Texas angel investor group expands to make impact in Houston

angels flying in

Austin-founded SWAN Impact Network has entered the Houston innovation ecosystem. Photo via Getty Images

An angel investment network founded in Austin has announced its entrance into the Houston market.

SWAN Impact Network, which focuses on funding early-stage, impact-driven startups, announced that Houston will be its next market expansion. Founded in 2016, the organization expanded to Dallas two years ago. Now, SWAN is hitting the Bayou City and is actively looking for potential angel investors to join its network.

"Houston is the logical place for us to go because a lot of our deep expertise we developed is grounded around life science, health and wellness, and environmental," Bob Bridge, executive director of SWAN, tells InnovationMap. "There's a lot of people in Houston in the spaces where we've spent most of our time and money."

SWAN, originally founded as the Southwest Angel Network, has grown from several investors to over 80 across Texas. The investors, who meet virtually, range from former entrepreneurs, seasoned investors, and first time angels.

Valerie Tompson, who's serving as the Houston market lead, is an example of someone who was drawn to SWAN's mission, even though she had never invested in startups before.

"I was intrigued by the idea of being able to invest in companies that are making a difference in the world — and it's not a charitable donation," she says, explaining that joining a network allowed for her to learn the ropes and understand the process.

Bridge says they are looking to add 20 Houston investors over the next year. He says they are also interested in adding on volunteer analysts to help in the diligence work of the group. Whether you're a frequent investor or just interested in learning more, SWAN's door is open.

"We encourage new angels not to invest at first — go with us for a ride for six months, learn how we think about companies, see a bunch of companies pitch," Bridge says. "Once they start to get the comfort level up, then they can start making investors. We're very much about helping new angels get comfortable."

Currently, SWAN has two Houston startups — Scriptly Rx and Eisana — in its investment portfolio. In addition to the investor network, SWAN, a nonprofit organization, also has its SWAN Impact Philanthropic Fund that also invests in impact-driven businesses.

SWAN is hosting an event at the Ion on Wednesday, May 31, at 6 pm to celebrate its new Houston expansion, as well as to host a panel discussing impact investing. The event is free to attend, and registration is open.

Valerie Tompson, Houston chapter lead, and Bob Bridge, executive director, will be at the May 31 event. Photos courtesy of SWAN

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2020 brought over $700 million in venture funding deals into Houston, and startups saw larger deals in the first half of the year with a growing interest in angel activity. Image via Getty Images

Report: 2020 brought fewer, larger VC deals for Houston — but angel investment is on the rise

venture capital update

Houston startup's venture capital deals continue to grow in 2020, according to a new report from Houston Exponential. Last year, VC dollars were up, while deal count was down, representing more mature deals coming into the ecosystem — but the second half of the year was defined by a growth in angel investment interest.

The report by Serafina Lalany, chief of staff for HX, found that the Bayou City brought saw $715 million across 117 VC deals, according to Pitch Book data. It's the fourth year Houston has seen VC growth, and last year the city reported over $563 million across 168 deals.

"Houston has put concerted efforts into building its innovation ecosystem," says Harvin Moore, president of HX, in a release, "and 2020's record-breaking results show we are seeing not only resilience in the tech sector, but a significant increase in the rate of formation and success of growth-stage companies, which have an outsized effect on our local economy in terms of high paying job potential and Houston's increasing attractiveness as a great place to work."

Last August, HX published a report on the first half of the year and that study found that Houston — facing the challenges of both the pandemic and the oil price drop — managed to see a 7 percent increase in funding compared to the national average of 2.5 percent. With the second half of the year, the city's VC increase from last year was over 25 percent and up 252 percent since 2014.

The other difference between the first and second halves of the year for Houston VC was the stages of the deals made. Most of Houston's larger deals took place in the first and second quarters — and even the beginning of Q3 — of 2020:

But the second half of the year seemed like Houston's earlier stage VC activity returned, and Blair Garrou, managing partner at Houston-based Mercury Fund, confirmed this to InnovationMap on the Houston Innovator's Podcast in December.

"Seed rounds have definitely bounced back. We're seeing a lot of seed activity, because there's been a lot of seed funds raised," Garrou said on the podcast, adding that he's observed an increase in angel investment interest. "People are realizing that money is in innovation and tech — especially in software."

In her report, Lalany found that in Houston, angel investments are out-pacing seed, creating a "competitive environment."

"The addition of multi-stage and nontraditional investment firms into the arena has created upward pressure in deal valuations and sizes. The average seed round in 2015 was $1 million, whereas today it's double that," the report reads. "With these firms turning inward to focus on protecting their current investments at the start of the pandemic, the propensity for smaller, more riskier investments have declined."

Stephanie Campbell, managing director of the Houston Angel Network, said she's seen a rise in new membership for the organization. Last August, she was on track to get to 150 members — up from just 60 in 2018.

"Despite COVID, we've continued to grow," Campbell told InnovationMap, adding that she's heard investors express that they have more time now to dive in. "People are very much still interested in learning about deploying their capital into early-stage venture. They're looking for a network of like-minded individuals."

In contrast to this early stage activity, the VC activity that was still occurring was defined by larger deals. With VC essentially halting in March and April — especially in cities like Houston, Garrou adds — it makes sense that investors wanted more "sure things" and would invest more funds into companies they already know, versus being able to source new deals in person.

"When you go to later stages, there are a lot fewer deals going on," Garrou continues on the podcast. "Now, there may be larger investments being made, but I think they are into fewer companies, and I think that's just due to the the pandemic and the ability just to not be able to do face-to-face."

As Houston moves through 2021, the city is poised well for more growth and a continued diversification from just oil and gas, as Moore says in the release.

"Houston Exponential was created four years ago by civic and business leaders to deal with an existential problem: our dependence on the energy and medical sector without a thriving startup culture to lead us towards a future that will look very different from the past," he says. "COVID and the de-carbonization movement have made that need much more urgent — it's both a huge challenge and an enormous opportunity."

The SEC expanded its definition of accredited investors, so now is the time for potential venture capitalists and angels to step up. Pexels

Here's what the new SEC accredited investor definition means for potential Houston VCs

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This month. the Security and Exchange Commission, or SEC, modified the definition of "accredited investor," with the effect of dramatically increasing the number of people eligible to participate in non-publicly traded investments.

The SEC definition of accredited investor establishes requirements for who may invest in private deals, startups, and private funds. These rules are meant to protect individuals from investing in assets that are high risk and have little publicly accessible information.

Historically, accredited investor status was limited to those that met certain wealth or income thresholds — specifically, a net worth of $1 million excluding primary residence, or $200,000 in annual income for an individual or $300,000 combined annual income for married couples. The SEC's thinking was that higher net worth individuals or higher earners likely have the sophistication to evaluate the risks and the ability to financially withstand potentially losing money they invested in a private investment.

However, with fewer companies going public and an increased interest in participating in private deals, startups, and funds many have suggested the accredited investor rule appeared more and more antiquated.

The SEC's new definition adds individuals with certain professional certifications (Series 7, Series 65, or Series 82 license) and "knowledgeable employees" at private funds, regardless of an individual's level of wealth or income.

Now, individuals with heavy involvement in and responsibility for investment activities and those with financial certifications are assumed to have the financial sophistication and ability to assess the risks of private investments. The SEC also added the clients and employees of family offices, which are investment arms of high net worth families. In addition, the SEC also expanded the married couples' income calculation to include "spousal equivalent" to capture non-married couples.

It remains to be seen whether these additions to the definition of accredited investors will add a significant number of new angel investors, as many of the individuals with such certifications already meet the previous net worth or income requirements. The startup ecosystem, however, has welcomed the move away from wealth and income criteria, as a good first step toward opening the private offering markets to more qualified individuals.

If you now find yourself meeting any of these qualifications of accredited investor, what now? The Houston Angel Network is a great resource to help you navigate these new waters, by providing a framework and network to learn how to evaluate investment opportunities. A common rule of thumb is that nine out of ten startups fail and will return zero dollars to investors. It is prudent to invest in several startups or through a fund with experienced and capable managers to get the needed diversification to expect a return on your investment in this asset class.

Angel networks throughout the country exist to educate accredited investors and provide a network of sophisticated and experienced individuals across industries to support due diligence. By working together and learning from experienced investors, newly accredited investors can avoid common investment mistakes and can develop skills to evaluate non-public investment opportunities.

The upshot of the expansion of accredited investors is that the SEC still expects such investors to be sophisticated and well educated about investment opportunities with high risks and rewards. Investors new to non-public markets should consider joining a network like the Houston Angel Network, where they can see hundreds of startups a year and learn from experienced investors.

Additionally, new accredited investors can engage in the local startup community by volunteering their services as a mentor at a local startup development organization like the Ion, Rice Alliance, Capital Factory, Mass Challenge, Plug and Play and many more. If you are considering investing in startups or a fund, please reach out to us at the Houston Angel Network for more ways to get involved and learn.

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Stephanie Campbell is managing director of Houston Angel Network and co-founder of The Artemis Fund.

Over the past few years, the Houston Angel Network has doubled its members and continues to grow despite COVID-19's economic effects. Photo via Getty Images

Houston Angel Network sees membership growth amid pandemic

investing in investors

While the COVID-19 pandemic caused some investors to hit pause on some deals, the Houston Angel Network, which has doubled its membership over the past couple years, has maintained its deal flow and investment, while taking every opportunity to connect members virtually.

"Nothing's really changed — in terms of our activity — other than the fact that we can't meet in person," says Stephanie Campbell, managing director of HAN. "We quickly pivoted to virtual."

Campbell — who also is also a founding partner at Houston-based, female-focused venture capital group, The Artemis Fund — says she still saw the interest and need on each side of venture deals.

"What I realized was, especially working at a venture fund, the deal flow isn't going away. Companies still need capital — and investors are still interested in looking at deals," Campbell tells InnovationMap.

HAN, which was founded as a nonprofit in 2001, continues to be touted as among the most active angel network in the country. The organization has five industry groups that it focuses its deals on — energy, life sciences, technology, consumer products, and aerospace.

At each monthly meeting, members hear three pitches. However, Campbell is vetting many more companies far more deals and passing them along the network as she goes. All in all, HAN investors do around 100 deals a year with an average investment of $100,000.

Since Campbell joined in 2018, membership has doubled from 60 members to 120. Campbell says it's her goal to get to 150 members by the end of the year.

Stephanie Campbell has led HAN as managing director since 2018.

"Despite COVID, we've continued to grow," Campbell says, adding that she's heard investors express that they have more time now to dive in. "People are very much still interested in learning about deploying their capital into early-stage venture. They're looking for a network of like-minded individuals."

Campbell explains that, with the switch to virtual pitches and events, HAN is congregating more than ever. In the spring, Campbell introduced a thought leadership series, called Venture Vs. The Virus, that brought investment leaders together to discuss how the pandemic was affecting venture capital.

HAN is also using this time to better tap into technology to connect members with startups. On the back end, Campbell says, she's looking to enhance digital engagement with members and also improve data reporting within the organization.

From increasing networking and educational events and growing membership, HAN is prioritizing growing its place in the Houston innovation ecosystem. Campbell says she sees the pandemic is causing investors and tech talent on the coasts to re-evaluate where their living, and that's going to benefit Texas. Houston is going to see an influx of tech talent coming to town, and that's going to translate to more startups being founded locally.

"We want to make sure that we are a big part of this transition toward a more diverse and resilient economy," Campbell says. "Now's the time to lean in on Houston."

Teamwork makes the dream work, and this new investor alliance hopes to make Houston startups' dreams of seed funding come true. Getty Images

Investors join forces for citywide alliance to increase access to early-stage capital

Teamwork makes the dream work

Securing funding for your startup is now a one-stop shopping experience. Over 200 accredited investors have teamed up to create the Houston Investment Network Alliance — a platform that promotes investment opportunities and mentorship for early-stage companies.

HINA is a collaboration where participating investors can partner up to co-invest in startups, co-host investor events, and share opportunities.

Behind the alliance are four Houston investment entities: the Houston Angel Network, Rice Angel Network, GOOSE Society of Texas, and Cannon Ventures.

"HAN and the Goose Society have invested over $150M in early stage companies over the last decade. The appetite for startup investing continues to be alive and strong in Houston," says Stephanie Campbell, HAN managing director, in a release. "The birth of new groups like RAN and Cannon Ventures demonstrates a new and growing appetite for investment."

Each of the organizations have connections to Rice University and previously worked together on a sports technology-focused pitch night hosted at The Cannon, a West Houston coworking space lead by CEO and founder, Lawson Gow. Gow is the son of David Gow, owner of InnovationMap's parent company Gow Media.

The Cannon launched its own fund, Cannon Ventures, about seven months ago. It has four startup partners: SEATz, Win-Win, Data Gumbo, and SeeHerWork. Each Cannon Ventures startup partner will received anywhere between $100,000 to $400,000 of seed funding as well as access to space in The Cannon and its accelerator opportunities, Gow says.

Cannon Ventures has already also collaborated with the other HINA organizations. The Rice Angel Network is even based out The Cannon.

"We're increasingly co-investing with other angel networks," Gow says, "because it's hard to start a company and raise money, so the more we can do that to help Houston startups get the money they need."

According to Gow, Houston's thriving startup scene and deep pockets is a perfect opportunity for HINA.

"One of the great things about Houston is we've got a lot of money here," he says. "One of the most transformative things we can do for the startup community is get a lot of high-net worth individuals is get them off the bench and onto the field and activate them as regular angel investors into Houston-based startups. That's a really important goal of Cannon Ventures is to grow our membership base and get ore people involved."

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Houston hospital names leading cancer scientist as new academic head

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Houston Methodist Academic Institute has named cancer clinician and scientist Dr. Jenny Chang as its new executive vice president, president, CEO, and chief academic officer.

Chang was selected following a national search and will succeed Dr. H. Dirk Sostman, who will retire in February after 20 years of leadership. Chang is the director of the Houston Methodist Dr. Mary and Ron Neal Cancer Center and the Emily Herrmann Presidential Distinguished Chair in Cancer Research. She has been with Houston Methodist for 15 years.

Over the last five years, Chang has served as the institute’s chief clinical science officer and is credited with strengthening cancer clinical trials. Her work has focused on therapy-resistant cancer stem cells and their treatment, particularly relating to breast cancer.

Her work has generated more than $35 million in funding for Houston Methodist from organizations like the National Institutes of Health and the National Cancer Institute, according to the health care system. In 2021, Dr. Mary Neal and her husband Ron Neal, whom the cancer center is now named after, donated $25 million to support her and her team’s research on advanced cancer therapy.

In her new role, Chang will work to expand clinical and translational research and education across Houston Methodist in digital health, robotics and bioengineered therapeutics.

“Dr. Chang’s dedication to Houston Methodist is unparalleled,” Dr. Marc L. Boom, Houston Methodist president and CEO, said in a news release. “She is committed to our mission and to helping our patients, and her clinical expertise, research innovation and health care leadership make her the ideal choice for leading our academic mission into an exciting new chapter.”

Chang is a member of the American Association of Cancer Research (AACR) Stand Up to Cancer Scientific Advisory Council. She earned her medical degree from Cambridge University in England and completed fellowship training in medical oncology at the Royal Marsden Hospital/Institute for Cancer Research. She earned her research doctorate from the University of London.

She is also a professor at Weill Cornell Medical School, which is affiliated with the Houston Methodist Academic Institute.

Texas A&M awarded $1.3M federal grant to develop clean energy tech from electronic waste

seeing green

Texas A&M University in College Station has received a nearly $1.3 million federal grant for development of clean energy technology.

The university will use the $1,280,553 grant from the U.S. Department of Energy to develop a cost-effective, sustainable method for extracting rare earth elements from electronic waste.

Rare earth elements (REEs) are a set of 17 metallic elements.

“REEs are essential components of more than 200 products, especially high-tech consumer products, such as cellular telephones, computer hard drives, electric and hybrid vehicles, and flat-screen monitors and televisions,” according to the Eos news website.

REEs also are found in defense equipment and technology such as electronic displays, guidance systems, lasers, and radar and sonar systems, says Eos.

The grant awarded to Texas A&M was among $17 million in DOE grants given to 14 projects that seek to accelerate innovation in the critical materials sector. The federal Energy Act of 2020 defines a critical material — such as aluminum, cobalt, copper, lithium, magnesium, nickel, and platinum — as a substance that faces a high risk of supply chain disruption and “serves an essential function” in the energy sector.

“DOE is helping reduce the nation’s dependence on foreign supply chains through innovative solutions that will tap domestic sources of the critical materials needed for next-generation technologies,” says U.S. Energy Secretary Jennifer Granholm. “These investments — part of our industrial strategy — will keep America’s growing manufacturing industry competitive while delivering economic benefits to communities nationwide.”

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This article originally appeared on EnergyCapital.

Biosciences startup becomes Texas' first decacorn after latest funding

A Dallas-based biosciences startup whose backers include millionaire investors from Austin and Dallas has reached decacorn status — a valuation of at least $10 billion — after hauling in a series C funding round of $200 million, the company announced this month. Colossal Biosciences is reportedly the first Texas startup to rise to the decacorn level.

Colossal, which specializes in genetic engineering technology designed to bring back or protect various species, received the $200 million from TWG Global, an investment conglomerate led by billionaire investors Mark Walter and Thomas Tull. Walter is part owner of Major League Baseball’s Los Angeles Dodgers, and Tull is part owner of the NFL’s Pittsburgh Steelers.

Among the projects Colossal is tackling is the resurrection of three extinct animals — the dodo bird, Tasmanian tiger and woolly mammoth — through the use of DNA and genomics.

The latest round of funding values Colossal at $10.2 billion. Since launching in 2021, the startup has raised $435 million in venture capital.

In addition to Walter and Tull, Colossal’s investors include prominent video game developer Richard Garriott of Austin and private equity veteran Victor Vescov of Dallas. The two millionaires are known for their exploits as undersea explorers and tourist astronauts.

Aside from Colossal’s ties to Dallas and Austin, the startup has a Houston connection.

The company teamed up with Baylor College of Medicine researcher Paul Ling to develop a vaccine for elephant endotheliotropic herpesvirus (EEHV), the deadliest disease among young elephants. In partnership with the Houston Zoo, Ling’s lab at the Baylor College of Medicine has set up a research program that focuses on diagnosing and treating EEHV, and on coming up with a vaccine to protect elephants against the disease. Ling and the BCMe are members of the North American EEHV Advisory Group.

Colossal operates research labs Dallas, Boston and Melbourne, Australia.

“Colossal is the leading company working at the intersection of AI, computational biology, and genetic engineering for both de-extinction and species preservation,” Walter, CEO of TWG Globa, said in a news release. “Colossal has assembled a world-class team that has already driven, in a short period of time, significant technology innovations and impact in advancing conservation, which is a core value of TWG Global.”

Well-known genetics researcher George Church, co-founder of Colossal, calls the startup “a revolutionary genetics company making science fiction into science fact.”

“We are creating the technology to build de-extinction science and scale conservation biology,” he added, “particularly for endangered and at-risk species.”

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