funding fumble

Houston sees underwhelming venture capital funds in Q3 2019, following larger Texas trend

Texas venture capital deals had a slow quarter, according to Crunchbase data. Getty Images

The entire state of Texas saw an unimpressive third quarter of venture deals — especially compared to the second quarter's reports — and Houston was not immune.

The state reported $372.4 million fundraised by tech startups in Q3 of 2019, according to Crunchbase data, which is less than half of what was reported in Q3 of 2018 ($776.8 million) and what the state raked in the second quarter of this year ($830.6 million).

Houston brought in a measly $38.4 million last quarter, per Crunchbase, and compared to the $251 million raised by Houston companies in Q2, that drop stings. It's the lowest quarterly venture amount Houston's seen in over a year, and lower than Houston's $44.7 million reported for Q1. Zooming out a little, the city's venture reports remain a rollercoaster of sorts with strong quarters bookended by lousy ones.

Chart via InnovationMap using Crunchbase data.

Austin maintained its top spot on the Texas venture leader board with $236.4 million of Texas' total $372.4 million raised in Q3 2019, according to Crunchbase, but that's about $200 million less than the city raised in Q2. Meanwhile, Dallas — a city Houston usually competes with for the No. 2 spot — raised $70.3 million compared to its $126.7 million raised in Q2. The only region up in raises is categorized as "other Texas metros," which went from $7.3 million to $27.4 million between Q2 and Q3.

According to Crunchbase, the city's $38.4 million was raised in six deals between June and September 2019. The top deal of those six companies was raised by Axiom Space, which closed a $16 million in a seed round.

Crunchbase's Texas reporter, Mary Ann Azevedo, reminds readers that their proprietary data is subject to reporting delays.

"Actual deal counts and dollar volume totals are higher than what Crunchbase currently has on record, and the numbers we're reporting today are likely to change as more data gets added to Crunchbase over time," she writes.

Just like Crunchbase, InnovationMap doesn't get to report on every single venture deal. However, here are some of the raises we covered in the third quarter of this year.

  • Spruce, a service provider for apartment residents, raised a $3 million round in July. The company moved its headquarters to Austin around the same time. Read more.
  • Grab, a mobile software company that's designed an airport mobile ordering app, closed a multimillion-dollar series A this summer. Read more.
  • Fannin Partners LLC, an early-stage life science commercialization company, closed a $5.25 million round this summer. Read more.
  • Voyager, a bulk shipping software company, raised $1.5 million in seed funding in August. Read more.
  • Cemvita Factory, which created a way to mimic photosynthesis, raised an undisclosed amount from corporate partners in August and September. Read more.
  • Galen Data, which uses its cloud-based software to connect medical devices, closed a $1 million seed round in September. Read more.
  • Syzygy Plasmonics, a hydrogen fuel cell creator, closed a $5.8 million Series A round in September. Read more.
  • sEATz, an app that allows in-seat ordering, closed a $1.3 million seed round in September. Read more.
  • Sourcewater Inc., which specializes in oilfield water intelligence, closed its series A round at $7.2 million in September. Read more.
  • Topl, a blockchain developer, raised over $700,000 in its seed round in September. Read more.

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Building Houston

 
 

5G could be taking over Texas — and Houston is leading the way. Photo via Getty Images

Based on one key measure, Houston sits at the forefront of a telecom revolution that could spark a regional economic impact of more than $30 billion.

Data published recently by the Texas Comptroller's Office points out that as of last November and December, Houston led all cities in Texas for the number of so-called "small cells." Small cells are a key component in the rollout of ultra-high-speed 5G wireless communication throughout the Houston area and the country.

As the Texas Comptroller's Office explains, small cells are low-powered antennas that communicate wirelessly via radio waves. They're usually installed on existing public infrastructure like street signs or utility poles, instead of the big communication towers that transmit 4G signals.

The comptroller's tally shows Houston had approved 5,455 small-cell sites as of the November-December timeframe. That dwarfs the total number of sites (1,948) for the state's second-ranked city, Dallas.

"Houston is in the vanguard of small cell permitting in Texas, and not just because it's the state's largest city; advocates have lauded its proactive approach to 5G. Other cities, particularly smaller ones, are lagging well behind," the Comptroller's Office notes.

According to CTIA, a trade group for the wireless communications industry, 5G holds the promise to deliver an economic impact of $30.3 billion in the Houston area and create 93,700 jobs. The group says industries such as health care, energy, transportation, e-commerce, and logistics stand to benefit from the emergence of 5G.

"Maintaining world-class communications infrastructure is a requirement for success in a rapidly changing global economy. Small cells and fiber technology are the key foundational components for network densification and robust 5G. Cities like Houston that have embraced the need for this infrastructure will see the benefits of 5G faster than others," Mandy Derr, government affairs director at Houston-based communications infrastructure REIT Crown Castle International Corp. and a member of the Texas 5G Alliance, tells InnovationMap.

Derr says leaders in Houston have embraced the importance of small-cell technology through "reasonable and effective" regulations and processes aimed at boosting 5G capabilities. Three major providers of wireless service — AT&T, T-Mobile, and Verizon — offer 5G to customers in the Houston area.

"More small cells and fiber provide greater and faster access for the masses, enabling the connectivity that is essential to our businesses today — whether it's accepting payments on a mobile card reader, completing a sale on the go, or reliably reaching consumers where they are," Derr says.

In a blog post, Netrality Data Centers, which operates a data center in Houston, proclaims that Houston is shaping up to be a hub of 5G innovation.

"Houston has always been on the frontline," Mayor Sylvester Turner said during a 5G roundtable discussion in 2019. "It is who we are. It is in our DNA. We are a leading city. We didn't wait for somebody else to go to the moon. Or to be the energy capital of the world. Or the largest medical center in the world. But you don't stay at the front if you don't continue to lead."

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