Money moves

Houston sees significant jump in annual venture capital investments, according to new data

The city of Houston still lags behind Dallas and Austin when it comes to venture capital funds raised but did outshine compared to its 2018 numbers. Getty Images

While Houston fell behind Austin and Dallas when it came to amount of venture capital raised last year, the Bayou City still closed out 2018 with more funds raised than it reported in 2017, according to Crunchbase data.

Houston had a reported $372.8 million in investments in 77 known deals across 2018. In 2017, Houston had 95 deals reported but with a smaller total of funding dollars — $257.7 million — which gives Houston a 45 percent increase year over year.

Compared to other Texas metros, Houston still lags behind. Austin reported $1,285.5 million and Dallas companies had $601.8 million. These figures reflect only the reported deals to Crunchbase.

Photo via news.crunchbase.com

Even though 2018 overall shows Austin had a huge lead, in the third quarter of last year, Houston reported a similar amount of VC funds as Austin. In Q3, Houston startups pulled in $138.8 million — 39.2 percent of the state's entire VC funding — while Austin startups reported receiving $150.6 million — 42.6 percent of the funds, according to Crunchbase.

The fourth quarter was a slightly different story. Houston still edged out Dallas, but Austin took a significant lead. Houston had a reported $121.4 million from 11 reported VC deals, compared to Dallas' $101 million and Austin's $299.9 million. For Houston, the largest 2018 deal took place in Q4. Apex International, and oil and gas company, raised $75 million.

Austin-based Capital Factory's co-founder, Joshua Baer, tells Crunchbase that it will take some time for Houston's VC economy to catch up to Austin's, but that he doesn't think there's any reason it couldn't happen. Capital Factory, which has contributed to some Houston startups, recently announced it has preleased space in Houston-based The Cannon's new 120,000-square-foot space that's expected to deliver in spring.

Baer tells Crunchbase that Houston's biggest problem is access to venture capital — something that isn't rare of a problem at all. But Houston has a unique opportunity too.

"What Houston has that most places don't is a lot of corporate VCs," Baer says to Crunchbase. "Almost every energy company headquartered in Houston has a venture arm. They tend to fund companies that are Series B and later… so not the seed-stage stuff that is so popular in Austin and they do it all over the world, not just in Houston."

Five different Houston startups closed out 2018 with some funds. Here's how they plan to spend their investments.

Chevron Technology Venture will have an office in the new, 120,000-square-foot coworking space The Cannon is expecting to open this spring. Courtesy of The Cannon

As corporate venture grows as a presence in oil and gas, more and more startups have access to funding from large corporations. Aware of the corporate venturing trend, The Cannon, a West Houston coworking space, has formed a partnership with Chevron Technology Ventures, Chevron's venture arm that's currently based in Downtown Houston.

CTV will have an office and regular office hours in The Cannon's new, 30-acre campus that is expected to open this spring. (A previous version of this story included other details of the CTV office at The Cannon.)

"We are always trying to surround our members with as much support and as many resources as possible to help them succeed. Chevron's engagement with our community will help further these efforts in a really exciting way," says Lawson Gow, founder and CEO of The Cannon, in a release. Gow is the son of David Gow, owner of InnovationMap's parent company Gow Media.

Established in 1999, CTV aims to champion "the innovation, commercialization and integration of emerging technologies into Chevron," reads the Chevron website. The team seeks to identify and invest in technologies or processes that could enhance and optimize core aspects of Chevron's operations. The technologies of interest to CTV are, according to the website: Water management, production enhancement, emerging materials, power systems, information technology, and subsurface and base business.

The Cannon's commitment to helping startups find access to venture has been an ongoing goal since May of last year when The Cannon launched Cannon Ventures — a venture studio and investor network. Cannon Ventures then teamed up with a few other venture funds in December to create the Houston Investment Network Alliance.

Peek inside what the new Cannon space will look like

Courtesy of The Cannon

Houston-based Abel Design Group and Burton Construction are responsible for the designs and execution of the building.