Zooming out

3 observations about Houston's innovation ecosystem from out-of-town venture capitalists

Three non-Houston investors discussed the strengths and weaknesses of Houston's innovation ecosystem. Getty Images

You'll go cross-eyed looking at the same puzzle for too long, and sometimes it's better to take a step back and introduce some fresh perspectives and ideas from someone not so connected to the matter at hand.

At the second annual HX Capital Summit hosted by Houston Exponential at Rice University, HX gathered three out-of-town venture capital experts to discuss Houston's innovation ecosystem with Sandy Wallis, managing director at the HX Venture Fund. The fund-of-funds focuses on connecting non-local investors to Houston in order to bring new venture opportunities to town. On the panel, the experts discussed their observations about the Bayou City, which can be summed up as follows.

Community engagement and corporate interest are good signs for Houston 

Right off the bat, the panelists agreed that its much more encouraging visiting Houston nowadays than it was in the recent past. Clint Korver, managing director at San Francisco-based Ulu Ventures, has only recently played witness to the city, thanks to his firm's work with HX and the fund of funds.

"I'm just getting to know the Houston community," Korver says. "I'm really intrigued by how much community support there is."

Korver says that, not unlike Houston startups, Bay Area companies find it a challenge getting a foot in the door at major corporations. However, he's observed that Houston-based corporates want a seat at the table of Houston innovation.

"All the corporate attention that's being integrated here is super intriguing," Korver says. "That's our startups' hardest problems."

The other panelists, who are much closer to Houston, echoed Kover's interest in the role corporations play. Venu Shamapant, founding partner at Austin-based LiveOak Venture Partners, and Thomas Ball, founder and managing director at Austin-based Next Coast Ventures, have witnessed Houston evolve into what it is today over the past decade or so.

"We've both been coming to Houston over the past 20 years and been investing in startups, and it's been a dramatically different scene even in just the past five years," Shamapant says.

Houston's ecosystem is going to take time

While the panelists remarked on the evolution the city has and the support that large corporations seem to be willing to provide, Houston has other assets that's setting it up for success. The panelists mention a solid pool for talent, impressive educational institutions, and more.

"When I look at Houston, I think it has every ingredient for success, which is why I want to spend time here," Ball says.

Sure, as Ball says, Houston has the ingredients, but what it now needs is the time to cook.

"To me, it's more of just time that it's going to take. We can't bake this Houston cake by turning the thermostat up to 900 degrees in an hour. It's going to take three hours at 300," Ball says, adding that he doesn't know very much about baking. "It will take time. This won't be an overnight success. We're here for the long haul."

Houston has some challenges yet to overcome 

Wrapping up the panel, an audience member asked about the changes Houston still needs to make to really get to the point it needs to be at.

For Korver, the answer was pretty simple. Houston needs a big exit.

"There's this incredible amount of momentum that comes along with a successful company that takes a hold of everyone — the rising tide floats all boats thing," Korver says.

For Ball, particularly comparing Houston to other major innovation-focused cities, the issue is that Houston is so spread out.

"To me the one thing I struggle with in Houston is what I would call a density problem," Ball says. "I think you need density here and you need to concentrate your resources in certain places in this city."

Jon Nordby, Houston's MassChallenge Texas managing director, is the guest on the first episode of the Houston Innovators Podcast. Courtesy of MassChallenge

Jon Nordby has watched the city of Houston as it pivoted from innovation being a distant idea to a growing ecosystem of many moving parts and major players — all the while becoming one himself.

Nordby worked his way from advising startups and shaping the innovation coming into Houston at the Greater houston Partnership and then at Houston Exponential to now serving as the local leader for MassChallenge Texas in Houston. In fact, Nordby was a part of the team that brought MassChallenge to Houston in the first place. When he was the director of strategy at HX, the organization was discussing MCTX's Houston program.

"I guess I did a good enough job there that they invited me to be a part of the program when it launched," Nordby says on the podcast.

Nordby also discusses the program and how the inaugural cohort met — and even exceeded — his expectations in the first episode of InnovationMap's new Houston Innovators Podcast. The cohort was a shortened, smaller program, but it surprised everyone at the grand finale of the program when the Houston Angel Network gave out an investment to Houston-based Sensytec. Nordby says that's the first time a MassChallenge cohort anywhere had that opportunity.

In the podcast, Nordby shares what the next cohort will look like, and even shared how there will be two new categories within the program. MCTX will be looking for startups in the sports tech and aerospace industries and will provide special mentorship and programming for those startups. He also mentions that MCTX is gearing up for growth for its office space to be able to accomodate 100 participants in a future cohort.

Check out the podcast below for more details of MCTX's plans to expand, Nordby's take on Houston innovation, and why he's pretty glad he didn't move to Austin a few years ago.