Taking the "L"

Houston sees a decline in innovation jobs, according to a new report

According to a report, Houston lost over 3,000 innovation jobs between 2005 and 2017. Joe Daniel Price/Getty Images

You've heard of brain drain, the phenomenon of well-educated, highly skilled workers fleeing a geographic area for better opportunities elsewhere. It appears Houston is grappling with a different workforce affliction: innovation drain.

Houston is among several major business hubs in the U.S. — including Dallas-Fort Worth, Los Angeles, Philadelphia, and Washington, D.C. — where tech-dependent "innovation" jobs evaporated from 2005 to 2017, according to report released December 9 by the Brookings Institution think tank and the Information Technology & Innovation Foundation. At those cities' expense, innovation jobs have clustered in Boston, San Francisco, San Jose, Seattle, and San Diego. Those five metro areas accounted for more than 90 percent of job growth in the innovation sector from 2005 to 2017, researchers found.

Today, one-third of innovation jobs in the U.S. are located in just 16 counties, and more than half are concentrated in 41 counties, according to the report.

The report shows the Houston metro area lost 3,281 tech-oriented innovation jobs during that period. Dallas-Fort Worth lost even more (8,969), while the Austin metro area gained 1,200 and the San Antonio metro area picked up 1,472.

Houston's loss represents a slippage of 0.2 percent in the region's share of innovation jobs in the U.S., the report notes. On a percentage basis, DFW sustained an even greater loss (0.5 percent), while Austin's share declined 0.1 percent and San Antonio's didn't budge.

On the positive side, Houston ranked 14th for its sheer number of innovation jobs, with Dallas-Fort Worth at No. 7 and Austin at No. 16. They were among 20 "superstar" metro areas singled out in the report.

In the report, researchers classify innovation jobs as those in 13 R&D-heavy sectors, including aerospace, computer manufacturing, chemical production, and telecom. While the 13 innovation segments account for only 3 percent of U.S. jobs, they represent 6 percent of the country's economic output (GDP), one-fourth of exports, and two-thirds of corporate R&D expenditures, the report says.

Responding to the Brookings analysis, Susan Davenport, senior vice president of economic development at the Greater Houston Partnership, notes the Houston area employs about 150,000 tech workers, many of whom are employed outside the 13 innovation industries mentioned in the report. In fact, she adds, Houston boasts the highest share of tech workers at non-tech companies among the country's 20 largest metro areas.

"That said, we recognize the need to build Houston's digital tech presence, an area where we have traditionally lagged," Davenport tells InnovationMap.

Houston is making headway on that front, though. Davenport cites the expansion of Microsoft Corp.'s local operations, the recent opening of Bill.com's Houston office, and the rise of three Houston entrepreneurship initiatives — The Ion, TMC3, and The Cannon — as examples of this progress.

"Houston continues to gain recognition as a leading tech city," Davenport says. "The region cleared $500 million in venture capital funding this year, a new high for Houston, and tech-related employment continues to grow within the energy industry. We continue working with our partners to grow Houston's innovation ecosystem and are excited for the great momentum in this area."

Investor and entrepreneur Harvin Moore, president of Houston Exponential, a nonprofit that promotes startups and innovation, acknowledges the region's historical lack of focus on the innovation economy contributed to Amazon bypassing Houston as a finalist in 2018 for the e-commerce giant's second headquarters. Despite that harsh reality, Moore says the Brookings report fails to take into account innovation jobs embedded in sectors like Houston's massive energy industry.

"That data issue will always penalize a city with a large energy sector until it is corrected," Moore says. "And as we know, the energy sector is starting to innovate rapidly, as it must. And that innovation draws more employees to those companies and to Houston."

Trending News

Building Houston

 
 

AvidXchange executives explain why a crisis like the pandemic can provide opportunities for growth or realignment. Photo via Getty Images

From esports to telemedicine, some technologies are having a major moment during the COVID-19 crisis. As many businesses are operating remotely with work-from-home policies in place indefinitely, payments automation is another technology that's seen an opportunity amid the pandemic.

AvidXchange, which has invoice and payment processes automation software for mid-market businesses, is one of the companies in this payment automation space that's seen growth in spite of the economic downturn caused by the virus. The Charlotte, North Carolina-based company was founded in 2000 and went on to acquire Houston-founded Strongroom Solutions Inc. in 2015.

Since the acquisition, AvidXchange has quadrupled its presence in Houston and does a good deal of business locally. Equipping companies with tools for remote work is crucial — now and especially in light of Houston's propensity for challenges. Tyler Gill, vice president of sales for AvidXchange based in the Houston office and former CEO of Strongroom, joined Houston Exponential on a virtual panel to discuss this topic.

"We've had a history of disasters in Houston. Any time we can help businesses move to a more cloud-based infrastructure is going to be better," Gill says on the livestream. "I think working from home is maybe the new normal for a lot of employees — so how do we enable this?"

Gill and his colleague, Chris Elmore, senior sales performance director at AvidXchange, joined Joey Sanchez of HX for the talk about the acquisition, the pandemic, and growth for the company. If you missed it or don't have time to stream the whole conversation, here are some impactful moments of the chat.

“Economic downturns have a tendency to put a very bright light on a feature set or a product or a service that’s underperforming."

— Elmore says on how the pandemic affects innovation and startups. "My hope is that entrepreneurs will see this as a real time to get focused on their business — what's working well and what's not working well — and my hope is that they'll say, 'I need to fix that,' not 'I wish this was better,'" he says.

“For a young entrepreneur looking to build a business, make sure you’re looking for the people who are germane to your business.”

— Gill says about starting his business in Houston. At first, he was trying to find investors in oil and gas, but he found more success working with companies with a background in finance technology. "Houston has a history and density in fintech — I just had to find it."

“The fact that Strongroom owned the automated payment process in HOA that made them so attractive to AvidXchange because we didn’t.”

— Elmore says on the 2015 acquisition. He explains that AvidXchange had set up a presence in multifamily and commercial real estate, while Strongroom had a hold on homeowner's association, or HOA, business. The two companies competed for a while, and if Strongroom hadn't had their HOA specialty that made the company ideal for acquisition, Elmore says the two companies would still be competing today.

“When Strongroom was added to AvidXchange, our culture improved. By the way, we went from 40 employees to 1,000 within 14 months, and Strongroom was right at the beginning of that.”

— Elmore says on growth following the acquisition. The company now has 1,500 employees across seven offices and just closed a $128 million round of fundraising in April.

“Customers don’t care how big you get or how much money you raise from investors. They care about if your service is still doing the things they need to operate their business.”

— Gill says, reminding entrepreneurs to always prioritize and be focused on the client experience — through mergers or acquisitions, fundraising rounds, growth, etc.

“When you replace human interaction with technology, what you have to do, is to now move that person on to something more impactful and more important for the business. I don’t like tech for tech’s sake.”

— Elmore says on the importance of automation. "When you automate something, the output of automation is time," he adds.

“Houston couldn’t be a better place to build a business — I found great investors and employees here. It’s a city that’s used to risk. But it’s got to be you, the entrepreneur, that’s got something festering — that’s how you know it’s a great idea.”

— Gill says on inspiring future innovators. "What kept me motivated was I wanted to win. I felt like we had a great product, and we had a big market to serve. … I wanted to build something lasting and build a great team."

“We continue to be a great Houston story — some of my angel investors in Houston are still benefiting."

— Gill says on AvidXchange's presence in Houston. He adds that he's proud of how his former Strongroom team members have risen through the ranks of the company following the acquisition and that he sees the company, which is still privately held, moving toward IPO.

Trending News