Q&A

Capital Factory founder plans to double portfolio companies in Houston this year

Capital Factory has doubled down on Houston, and Founder and CEO Josh Baer shares how it's all part of his Texas Manifesto. Photo courtesy of Capital Factory

A statewide accelerator program has doubled down on Houston, and it's just the beginning.

Austin-based Capital Factory, which also has a presence in Dallas, recently merged with Station Houston in an effort to expand their mentor network and grow its startup portfolio with the addition of Houston companies.

As of today, Capital Factory has 40 startups from Houston in its portfolio, says Josh Baer, founder and CEO of Capital Factory, and Baer says he expects to add an additional 40 in 2020. The Station merger will help spur that growth and also play into Capital Factory's greater Texas Manifesto mission to advance innovation statewide.

"This is not just about adding one more city," Baer says. "It's really about how there's a lot of unique things that Houston brings that are going to make the whole picture a lot stronger."

Baer sat down with InnovationMap to discuss the details of the merger, how Capital Factory will be tuned into The Ion, and how Houston startups can tap into Capital Factory — both locally and at this year's SXSW.

InnovationMap: Capital Factory has been active in Houston for a few years and announced a partnership with The Cannon last year. How has that activation been going?

Josh Baer: We've been in Houston for quite a while now. We started off with our Texas Manifesto almost three years ago and the first thing we did was a listening tour of all the different cities, and we spent a bunch of time in Houston.

Part of the growth we've seen in part is from our partnership with The Cannon as they've opened. They've been a great partner allowing us to reach all of Houston because Houston is really big. It's not like Austin where you can primarily service from one place. We're not builders, that's not our role. We want to be wherever everybody else is doing great things. And that's The Cannon, The Ion, and the Texas Medical Center and all the other places too. There's lots of room for different flavors and focuses and groups, and we need to be at all those places.

IM: What's Capital Factory's presence in Houston and how do you see it growing?

JB: Last year, we hired our first two employees in Houston — that was Kendrick and Brittany, our mentor coordinator and venture associate — so that we could build our mentor network and connect them into the rest of Texas and source the best companies and connect them to the rest of Texas. Last year with those two employees, we brought in 14 Houston companies into our accelerator.

In total right now, we have 40 companies ever that have joined our accelerator from Houston, which is still a pretty significant number. This year, we expect more than 40 companies to join the accelerator from Houston.

IM: How will Capital Factory be involved in The Ion?

JB: Well we are so happy that we have exactly the role we would want to have at The Ion. And that is having some prime space right in the middle of it, and we're located not in the coworking space but in the event space because that's really, we want to be — we want to be where everyone is meeting and activating.

One of the things that we'll focus on is building out the mentor network at The Ion and connecting it into the rest of our mentor network. We're not going to be the only accelerator there. There's going to be a bunch of accelerators there. There's gonna be a bunch of mentor networks. And we're excited to partner with all of those and many more probably bring great people into our networks. I'm pretty confident we'll be the biggest mentor network there and we'll be the default one. We'll be the main one that everybody's part of, and particularly because it connects into everything else. But we'll do that in a really collaborative way.

IM: You kind of dove headfirst into the Dallas innovation ecosystem with a real estate play. Why did making these partnerships make more sense for Houston?

JB: Well, Capital Factory isn't backed by a big university or a billionaire, or a pension fund or something. It's really backed by entrepreneurs. And so while we're fortunate that we do have capital to invest in these startups, our value is not really like the capital like that builds buildings. It takes a lot of money and a lot of capital and that comes from universities and different types of investors and from communities right from the city and others that are part of that.

And so in Dallas, when we looked at that market, there was a real need — nobody was building a place like this, so we had to. We needed a center of gravity. Dallas is big too — other people will build more and we're going to need to be at those places too, just like in Houston.

But in Houston, not only did we are Texas Medical Center, and then we already had The Cannon and there's going to be The Ion, which are hundreds of thousands of square feet of prime real estate that's going to be amazing. We don't want to recreate that or compete with that. We want to be part of that.

So, if somebody else is already putting up tens or a hundreds of millions of dollars to build the building, I don't need to do that. I want to be part of that. My value is not capital. It's bringing the people into the building. It's activating the building and bringing programming into it, and that's where Capital Factory really adds the most value.

IM: How exactly did the merger with Station Houston come about?

JB: You know, it goes all the way back to the very beginning. I'm pretty sure that I was one of the first people that the founders of Station talked to when they were getting started when Emily and Blair and others were working on it. You know, Capital Factory was the place they came to look at. And, I was friends with all of them, and we were very open book about it, and said, "Hey, you know, here's how we work. We should see how we can work together." Because of that, we've always had a good relationship — Station was the first place that we ever went on a bus trip to Houston. We've had lots of overlap between our mentor networks and startups that we work with and others.

And Station has gone through some different changes over the years — leadership and their model evolved from for profit to nonprofit and onward. And through those changes, we just kept moving closer and closer together. It became really clear, especially with the launch of The Ion, that it was really the perfect opportunity for us to align ourselves even more closely and really connected fully into the rest of what's happening in the rest of the state.

IM: I’ve spoken to Gabriella Rowe, former CEO of Station, about it and she really sees it as a return to Station’s roots as an organization. How do you see the merger for Capital Factory?

JB: Well for us, you know, I really like the analogy of a stool. Everybody knows that to have a good foundation, a stool needs to have three legs. And, our mission in connecting Texas together through our Texas Manifesto. [Austin and Dallas were] working and working well, but it still wasn't a strong foundation. Ramping this up across Dallas and Houston, it completes the foundation and gives it a really strong footing and a really powerful footing to make it a Texas wide play.

We don't see this as a cookie cutter kind of thing. Each city is different. Each city has different needs and brings different things [to the table]. And we see that for sure from Houston. The type of entrepreneurs and companies that we've worked with are different. They're working on big, messy problems — robots and dangerous things. And that is exciting and attracts other partners — the big companies and the army and others that want tap into that too. And so, this is not just about adding one more city. It's really about how there's a lot of unique things that Houston brings that that's going to make the whole picture a lot stronger.

IM: What’s the status of the merger at this point?

JB: The paperwork's done, and we're taking a very intentionally slow process with [the execution of the merger]. We told everybody, "you shouldn't expect to see a lot to change fast." We want to be careful and thoughtful. So, we're going to listen a lot, and we're going to make changes slowly. And our goal is that for all the Station members, this is just a value add. They get everything they had before, plus now they get more. Now they get access to the Capital Factory network now, and they get access over time to more at the ion.

[But bigger picture,] it's not done at all. We barely started. We're still really listening and learning, so I don't feel like much has happened yet. The beginning part is, right now, every station Houston member has access to the rest of the Capital Factory network — both physically and virtually. They can go to Austin or Dallas. They can go to The Cannon. And more importantly than that, they can use our online network of union.vc, which is a website where they can log in, create a profile, and they can see all the other startups and mentors across the state and they can be seen by them. And that's what we can do to help connect them all together.

IM: Capital Factory kept Station’s remaining staff, right? Will Capital Factory be hiring more staff in Houston? 

JB: Right, we now have five Houston employees, three of them used to be Station's. We do expect to hire, but we don't have any specific roles to announce, but we have over a dozen people on the team in Dallas now two years into it.

IM: How can Houston startups make the most of SXSW this year?

JB: Honestly, our goal is to be the easy button. The first thing is come to Capital Factory. Capital Factory is an official South by Southwest house. This year, it's all official programming. And of course, the type of programming that you're going to see is focused on startups and government and defense.

We'll have Fast Company, Deloitte, Booz Allen, the army, and the air force — all kinds of other people there. And so that's an easy place to plug in. And for entrepreneurs who are part of our network, they don't have to have South badge to do that. They can be part of what's going on at Capital Factory as members.

IM: For startups wanting to get involved with Capital Factory, what's step one?

JB: The first step is to come to The Cannon or Station and meet us possible. And the person that first person they want to meet is Brittany Barreto, who's our venture associate. That's her job is to scout startups and meet them and help kind of bring them into the funnel.

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Building Houston

 
 

Here's what not to miss at the first all-virtual CERAWeek by IHS Markit. Screenshot via virtual.ceraweek.com

While usually hundreds of energy experts, C-level executives, diplomats, members of royal families, and more descend upon Houston for the the annual CERAWeek by IHS Markit conference, this year will be a little different. Canceled last year due to COVID-19, CERAWeek is returning — completely virtually.

The Agora track is back and focused on innovation within the energy sector. The Agora track's events — thought-provoking panels, intimate pods, and corporate-hosted "houses" — can be accessed through a virtual atrium.

Undoubtedly, many of the panels will have Houston representatives considering Houston's dominance in the industry, but here are five innovation-focused events you can't miss during CERAWeek that feature Houstonians.

Monday — New Horizons for Energy & Climate Research

The COVID-19 pandemic has made vivid and real the risks of an uncontrolled virus. Risks posed by climate change are also becoming more palpable every day. At the forefront of understanding these risks, universities are developing solutions by connecting science, engineering, business, and public policy disciplines. Along with industry and governments, universities are critical to developing affordable and sustainable solutions to meet the world's energy needs and achieve net-zero emission goals. Can the dual challenge of more energy and lower emissions be met? What is some of the most promising energy and climate research at universities? Beyond research, what are the roles and responsibilities of universities in the energy transition?

Featuring: Kenneth B. Medlock, III, James A. Baker, III, and Susan G. Baker Fellow In Energy And Resource Economics, Baker Institute and Senior Director, Center For Energy Studies at Rice University

Catch the panel at 1 pm on Monday, March 1. Learn more.

Tuesday — Conversations in Cleantech: Powering the energy transition

With renewables investment outperforming oil and gas investment for the first time ever in the middle of a pandemic, 2020 was a tipping point in the Energy Transition. Low oil prices intensified energy majors' attention on diversification and expansion into mature and emerging clean technologies such as battery storage, low-carbon hydrogen, and carbon removal technologies. Yet, the magnitude of the Energy Transition challenge requires an acceleration of strategic decisions on the technologies needed to make it happen, policy frameworks to promote public-private partnerships, and innovative investment schemes.

Three Cleantech leaders share their challenges, successes, and lessons learned at the forefront of the Energy Transition. What is their vision and strategy to accelerate lowering emissions and confronting climate change? Can companies develop clear strategies for cleantech investments that balance sustainability goals and corporate returns? What is the value of increasing leadership diversity for energy corporations? Can the Energy Transition be truly transformational without an inclusive workforce and a diverse leadership?

Featuring: Emily Reichert, CEO of Greentown Labs, which is opening a location in Houston this year.

The event takes place at 11:30 am on Tuesday, March 2. Learn more.

Wednesday — Rice Alliance Venture Day at CERAWeek

The Rice Alliance for Technology and Entrepreneurship pitch event will showcase 20 technology companies with new solutions for the energy industry. Each presentation will be followed by questions from a panel of industry experts.

Presenting Companies: Acoustic Wells, ALLY ENERGY, Bluefield Technologies, Cemvita Factory, Connectus Global, Damorphe, Ovopod Ltd., DrillDocs, GreenFire Energy, inerG, Locus Bio-Energy Solutions, Nesh, Pythias Analytics, REVOLUTION Turbine Technologies, Revterra, ROCSOLE, Senslytics, Subsea Micropiles, Syzygy Plasmonics, Transitional Energy, and Universal Subsea.

The event takes place at 9 am on Wednesday, March 3. Learn more.

Thursday — How Will the Energy Innovation Ecosystem Evolve?

Although the cleantech innovation ecosystem—research institutions, entrepreneurs, financiers, and support institutions—is diverse and productive, converting cleantech discoveries and research breakthroughs into commercially viable, transformative energy systems has proven difficult. With incumbent energy systems economically efficient and deeply entrenched, cleantech innovation faces a fundamental dilemma—the scale economies necessary to compete require a large customer base that does not yet exist. How is our clean energy innovation ecosystem equipped to be transformative? What needs to be strengthened? Is it profitable to focus on individual elements, or should we consider the system holistically, and reframe our expectations?

Featuring: Barbara Burger, vice president of innovation at Chevron and president at Chevron Technology Ventures

The event takes place at 7:30 am on Thursday, March 4. Learn more.

Friday — Cities: Managing crises & the future of energy

Houston is the capital of global energy and for the past four decades the home of CERAWeek. Mayor Sylvester Turner will share lessons from the city's experience with the pandemic, discuss leadership strategies during times of crisis, and explore Houston's evolving role in the new map of energy.

The event takes place at 8 am on Friday, March 5. Learn more.

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