Follow the money

Leading venture capitalists forecast the future of funding in Houston

Venture capital panelists discussed Houston's venture funding future — both the good and the bad. Houston Exponential/Twitter

Despite Houston being known for its money, venture capital has struggled to hit its stride until recently. Now, as Houston has attracted more money for its startups — even coming close to Austin, according to recent data — the Bayou City faces a challenge ahead.

"We will go through a massive tech correction — period. End of story," says Blair Garrou, managing partner of Houston-based Mercury Fund, at the inaugural HX Capital Summit.

The correction, Garrou says, would have happened a few years ago, but Middle Eastern and Chinese investments have been holding down the fort, so to speak.

"Whenever this correction happens, whether it's a year, two years, or three years, [my hope is] that the capital here invests through the cycle," Garrou says. "Anyone who invests through the cycle will win."

Garrou was joined by a few other venture capitalists on the panel hosted by Houston Exponential at the TMC Innovation Institute on December 4: Tim Kopra, partner at Houston-based Blue Bear Capital; Mark Friday, associate at Houston-based Cathexis; Joe Milam, CEO of Austin-based Angelspan; Jay Zeidman, managing partner of Houston-based Altitude Ventures Texas; and moderator Rashad Kurbanov, CEO of Houston-based iownit capital and markets.

While the tech correction looms, Houston's current venture ecosystem blooms, thanks to a rise in high net worth personal and family investments.

"There's a real hunger from a lot of ultra-high net worth families to get into this sector, and it'd be really interesting if we can cultivate that here in Houston," says Kopra.

People have gotten more comfortable investing in tech, says Garrou, so the investment opportunities have grown.

"There's a greed component to it that people don't like to talk about," Garrou says. "When people see people making money in a certain sector, they say, 'why not me.'"

However, there are a few things holding back some investors. One being that companies from earlier venture funds have yet to reach their full potential, says Garrou, and he and other venture capitals need to move the needle on that to demonstrate success. He says, once that happens, more capital will flow.

Another hesitation Zeidman says he's seen is within investing in funds, rather than directly into startups.

"There's a difference in investing in companies and investing in funds," Zeidman. "I think a lot of folks are skeptical about investing in funds. I want to be in a deal — I don't just want to give you money and you go decide what to do with it."

Houston Exponential, the city-backed innovation arm for Houston, launched a fund of funds in October. The HX Venture Fund has the potential to create a "flywheel effect" in Houston, says Garrou.

"We're going to see dozens and dozens of funds from across the country come to Houston — they're already coming," Garrou says. "But what's important is they are going to want to co-invest with local investors, and that's the key to venture capital."

While encouraging out-of-city investors is a key part of the equation, Houston does stand well on its own, Milam says. Houston has historically been compared, perhaps wrongly, to Austin., because it got a head start when it came to startup growth. But it's a different story now.

"Austin isn't as advanced as people give it credit for," says Milam. "I don't think Houston at all has [to] look at Austin as a role model or for guidance. Houston has a far better and brighter future when it comes to mobilizing capital and Houston-born startups."

Ultimately, the panelists agreed that despite Houston's slow start and rough waters ahead, Houston's future is bright when it comes to venture capital and startup growth.

"When you look at Houston, we've got a huge economy here — a huge number of customers here," Friday says. "I think we can close the gap of the ratio the amount of venture and startup activity to the overall size of our economy."

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Building Houston

 
 

From enlightening talks to anniversary celebrations, here's where you need to be in August. Getty Images

This month, Houstonians have yet another good batch of in-person and online innovation events — from Zoom panels to conferences — and you and your tech network need to know about them.

Here's a roundup of virtual events not to miss this month — like demo days, workshops, conventions, and more.

Note: This post might be updated to add more events.

August 4 — Bayou Startup Showcase

Join Rice University and the University of Houston to celebrate the launch of the newest startups from OwlSpark and RED Labs. The Eighth Annual Bayou Startup Showcase will have founders from Class 9 showcase their summer progress. Come listen to pitches, network and get a first look at Houston's newest startups.

The event is on Wednesday, August 4, at 6 pm. It's free and happening at The Cannon (1334 Brittmoore Rd). Click here to register.

August 5 — Ask-Me-Anything Event With Carin Luna-Ostaseski: Tackling Roadblocks as a Solopreneur

A Hello Alice alum and first-generation Cuban American, Carin Luna-Ostaseski has truly achieved the unexpected, launching her one-woman operation through crowdfunding and becoming one of the first Hispanic entrepreneurs in history to create a scotch whisky brand. During the virtual event, she'll answer all of your questions, offer tips on navigating uncharted territory in business, and share details on the newly launched Entrepreneurial Spirit Fund by SIA Scotch that's awarding $10,000 grants to small business owners of color.

The event is on Thursday, August 5, at 1:30 pm. It's free and happening online. Click here to register.

August 10 — FTE Show: Creating a Digitally Enabled Innovation Community that Works with Jon Lambert and Lawson Gow

The way entrepreneurial communities interact and collaborate today cannot keep pace with the ever increasing speed of innovation. What are best ways to leverage physical and virtual hub interactions to create a digitally enabled innovation community with that works? Join The Cannon Founder Lawson Gow and CEO Jon Lambert as they share specifics around what they are trying, where they are getting traction and where they are most challenged.

The event is on Tuesday, August 10, at noon. It's free and happening online. Click here to register.

August 10 — HealthTech Beyond Borders

This online event created to offer business opportunities and global collaboration focused on innovation and technology in medicine between companies in Chile and the United States. Join the International Summit to explore the future and impact of new technologies in the health sector.

The event is on Tuesday, August 10. It's free and happening online. Click here to register.

August 11 — Open Project Night: Building an Equitable, Inclusive and Resilient Houston

Impact Hub Houston is proud to bring you a monthly opportunity to come together to work on solutions for some of Houston's most pressing issues. Our city is full of changemakers across all ages, cultures, skillsets, and industries. This is your chance to conned and collaborate for the greater good.

The event is on Wednesday, August 11, at 5 pm. It's free and happening online. Click here to register.

August 11 — Women in AI USA: WaiACCELERATE 2021 Demo Day

Ethical leadership & business acceleration program, WaiACCELERAT USA, aims to bridge the gender gap in the industry and targets female innovators looking to start a business in the fields of AI, Machine Learning and Data Science. With the final Pitch Event "ACCELER-AI-TE!" organized in VR, we will celebrate 40+ impact and commercially-proof early-stage startups and their founders

The event is on Wednesday, August 11, at 6 pm. It's free and happening online. Click here to register.

August 12-13 — EVOLVE 2021: How AI is Transforming Industry

Join industry leaders from the world's largest and most innovative companies for this 2-day hybrid event featuring both technical and business presentations focused on the real-world value of Artificial Intelligence. Evolve will provide a unique, interactive experience where you will learn from and engage with thought leaders from across North America.

The event is on Thursday, August 12, to Friday, August 13. It's free and happening at Houston Marriott Sugar Land and online. Click here to register.

August 17 — Texas Startup Scene & Ask Me Anything with Wogbe Ofori

Are you an entrepreneur starting a new company? Recently moved your company to Texas? Want to find out how to connect with other entrepreneurs, mentors, and investors in the startup ecosystem? Join Capital Factory to hear an overview from experienced entrepreneurs, venture capitalists, investors, and community partners at Intro to Texas Startup Scene & Ask Me Anything. Get a chance to introduce yourself and ask any questions on entrepreneurship and other related topics.

The event is on Tuesday, August 17, at 2 pm. It's free and happening online Click here to register.

August 18 — Tips for Working with a Gen Z Intern

Ampersand CEO, Allie Danziger, will speak to business owners and founders on the benefits of hiring an intern for your growing business, and tips for managing a remote, or in person, intern. It has to be a lot more than just "getting coffee" in order to maximize the experience on both sides and Allie will talk through tips on clear communication, ideal assignments, best way to structure the relationship and more. She will answer attendees questions, live, and discuss real-life scenarios the aspiring professionals and business partners in Ampersand have faced.

The event is on Wednesday, August 18, at 11 am. It's free and happening at The Cannon (1334 Brittmoore Rd). Click here to register.

August 19 — LatinX in Tech presented by Accenture

Capital Factory is dedicated to increasing diversity in the tech community and making its co-working space an inclusive environment for people of all backgrounds and identities. Attendees can look forward to a keynote address from a serial entrepreneur or investor, insightful discussion sessions, a startup showcase pitch competition, and informative panels.

The event is on Thursday, August 19, at noon. It's free and happening online Click here to register.

August 25 — The Cannon + Dell Pitch Party

Calling all member startups that are fundraising or are planning to open a round in 2021. The Cannon has partnered with Dell to host a virtual Pitch Party. Prizes will include up to $10k in Dell Equipment and the opportunity to pitch in the winners round later this year. If you would like to learn more and be considered to pitch, please fill out the application here.

The event is on Wednesday, August 25, at noon. It's free and happening online. Click here to register.

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