Money moves

Houston Exponential's ambitious venture fund closes first round with $25 million

Nine companies committed to Houston Exponential's first round of funding. Shobeir Ansar/Getty Images

Houston Exponential closed the first round of funding for its fund of funds with $25 million in commitments from nine companies. The money will go to non-Houston venture capitalists to invest back into Houston startups.

HX Venture Fund's first-round partners include: Insperity, Chevron, Shell, Quanta Services, Westlake Chemical, The Plank Companies, PROS, HEB, and Camden.

Kingwood-based Insperity was the anchor investor, committing to $5 million last October, according to the release. The company also provided an undisclosed amount of resources support the operations of the fund as it launched.

"This is another transformational moment for Houston," says Gina Luna, chair of Houston Exponential, in the release. "From day one at Houston Exponential, we have been executing a plan to accelerate the growth of the ecosystem, including connecting Houston startups with the capital they need to grow their businesses. This is a significant, tangible milestone. Houston's leading companies have stepped up in a big way to make this happen, and this is a clear signal that Houston is committed to success."

Houston-based venture capital firm Mercury Fund's co-founder and managing director, Blair Garrou, chaired the fund's advisory board. He's also a board member for HX.

The fund of funds won't donate to Houston organizations directly, Garrou says in a statement. The fund's organizers had a different approach to growing funds in Houston's startup space.

"The HX Venture Fund will invest in venture capital funds outside of Houston – generating investment and interest in the region while increasing the investable capital available to Houston-based startups," says Garrou. "The HX Venture Fund is built upon a proven model that provides multiple benefits to its investors."

The benefitting venture capital funds haven't yet been named.

HX modeled the fund after the Renaissance Venture Capital Fund in Michigan, from which 10 outside venture capital firms benefitted —Mercury Fund was one of the 10. It was Garrou who led the movement to get Renaissance Fund's CEO and Fund Manager, Chris Rizik, as a part of the HX Venture Fund from the start as a member of the investment committee.

The Michigan fund launched 9 years ago and exceeded all expectations. For ever dollar Rizik and his team invested, $17 came back into the Michigan area, he told the Houston Business Journal. He says Houston has the same potential.

"I've spoken to many cities about Renaissance's fund of funds model and the impact it has had on Michigan," says Rizik in the release. "Houston has leaned into this model and it is impressive what they have been able to accomplish in a short time. It is a testament to the commitment of Houston's business and tech leaders to growing the ecosystem. It's really exciting to see."

In October 2017, Houston Exponential was launched by Mayor Sylvester Turner's Innovation and Technology Task Force in collaboration with the Greater Houston Partnership's Innovation Round Table and the Houston Technology Center. HX's launch included three main goals, according to the release: "make Houston a top 10 innovation ecosystem, generate $2 billion in venture capital annually and create 10,000 new technology jobs a year by 2022."

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Building Houston

 
 

Panelists from the University of Houston and Houston Methodist discussed tech transfer challenges and opportunities for academic innovators. Photo courtesy

Groundbreaking and disruptive innovations across industries are coming out of research institutions, and their commercialization process is very different from other startups.

An expert panel within Technology transfer discussed some of the unique obstacles innovators face as they go from academia into the market — like patenting, funding, the valley of death, and more.

Missed the conversation? Here are eight key moments from the panel that took place at the University of Houston's Technology Bridge on Wednesday, May 19.

This event was hosted by InnovationMap and University of Houston.

“If your technology can immediately impact some industry, I think you should license out your technology. But if you think that the reward is much higher and does not yet match something in the industry, you should go the high risk, high reward path of doing it yourself. That’s a much more challenging. It takes years of work.”

— Hadi Ghasemi, co-founder of Elemental Coatings and Cullen associate professor in the department of mechanical engineering at the University of Houston, says on how tech transfer usually happens via those two pathways. Ghasemi explains that it also depends on the academic's passion for the product and interest in becoming an entrepreneur.

“There’s a mismatch in that you can have a really clinically impactful technology but still not have money to develop it into a product.” 

— Rashim Singh, co-founder of Sanarentero and a research assistant professor of pharmaceutics at the University of Houston College of Pharmacy, says on the different priorities from within academia and within the market.

“What I’ve seen is if you know you want to patent something, tell the right people early. Make sure you have the right players involved. Our tech office already has venture, Pharma, etc. partners that can help with the patent process.”

— Ginny Torno, administrative director of innovation and IT clinical systems at Houston Methodist

“You don’t need to be fully transparent about your technology. As a company, you need to have some secret sauce."

— Ghasemi says on the patent and paper publishing process. Academics are used to publishing their research, but when it comes to business, you need to hold some things close to the chest.

“One of the most important piece the UH Tech Bridge has provided is the wet lab space to develop these technologies a little further toward commercialization. … Wet lab is very precious space in Houston specifically because there isn’t much here.”

— Singh says on how important access to lab space is to the entrepreneur.

"“You’re starting to see more and more organizations that have innovation arms. ... There are a lot of focus on trying to make Houston another innovation hub, and I think there is more support now than even a few years ago.”

— Torno says on what's changed over the past few years, mentioning TMC3 and the Ion.

“Try to serve private capital as soon as possible. The grant money comes, and those are good and will help you prove out your technology. But once you have private money, it shows people care about your product.”

— Ghasemi says as a piece of advice for potential tech transfer entrepreneurs.

“The biggest gap is to arrange for funding — federal, private, etc. — to support during the valley of death.”

— Singh says on the struggle research-based startups, especially in drug discovery, faces as they fight to prove out their product and try to stay afloat financially.

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