Accelerator for Cancer Therapeutics, and Health Tech.

“TMCi nurtures long-term growth, development, and competitiveness to increase startups chances of success and global expansion," says Emily Reiser, associate director of TMC Innovation. "By bringing their novel technologies and exposing them to a curated selection of TMC’s expert network, startups receive support and evaluation to build, scale, and expand in the US market."

Two of the cohort's specialties include cardiovascular and oncology — two of TMC's strongest areas of expertise — with solutions ranging from surgical devices to AI-enabled risk stratification and hospital efficiency.

Innovate UK is the country's national innovation agency dedicated to supporting business-led innovation in all sectors.

“The United Kingdom is fully committed to improving global healthcare through scientific collaboration," says His Majesty’s Consul General in Texas Richard Hyde in the release. "Through the expansion of the TMC UK BioBridge and in partnership with Innovate UK, this programme will help to expose the brightest and best British companies to the world’s largest medical city. Our companies will collaborate and grow as they work to develop cutting edge technology. The partnership between the UK Government and TMC demonstrates that international collaboration can drive both economic growth and improvement to quality of life.”

The 16 companies making up the inaugural cohort are as follows, according to TMC.

  • AINOSTICS aims to revolutionize the treatment and prevention of neurological conditions, such as dementia, by developing innovative AI-enabled solutions that draw novel insights from routinely acquired non-invasive medical scans to deliver accurate diagnosis and outcome prediction, and in turn facilitate personalized care and timely access to disease-modifying treatments for patients.
  • Alvie is a blended human plus AI-enabled digital solution providing personalised pre and rehabilitation coaching and supportive care for cancer and surgery. Alvie's technology combines data profiling, risk-stratification and tailored prescriptions of health and well-being with curated educational content, targeted behaviour change coaching and expert support through chat messaging and virtual consultations.
  • C the Signs™ is a validated AI cancer prediction platform, which can identify patients at risk of cancer at the earliest and most curable stage of the disease. Used by healthcare professionals, C the Signs can identify which tumor type a patient is at risk of and recommend the most appropriate next step in less than 30 seconds. The platform has detected over 10,000 patients with cancer, with over 50 different types of cancer diagnosed, and with a sensitivity of >98% for cancer.
  • At PEP Health, We believe all patients deserve the best care possible. Our cutting-edge machine-learning technology enables healthcare organisations, regulators, and insurers the real-time, actionable insights they need to have a direct and dramatic impact on patient experiences.
  • PreciousMD improves the lives of lung-cancer and other lung-related illnesses patients worldwide by enabling imaging-based diagnostics needed for personalized treatment pathways.
  • Ufonia is an autonomous telemedicine company, we use large language models and voice AI to increase the capacity of clinical professionals.
  • My mhealth offers digital therapeutics for a range of long-term conditions- COPD, Asthma, Diabetes and Heart Disease. Our product has been successfully deployed in the UK and India, with >100,000 users registered to date. Our solutions empower patients to self-manage their conditions, resulting in dramatic improvements in outcomes, as evidenced through multiple clinical trials and real-world evaluations.
  • At Surgery Hero, we offer a clinically backed solution that ensures whole-human support before and after surgery. We help health systems, employers and health plans cut costs without sacrificing quality of care.
  • Panakeia's software platform enables extremely rapid multi-omics profiling in minutes directly from routinely used tissue images without needing wet lab assays.
  • QV Bioelectronics are striving to deliver longer, better quality lives for brain tumour patients. Using their first-of-its-kind implantable electric field therapy device, GRACE, QV will provide effective, focal & continuous treatment without impacting patient quality of life.
  • 52 North is a med-tech company focused on improving health outcomes and health equity by reinventing care pathways. The NeutroCheck® solution is a finger-prick blood test and digital platform built to significantly improve safety and quality of life for cancer patients, by helping to identify at-home those patients who are at risk of the most fatal side-effect of chemotherapy: neutropenic sepsis.
  • Somnus is fulfilling an unmet need in global healthcare by developing real-time, point of care blood propofol monitoring. Its products will improve the care of sedated and anaesthetised patients, save money for hospitals, and facilitate a major reduction in greenhouse gas emissions.
  • ScubaTx is a breakthrough organ transplant preservation company established to solve the global unmet need for cost-efficient and longer-duration organ preservation technology. ScubaTx has developed a simple, small and affordable device which uses Persufflation to extend the preservation of organs.
  • IBEX is on a mission to help people live active, healthy and productive lives by increasing their access to early diagnosis of osteoporosis. The IBEX BH software as medical device delvers routine, automated assessment of fracture risk from routine radiology for earlier detection and more equitable treatment of osteoporosis.
  • NuVision produces products derived from donated human amniotic membrane that are used in ophthalmology to help patients with chronic, traumatic and post-surgical wounds of the eye to be treated earlier and recover more fully and more quickly. The company’s products are also used in the management of dry eye disease, a debilitating conditions that affects around 17m people in the USA.
  • Calon Cardio-Technology is on a mission to improve quality of life for patients with Left Ventricular Assist devices (LVAD) and reduce the common post operative complications associated with these implantable heart pumps. We plan to do this by introducing a completely wireless heart pump system and augment patient follow-up with built-in remote monitoring capabilities.

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