This week's roundup of Houston innovators includes Adrianne Stone of Bayou City Startups, Sarma Velamuri of Luminare, and Curtis Jackson of G-Unity Foundation. Photos courtesy

Editor's note: In this week's roundup of Houston innovators to know, I'm introducing you to three local innovators across industries — from health tech to nonprofit — recently making headlines in Houston innovation.

Adrianne Stone, founder of Bayou City Startups

Every month, Adrianne Stone of Bayou City Startups hosts a happy hour for startup founders to create a safe space to network, collaborate, commensurate, and more. Photo courtesy of Adrianne Stone

Adrianne Stone knows firsthand how lonely the startup founder journey is, so she set out to help create a community for founders when she started Bayou City Startups last year. Now, Stone shares on the Houston Innovators Podcast that her monthly happy hours attract over 50 attendees on average.

"Being the venture associate with Capital Factory in Houston, I'd seen what the Houston ecosystem had to offer. There were events — happy hours, coffee meet-ups, all these things," Stone says on the show. "But it was not just a casual networking event usually. I wanted a consistent community where I could show up and say, 'guys, I had the worst week,' to people who got where I was coming from and who could commensurate or lean in and help."

The next opportunity to network with Bayou City Startups is Tuesday, July 18, from 5 to 7 pm at Kirby Ice House. Read more.

Sarma Velamuri, co-founder and CEO of Luminare

Sepsis has been the No. 1 killer hospitals, but this Houston startup has a tech to help mitigate the risk. Photo via Getty Images

When he was an internal medicine physician, Sarma Velamuri watched helplessly as a friend’s 22-year-old daughter lost her life to sepsis. He had to tell his friend that she would not be coming home.

“There are 300,000-plus people a year who die of sepsis,” says Velamuri. “It’s important that people understand it’s not just those who are most susceptible to infections.”

This fact is not only unfortunate, but preventable. And that’s why Velamuri, who describes himself as “a recovering hospitalist,” co-founded Luminare in 2014. A full-time CEO since 2017, Velamuri, who runs the company with co-founder and CTO Marcus Rydberg, is based in the TMC Innovation Factory. Read more.

Curtis Jackson, founder of the G-Unity Foundation

For the second year, Curtis Jackson's program supported Houston student entrepreneurs. Photo courtesy of G-Unity

Chances are, you've heard of 50 Cent — his 2003 album "Get Rich or Die Tryin'" was a soundtrack to many. But Curtis James Jackson III, 50 Cent's real name, has done a lot since gracing your radios. He moved to Houston in 2021 and founded the G-Unity Foundation. In May, he wrapped on the second year of the G-Unity Business Labs, a business development incubator for Houston Independent School District high schoolers.

"I’ve spent years donating my time and energy to communities in need. I started G-Unity to do the same—to give back to kids so they have it a little easier than I did," Jackson writes on the website. "Team building and entrepreneurship are skills I learned along the way, but they are so important to develop early. I look forward to G-Unity supporting programs that are doing the crucial work of teaching kids to excel at life."

Around 150 students participated, and the winners are splitting a $500,000 investment. Read more.

Every month, Adrianne Stone of Bayou City Startups hosts a happy hour for startup founders to create a safe space to network, collaborate, commensurate, and more. Photo courtesy of Adrianne Stone

Houston innovator dedicated to fostering community within local founders

HOUSTON INNOVATORS PODCAST EPISODE 194

Starting a company can be daunting and lonely, but entrepreneurs — at least those who call Houston home — have a monthly opportunity to connect with fellow founders thanks to Adrianne Stone.

Stone, who's had a varied career from getting her PhD in Translational Biology & Molecular Medicine at Baylor College of Medicine and joining the 23andMe team as a scientist to supporting founders at Capital Factory, launched Bayou City Startups last year to help connect Houston founders over beers. Now, Stone shares on the Houston Innovators Podcast that her monthly Bayou City Startups meetups attract over 50 attendees on average.

"Being the venture associate with Capital Factory in Houston, I'd seen what the Houston ecosystem had to offer. There were events — happy hours, coffee meet-ups, all these things," Stone says. "But it was not just a casual networking event usually. I wanted a consistent community where I could show up and say, 'guys, I had the worst week,' to people who got where I was coming from and who could commensurate or lean in and help."

Stone observes a need for that type of community more in Houston than Silicon Valley, where she worked when she was at 23andMe. The Bayou City has less of a concentrated startup scene.

"Houston and the Bay Area could not be more different in a lot of ways," she explains. "Everybody I met had a startup in California — it didn't matter if they worked somewhere else, they had a startup.

"I would love to see more of that here in Houston," Stone continues. "Our founders in Houston are super scrappy. They do so much with so little, and we just do not have the amount of capital floating around this ecosystem that you do in SF. I'd love to see more of that here too."

The next opportunity to network with Bayou City Startups is Tuesday, July 18, from 5 to 7 pm at Kirby Ice House. Stone says she picks different types of bars all over the city to meet people where they are and to offer a variety of locations. She adds that she's always up for co-hosts and partners.

Part of what makes Stone, who consults with startups in a professional capacity, an interesting point of view is her "zig-zagging" career. She's held a wide range of roles at an even wider range of professions before she made it to tech startups.

“The through line for me is following my curiosity,” she says on the show. “I was interested in politics, so I did a White House internship. I had a background in science, so I wanted to do something with it, so I went into teaching. Through teaching, I got interested in web development and blogging, so that's how I made the transition into the digital space.”

Her advice to fellow zig-zaggers? Knowing when to say no to things.

"You can overcommit yourself and you're going to burnout or drop the ball or end up disappointing people," she says, admitting she's had to get better at this herself. "Practice saying no. Make it your default. Founders tend to say yes first."

Stone shares more about her career and her observations on Houston's startup ecosystem on the show. Listen to the interview below — or wherever you stream your podcasts — and subscribe for weekly episodes.

This week's innovators to know include Richard Seline of ResilientH20, Adrianne Stone of Capital Factory, and Ethan Saadia of Wayt. Courtesy photos

3 Houston innovators to know this week

who's who

Editor'snote: All three of this week's Houston innovators to know started something new amid a global pandemic — a new job at a Texas-wide accelerator, a new app to help shops and businesses safely serve customers, and a new resilience-focused hub that launched just in time for hurricane season.

Richard Seline, managing director of ResilientH20

Richard Seline of ResilientH2O Partners explains how he's helping foster new hurricane and flood prevention technologies in the Bayou City. Photo courtesy of ResilientH20

Following Hurricane Harvey, Richard Seline saw several emerging startups focusing on flood tech. Meanwhile, he saw insurance companies very interested in finding new technologies in the same space. But, these two entities were not talking.

"It's two different languages," Seline says on the Houston Innovators Podcast. "There's a whole language and a whole mindset within the insurance industry that is not real well known."

Seline, managing director of ResilientH20, along with the Insurance Information Institute and The Cannon, has launched the Gulf Coast & Southwest Resilience Innovation Hub to foster this type of technology and bring insuratech startups and the big insurance players to the table. Stream the podcast and read more.

Adrianne Stone, venture associate for Capital Factory

Adrianne Stone has joined Capital Factory's Houston operations as the company prioritizes digital startup interaction. Photo courtesy of Capital Factory

After spending a year and a half in Silicon Valley on the products team for 23andme, Adrianne Stone is back in Houston, filling the venture associate role for Capital Factory. Stone got her Ph.D from Baylor College of Medicine and replaces Brittany Barreto, another BCM Ph.D who left the position to pursue a new venture.

"The mindset in Silicon Valley is different from how it is here in Texas — in good ways and bad ways. It was interesting to be exposed to a very potent startup vibe," Stone tells InnovationMap. "I'm looking forward to being able to meet all the cool companies, founders, and investors we have here in the Houston area." Read more.

Ethan Saadia, app developer and creator of Wayt

Ethan Saadia, a 17-year-old high school student, created an app to improve the user experience of shopping during a pandemic. Photo courtesy of Wayt

Like most of the world, Ethan Saadia has seen small, local businesses suffer from the social distancing mandates amid the COVID-19 outbreak. Saadia, a rising high school senior, wanted to do something to help.

He created Wayt, a smartphone app that provides businesses and their customers with a platform to communicate making curbside pickup, booking appointments, and even join a virtual line. Ultimately, Wayt has a great opportunity to help businesses — even outside of a pandemic

"From my perspective and experiences from my friends and family," says Saadia, "curbside pickup and virtual lines are definitely here to stay because even before the pandemic, popular places used to have long lines and that presented many new challenges. The pandemic is just accelerating technological change that will make our lives easier." Read more.

Adrianne Stone has joined Capital Factory's Houston operations as the company prioritizes digital startup interaction. Photo courtesy of Capital Factory

Statewide accelerator hires new Houston staffer and embraces 'virtual first' approach amid COVID-19

new hire

For years, Capital Factory has existed to promote innovation and grow startups across Texas and has expanded from its headquarters in Austin to Dallas, Houston, and beyond. In light of COVID-19, the organization has pivoted to make sure it can work with startups remotely and online.

"I think Capital Factory has successfully embraced virtual first," says Bryan Chambers, vice president of the accelerator and fund at Capital Factory. "I think it's gone well and it feels like we're just hitting our stride."

Chambers admits that the onset of the coronavirus had a great effect on Capital Factory — SXSW being canceled did its damage on the organization, which has a huge presence every year. However, cross-state startup collaboration is the driving force behind Capital Factory's Texas Manifesto.

"We're one big state, and we're one big startup ecosystem," Chambers says. "The resources across Dallas, Houston, Austin, North Texas, and San Antonio are available for everybody. Candidly, COVID aligns with that. There's no better time — COVID is erasing the boundaries in a virtual world."

In addition to navigating the transition to virtual operations, Capital Factory has also introduced its newest Houston staff member, as Adrianne Stone has started this week as venture associate for the organization. Stone received her Ph.D in Translational Biology and Molecular Medicine from Baylor College of Medicine before heading out to the West Coast and working at 23andme. She brings both her experience with health tech and Silicon Valley to her position.

"The mindset in Silicon Valley is different from how it is here in Texas — in good ways and bad ways. It was interesting to be exposed to a very potent startup vibe," Stone tells InnovationMap. "I'm looking forward to being able to meet all the cool companies, founders, and investors we have here in the Houston area."

Stone replaces Brittany Barreto, who helped in coordinating her replacement and is staying on part-time for the rest of August to help with training and immersion into the ecosystem. Barreto, who is one of the founders of the recently launched startup masterclass Founder's Compass, has also introduced a new brand called Femtech Focus, that includes a podcast where she talks to innovators in the women's health and wellness space.

"I'm ready to get back into the founder's saddle," Barreto says, adding that there's more to come for Femtech Focus.

Throughout her tenure, Barreto has overseen Capital Factory's Houston portfolio companies — both identifying potential investment opportunities and connecting startups to resources and mentors. She passes the torch to her former BCM classmate, and says she's excited to do so to a fellow Ph.D.

"The last year and a half, I've working really hard on laying this foundation. I don't want all that hard work to go away, so I cared a lot about who was going to take my position," she says. "I wanted to make sure that all my founders had someone who cared about them as much as I do."

Ad Placement 300x100
Ad Placement 300x600

CultureMap Emails are Awesome

Houston medical robotics startup announces $42M series C

cha-ching

A Houston medical device company that's tapping into robotics technology for the operating room has just announced a major chunk of fresh funding.

EndoQuest Robotics Inc. announced that it has closed a $42 million series C to advance its robot technology that's targeting endoluminal and gastrointestinal minimally invasive procedures. Returning investors, CE Ventures Limited and McNair Interests, and new investor, Puma Venture Capital, led the round of funding.

"Our investors share our vision of leveraging robotics to redefine the possibilities in minimally invasive procedures," Kurt Azarbarzin, CEO of EndoQuest Robotics, says in a press release. "This financing enables us to continue innovating and refining our technology, ultimately improving patient care and transforming the future of endoluminal interventions."

The funding will go toward continued research and development, regulatory initiatives, commercialization, and other key initiatives. Dr. Vipul Patel, the co-founder and senior venture partner of Puma Venture Capital, is a robotic urologic surgeon and sees potential in EndoQuest's technology.

"I've had the privilege of seeing just about every robotic surgical system either in development or on the market today and can honestly say that EndoQuest's system is a true game changer for both physicians and patients," Patel says in the release.

Founded in 2017, EndoQuest's robotics technology has not yet been cleared by the FDA and is not for commercial sale in the United States.

"The EndoQuest team is trailblazing novel solutions in minimally invasive surgery," Neeraj Agrawal, executive director of Crescent Enterprises, the parent organization to CE Ventures Limited. "We welcome our new partners, and remain fully supportive of the Company and the prospects to transform healthcare with our innovative endoluminal surgical platform."

EndoQuest Robotics is targeting endoluminal and gastrointestinal minimally invasive procedures. Image via endoquestrobotics.com

Houston expert: How to build startup runway in a choppy venture funding market

guest column

The venture funding market in 2023 has been very tough.

The number of rounds closing is significantly down from the 2022, and a record number of companies are raising. Overall VC fundraising is down, but great deals are getting funded well and at good valuations, while many are struggling. Fewer new investors are writing lead checks and being more cautious when they do, later stage investors are shifting earlier stage to manage risk, bad cap tables, operating plans, and reluctant insiders are killing otherwise good deals, and everyone is working on ensuring their portfolio is in good shape.

This is just another venture cycle. The sky is not falling, the playbook for this cycle was written long ago. But if you are a founder, you may need to take action. If you are less than 15 months of runway, it’s time to go to your investors with a plan. You need to either be well on your way to closing a round, starting your fundraise if the company is ready, know your investor group’s plan to bridge or do an inside round if necessary and what you need to achieve to unlock that, or bring them a realistic plan yourself to get to 18 to 30 months of runway. But whatever you need to do, you need to do it now.

The runway plan

The core of a good runway plan is building a cash wedge by taking a little from everywhere, and drop margin and cash. A little revenues, a little in pricing, a little headcount reduction, a little insider capital, a little new capital, and a little balance sheet help. How much a little is, depends on your own dynamic. The secret to a good cash wedge runway plan is starting early, and doing it now. Every day of delay increases the depth of the changes needed for the same runway – until you reach a point where the brutal burn math just doesn’t work, and the changes become costly or even untenable.

Focus on your customers. Nothing cures runway or fundraising ills like revenue. You’ve built these relationships for a reason. They are taking your calls because they care. If you and your team aren’t spending most of your time with customers right now, you are doing it wrong. Good customers get it. Focus their attention on how your product makes them money, and how much. Support their internal efforts to grow the account. Open book it, raise prices if it makes sense, and ask for more volume or contract extensions at good prices if you can’t. With new customers, focus on getting more phase ones that fit in the budget your champions have available quickly. Bet you and your customer can find more budget later when you’ve demonstrated value to them. Bid every grant and non-dilutive source that makes sense, which builds leverage for yourself and your investors.

Burnmatters. In a tight market, no one likes to buy burn, and demonstrating efficiency of revenue and backlog relative to capitalization and burn level matters. If you’re going to cut (and you probably should), cut much deeper than you think, and do it now. You ran this company when it was four people and no money, you can do it again if you really had to. Start making quick decisions about what you can defer and cut in the near term, there is always an easy 5 to 10 percent of costs you can cut and push to next year, and often a few points that can be pulled from supply chain deals. Overplan for growth, but don’t release to spend until your capital markets plan is clear.

Rebalance your spend. Shift your cost structure and organization chart forward towards the customer. Aggressively expand customer facing lead generation, guerilla marketing, applications engineering and direct sales efforts, at the expense of internally facing ones like R&D, manufacturing, and overhead. Repurpose people, change comp structures, job descriptions, or adjust costs and headcount. Get your team on board with the focus and where your runway is. A 12-person startup has about 2,000 labor hours a month to throw at its problems, 3,000 hours on overdrive, when your runway shortens, it’s time to hurl those at customers. Keep in mind, none of this is permanent, good startup organizations are elastic and in six months you can shift back or add again. You’re only really making 180-day changes here. That’s what the nimble startup means. It’s about runway and quick product and operational shifts.

Hit the balance sheet for cash. Depending on company stage and type, sell any underutilized assets and inventory, defer some capex, put someone on collecting AR and adjust your contract terms and pricing to pull forward cash flow, term out and negotiate payment terms on AP, leases and debt. One huge caveat. Do not take venture debt. Until you are profitable, venture debt does not actually create the runway in the real world that you see on paper, and has killed more good startups on the cusp of greatness. Venture debt is Lucy, runway is the football, and you are Charlie Brown.

Adjust your capital markets strategy. The classic rule is raise all you can when you can, because capital is available most when you need it least. But that’s not the whole story. And founders need to realize it is really dangerous to take a deal to market that is not ready, and doesn’t have the right level of insider support, is priced or structured wrong. While the market sets the price and terms, once you’ve a cap table full of investors, both new and existing investor appetite, and valuation, becomes a partial function of existing and new investor appetite and support. Take out a deal that’s not ready, or with too much burn, too little insider support, too high a last valuation, too large a convert or safe overhang or prior capitalization, too little team ownership, or too much valuation or cash need relative to its team, technology, TAM and traction (and cap table), and a founder and board can turn a good opportunity into a death spiral headed straight off a cliff, fast.

The "Magical 25" percent ratio. This is an art not a science, but the Magical 25 percent ratio on a prototypical startup will give you an idea of how powerful a Runaway Plan can be to get a deal done and reset a founder’s opportunity.

Imagine a middle of the road seed funded SaaS startup, burning $350,000 gross, with $100,000 in MRR, which has raised $3 million in cash from three investors and spent half of it. On its current trajectory it has six months of cash left, and is bankrupt by March. Market turned down, and the initial investor calls don’t result in a lead VC leaning in. The logic of burn rate math is brutal. In 90 days the company is on fumes, and it has no term sheet in hand, with the odds of getting one generally falling. And in today’s market the $1 million in ARR has become the new minimum not sufficient condition for fundraising, and the company will need to get farther on it’s A to be attractive to a B round investor. If the founder does nothing and waits 90 days they’ll be begging their investors for a bridge, and begging new investors for a flat round, and will likely end up with downround or an ugly insider bridge. At $250,000-a-month burn and no term sheet, within 150 days the founder will then need an inside round of between $4.5 and $6 million to get to the prototypical 24 month runway, or a $1.5 to $2 million bridge to buy enough more months to fundraise and build value. That’s 1.5x to 2x the capital raised, or over half the existing capital in a bridge, and puts intense pressure on strength of your cap table, growth rate, broad insider support, and quality of revenues in a tight venture funding market.

If the founder instead cuts costs 25 percent immediately, and then throws all hands on deck to find 25 percent more revenue — at this level of burn the startup probably has a team of at least 12 to 15 people, meaning the founder can throw at least 2,000-3,000 man hours in an all hands customer push in just the next 30 days if they had to. At the same time, the founder goes to his largest investors, walks through the cash and cost plan, and asks them to give him a term sheet for a seed extension with existing investors all kicking in 25 percent of their contribution to date, with the extension equal to 25 percent of the total capital at close. It can be papered fast and cheap. That adds $750,000, leaving the founder to find one new investor to join the insiders at the last price for 25 percent of the extension – a much easier ask of a new investor in a tough market, and probably one the founder has a couple of interested parties that have been watching, or certainly one of the founder’s investors can make a quick call to a friend to close. Brutal burn rate math has now become magical burn rate math and the company has 18 months of runway, has halved its net burn, and can additionally get away with half the A round equal to 1x the capital it has raised to date at the end of it if need be.

The "magical" part is the founder has now changed the odds for everyone – his team only has to find 25 percent revenues and costs. His insiders are only asked for 25 cents on the dollar support at a price they should love, leaving the typical fund with plenty of follow-on reserves after that, a new investor does not have to carry the lion share of the burn, set price, do as much dd, or worry about investor fatigue, and the insiders don’t have to go it alone and have external validation, and the founder has minimized their dilution, and their fundraising time. If the founder then is able to keep costs flat for just 6 months in a sprint and pick up another 25 percent in revenues, the runway at the current cashout date is still 16 months, and the company is set up well for its next round, with on $4 million in capitalization on nearly $2 million in ARR, a new investor with dry powder in the deal, and plenty of reserves left on the cap table to support the A, with a lot more traction – leaving the size of A round the company has to have at less than half the level of before, the effective revenue multiple insiders and new investors are facing halved, the burn the new investor had to buy halved and lots of time and options for the founder to drive value, dilution, and scale.

Founders, it’s your company. Your decision. Just be aware, how and how fast you play the tough decisions when the market shifts, changes the calculus for your investors, and their level of confidence and ammunition to back your future decisions. When you feel the market starting to tighten up, consider giving yourself, and your investors, some breathing space, then use that breathing space to drive value.

------

Neal Dikeman is a venture capitalist and seven-time startup co-founder investing out of Energy Transition Ventures.

Houston entrepreneur launches platform for on-demand ordering with biz support for restaurateurs

it's chewtyme

While Ashley Loveless Cunningham has advised clients how to fix bad credit and build a healthy financial life for years, a look at her family’s own spending on food delivery came as a wake-up call.

Like a lot of busy households, they loved to order food through delivery apps, so much so that Cunningham realized it was time for a change. With the delivery charge and other fees that apps like DoorDash and GrubHub tack on, a food order can easily double in price. A $15 bowl from Chipotle that her son liked to order cost almost $40 by the time it got to the house — and that doesn’t even include a tip for the delivery driver.

“I thought, wait a minute. This is ridiculous,” she says.

She says she brainstormed, and began to look into ways to offer an alternative, not only for consumers, but for minority-owned restaurants that were struggling to keep their doors open.

So, Cunningham, whose business ventures include her financial literacy business New Credit Inc. and a perfume line, created her own app, ChewTyme.

The app launched in Houston and Atlanta last Friday, and has drawn over 3,000 consumer downloads, which Cunningham says is a “pretty good” start.

Cunningham, 40, a native of Mobile, Alabama, says she moved to Houston with her family ten months ago, drawn by the opportunity to grow their various businesses. And, the city’s vibrant food scene offered another avenue.

“Everybody moves here to open a restaurant,” she says of Houston.

Extra support on the side

Through restaurant owner clients of her credit counseling business, she learned that many were struggling to remain open. A lot of the business owners aren’t aware of the many options available to them, in business lines of credit, assuming their own personal financial credit is in good shape.

That’s where the business education side of the app comes in, where restaurateurs will gain access to “Business University,” financial guidance for their journey in the industry.

“I tell people, it’s not only about cash funding. There are other resources out there, things we need to thrive in the business space,” she says, adding that this includes mentorship and publicity services.

Many restaurant owners told her they partner with at least two or three food delivery apps already. But she thinks ChewTyme will stand out.

“A lot of people I’ve talked to, they just don’t know where to start,” she says. Her partnership with the restaurants would solve that issue, helping restaurateurs create a “full, state-of-the-art profile” that guides them every step of the way.

While she's yet to onboard her inaugural Houston restaurants, the app has begun to draw interest, Ashley says, especially from entrepreneurs who need a cheaper way to scale their business growth.

Cunningham says ChewTyme offers a competitive alternative to many third-party apps, which she says charge anywhere from a 20-22 percent commission on a restaurant’s delivery orders. The app will charge a 17 percent commission, with no monthly fee, and a flat $4.95 delivery rate to consumers, whom she plans to attract with discounts and promotions.

She hopes to initially sign up 25 restaurants in Houston and the same number in Atlanta, during the beta run of the app. As they work out the kinks, she feels confident in expansion.

Her biggest challenge moving forward is hiring quality drivers, she says.

“That really scares me. People who want to work, who have integrity. I’ve heard horror stories because people literally pick up their food and don’t deliver it,” she says.

ChewTyme is working with contracting partners who are conducting screening and background checks for potential drivers, and onboarding restaurant owners with follow-up. Interested restaurateurs or drivers can request more information on ChewTyme's website.

Tapping into a high-growth market

Third-party food delivery exploded in popularity during the pandemic, and a 2021 McKinsey report found that food delivery more than tripled since 2017. Post-pandemic, the on-demand services industry growth hasn't waned.

The Texas Restaurant Association fought for a law passed in 2021 to prevent third-party apps from adding restaurants to a delivery platform without a financial agreement or partnership, according to Christine Robbins, executive director of the association. But now that relationship seems to have settled into a profitable venture on both sides.

Taj Walker, of H-Town Restaurant Group, which owns Hugo’s, Xochi, and six other local restaurants, says the apps don’t typically charge a fee unless the restaurant takes part in an app’s ad promotion of their restaurant.

An app’s commission can range from 10 to 25 percent, he says, which their restaurants compensate for by charging 10 percent more on app orders than in-house food. The apps have become an important revenue stream for some H-Town’s more casual eateries, especially Urbe and Prego, which are popular among younger clientele, Walker says.

While Cunningham’s main goal is to uplift minority entrepreneurs and communities, the app will be available to any restaurateur who wants it.