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.

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Building Houston

 
 

This Houston-based SPAC has announced the tech company it plans to merge with. Photo courtesy of Gow Media

A Houston SPAC, or special purpose acquisition company, has announced the company it plans to merge with in the new year.

Beaumont-based Infrared Cameras Holdings Inc., a provider of thermal imaging platforms, and Houston-based SportsMap Tech Acquisition Corp. (NASDAQ: SMAP), a publicly-traded SPAC with $117 million held in trust, announced their agreement for ICI to IPO via SPAC.

Originally announced in the fall of last year, the blank-check company is led by David Gow, CEO and chairman. Gow is also chairman and CEO of Gow Media, which owns digital media outlets SportsMap, CultureMap, and InnovationMap, as well as the SportsMap Radio Network, ESPN 97.5 and 92.5.

The deal will close in the first half of 2023, according to a news release, and the combined company will be renamed Infrared Cameras Holdings Inc. and will be listed on NASDAQ under a new ticker symbol.

“ICI is extremely excited to partner with David Gow and SportsMap as we continue to deliver our innovative software and hardware solutions," says Gary Strahan, founder and CEO of ICI, in the release. "We believe our software and sensor technology can change the way companies across industries perform predictive maintenance to ensure reliability, environmental integrity, and safety through AI and machine learning.”

Strahan will continue to serve as CEO of the combined company, and Gow will become chairman of the board. The transaction values the combined company at a pre-money equity valuation of $100 million, according to the release, and existing ICI shareholders will roll 100 percent of their equity into the combined company as part of the transaction.

“We believe ICI is poised for strong growth," Gow says in the release. "The company has a strong value proposition, detecting the overheating of equipment in industrial settings. ICI also has assembled a strong management team to execute on the opportunity. We are delighted to combine our SPAC with ICI.”

Founded in 1995, ICI provides infrared and imaging technology — as well as service, training, and equipment repairs — to various businesses and individuals across industries.

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