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.

Trending News

Building Houston

 
 

Proxima Clinical Research has announced an office expansion — and more Houston innovation news. Photo via Twitter

Houston's innovation ecosystem has had some big news this month, from new job titles for Houston innovators to expanding office space.

In this roundup of Houston startup and innovation news, a Houston organization expands its footprint in the TMC, Rice University opens applications for a cleantech accelerator, and more.

Organization expands footprint in Houston

Proxima CRO has announced its expansion within TMCi. Photo via Twitter

Proxima Clinical Research, a contract research organization headquartered in Houston, announced that it is expanding its office space in the Texas Medical Center Innovation Factory.

"Texas Medical Center is synonymous with innovation, and the TMC Innovation space has proven an ideal location for our CRO. It's an important part of our origin story and a big part of our success," says Kevin Coker, CEO and co-founder of Proxima CRO, in a news release.

The expansion will include around 7,500-square feet of additional office space.

"The resources found across TMC's campuses allow for companies such as Proxima Clinical Research to achieve clinical and business milestones that will continue to shape the future of life sciences both regionally and globally. We are excited for Proxima to expand their footprint at TMC Innovation Factory as they further services for their MedTech customers," says Tom Luby, director of TMC Innovation, in the release.

$20M grant fuels hardtech program's expansion

Activate is planting its roots in Houston with a plan to have its first set of fellows next year. Photo via Activate.org

A hardtech-focused nonprofit officially announced its Houston expansion this week. Activate, which InnovationMap reported was setting up its fifth program here last month, received a $20M commitment by the National Science Foundation to fuel its entrance into the Bayou City.

“Houston’s diversity offers great promise in expanding access for the next generation of science entrepreneurs and as a center of innovation for advanced energy," says NSF SBIR/STTR program director Ben Schrag in a news release.

The organization was founded in Berkeley, California, in 2015 to bridge the gap between the federal and public sectors to deploy capital and resources into the innovators creating transformative products. The nonprofit expanded its programs to Boston and New York before launching a virtual fellowship program — Activate Anywhere, which is for scientists 50 or more miles outside one of the three hubs.

“We are delighted to be opening our newest Activate community in Houston,” says Activate Anywhere managing director Hannah Murnen, speaking at the annual Advanced Research Projects Agency-Energy Innovation Summit. “Houston is a city where innovation thrives, with an abundance of talent, capital, and infrastructure—the perfect setting for the Activate Fellowship.”

Activate is still looking its Houston’s first managing director is actively underway and will select fellows for Activate Houston in 2024.

TMC names new entrepreneur in residence

Zaffer Syed has assumed a new role at TMC. Photo via TMC.org

Houston health tech innovator has announced that he has joined the Texas Medical Center's Innovation Factory as entrepreneur in residence for medtech. Zaffer Syed assumed the new role this month, according to his LinkedIn, and he's been an adviser for the organization since 2017.

Syed has held a few leadership roles at Saranas Inc., a medical device company founded in Houston to detect internal bleeding following medical procedures. He now serves as adviser for the company.

"As CEO of Saranas, he led the recapitalization of the company that led to the FDA De Novo classification and commercial launch of a novel real-time internal bleed monitoring system for endovascular procedures," reads the TMC website. "Zaffer oversaw clinical development, regulatory affairs and strategic marketing at OrthoAccel Technologies, a private dental device startup focused on accelerating tooth movement in patients undergoing orthodontic treatment.

"Prior to working in startup ventures, Zaffer spent the first 13 years of his career in various operational roles at St. Jude Medical and Boston Scientific to support the development and commercialization of Class III implantable devices for cardiovascular and neuromodulation applications."

TMC is currently looking for an entrepreneur in residence for its TMCi Accelerator for Cancer Therapeutics program.

Applications open for clean energy startup program

Calling all clean energy startups. Photo courtesy of The Ion

The Clean Energy Accelerator, an energy transition accelerator housed at the Ion and run by the Rice Alliance for Technology and Entrepreneurship, has opened applications for Class 3. The deadline to apply is April 14.

The accelerator, which helps early-stage ventures reach technical and commercial milestones through hybrid programming and mentorship, will host its Class 3 cohort from July 25 to Sept. 22.

“Accelerating the transition to a net-zero future is a key goal at Rice University. Through accelerating the commercial potential of our own research as well as supporting the further adoption of global technologies right here in Houston, the Rice Alliance Clean Energy Accelerator is proof of that commitment,” says Paul Cherukuri, vice president of innovation at Rice, in a news release. “The Rice Alliance has all the critical components early-stage energy ventures need for success: a corporate innovation network, energy investor network, access to mentors and a well-developed curriculum. This accelerator program is a unique opportunity for energy startups to successfully launch and build their ventures and get access to the Houston energy ecosystem.”

According to Rice, the 29 alumni companies from Class 1 and 2 have gone on to secure grants, partnerships, and investments, including more than $75 million in funding. Companies can apply here, learn more about the accelerator here or attend the virtual information session April 3 by registering here.

Trending News