Ara Partners announced this week that it has acquired a majority interest in Houston-based USD Clean Fuels. Image via Getty Images

Fresh off its $3 billion fund closure, a Houston private equity firm has made its latest acquisition.

Ara Partners announced this week that it has acquired a majority interest in Houston-based USD Clean Fuels, a developer of logistics infrastructure for renewable fuels. The terms of the deal were not disclosed.

"We have high conviction that the green molecules economy – whether it's renewable fuel feedstocks or biofuels – offers disproportionate opportunity for returns and impact," George Yong, partner and co-head of Infrastructure at Ara Partners, says in a news release. "The USDCF platform is particularly compelling because it combines a best-in-class management team with a portfolio of premiere terminal logistics projects that provide the ideal foundation for a durable and scalable infrastructure business."

Included in the transaction, USDCF has acquired the West Colton Rail Terminal, a biofuels terminal operating in in California. Ara has reportedly committed additional capital to support USDCF's infrastructure footprint expansion.

"We are excited to join forces with Ara Partners to bring critical infrastructure solutions to the rapidly growing North American renewable fuel market, beginning with the West Colton Rail Terminal," Dan Borgen, CEO of USDCF, says in the release. "We are proud to be backed by an investor that is completely focused on enabling an accelerated and economical path to a low-carbon economy."

Ara Partners, which has around $5.6 billion of assets under management, closed its third fund a few weeks ago to the tune of $3 billion. The firm has offices in Houston, Boston and Dublin, Ireland, and focuses on industrial decarbonization.

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This article originally ran on EnergyCapital.

The Ion has announced the latest companies to move into the hub. Photo courtesy of The Ion

The Ion announces new tenants that have recently moved in, expanded within the hub

moving in

Several organizations — from tech startups to a nonprofit — have moved into the Ion recently to either relocate or expand their presence in Houston.

The Ion District announced new tenants today, bringing the total space leased to 86 percent, according to a news release. The recent additions to the Ion include:

  • Carbon Clean announced its new United States HQ last month. The startup’s technology has captured nearly two million tons of carbon dioxide at almost 50 sites around the world.
  • Cognite is a Norwegian software company for asset-heavy industries that turns industrial data into customer value.
  • OpenStax, a Houston-based nonprofit, is publishing openly licensed college textbooks that are free online and low cost in print.
  • Synopic is a California-based startup that's building next-gen depth-enabled cameras to improve visualization and decision making during medical procedures.
  • Houston-based Motif Neurotech, a medical equipment manufacturing startup, is working to develop minimally invasive electronic solutions for mental health.
  • RedSwan CRE, founded in Houston, is a crowdfunding-style investment platform and marketplace of tokenized commercial real estate.
  • Nauticus Robotics, a marine robotics hardtech and software company, recently went public.
  • Rice University’s Office of Innovation and its Nexus Lab, which is under construction and designed for prototyping and scaling-up technologies, is increasing its presence in the Ion.
  • Also noteworthy is the expanded office of Ara Partners, which first moved into the Ion last year. The Houston-based, global private equity firm is focused on investing in carbon decentralization technology.
  • Dallas-headquartered flexible workspace provider Common Desk announced that it would expand its space by nearly 50 percent at the Ion last December.

“Welcoming this amazing lineup of new tenants, across the breadth of sectors they represent, demonstrates that the Ion is the place to be and do business in Houston,” says Jan E. Odegard, executive director of the Ion, in the news release. “By continuing to fill our space with new innovators across all these different offerings, from all around the globe, we’ve become the home for collisions that will create solutions to the biggest problems facing our world today.

"We pride ourselves on advancing the diverse knowledge, teams, technologies, and products that will propel our world forward. Our inspiring new tenants will do just that,” he continues.

The Ion's grand opening took place just about a year ago, and existing tenants include Chevron, Microsoft, (Schlumberger) SLB Innovation Factori, Houston Methodist. The growing Ion District is home to more than 300 businesses, including corporates, small businesses, startups, and restaurants.

“The Ion continues to see leasing demand from companies that understand the value of a creative and active work environment,” says Bryson Grover, investment manager of real estate development at Rice Management Co. “Companies are choosing Ion District because it offers more than just a solution for space needs. Workers are given the opportunity to experience a sense of community that brings together like-minded individuals and those with different perspectives.”

Here's your latest roundup of Houston startup and innovation news you may have missed. Photo via Getty Images

Houston startup raises $25M, biz plan competition opens apps, and more local innovation news

Short stories

We're on the other side of the hill that is Houston's summer, but the Bayou City's still hot in terms of innovation news, and there might be some headlines you may have missed.

In this roundup of short stories within Houston startups and tech, a Houston venture capital fund has made its latest investment, a hydrogen startup has raised fresh funding, accelerators open apps, and more.

Houston hydrogen startup closes $25M series B

This hydrogen company has fresh funding. Photo via utility.global

Utility Global, a Houston-based sustainable hydrogen company, has closed its series B round of funding to the tune of $25 million, Axios reports.

Houston-based private equity firm Ara Partners led the round. Other participating investors included: Samsung Ventures, NOVA, and Aramco.

Utility Global, founded in 2018, has developed a clean hydrogen solution. The proprietary tech — called the eXERO Technology Platform — includes a zero electricity process that converts sustainable waste streams into high-purity hydrogen. Additionally, the company developed its H2Gen Product Line that delivers customers reliable, low carbon, and high purity hydrogen, which offers unparalleled feedstock flexibility and highly competitive economics.

"Leveraging our industry-first eXERO™ Process, Utility Global is expanding into numerous industrial sectors," reads the company's website. "Whether it's next-gen fueling, green chemicals, or sustainable steel, Utility Global's products can meet your needs. Our ultra-high-purity hydrogen is also ideal for the electronics, food, and glass industries. In the steel industry, our waste-to-hydrogen offering converts waste-gases into pure hydrogen, enabling decarbonization of the steel making process.

Houston female-focused VC fund leads round of fintech company

The Artemis Fund — led by Diana Murakhovskaya, Leslie Goldman, and Stephanie Campbell — has announced its latest investment. Courtesy photos

Houston-based Artemis Fund — a women-led, female-focused venture capital fund, has released information on its latest investment. The firm announced it has led the seed funding round for Los Angeles-based Payverse, a payment processor focusing on enabling global commerce via emerging technologies.

The round also saw participation from Alpha Ascent Ventures, Frank Mastrangelo, Mary Wieler, and Jonathan Palmer. Hunton Andrews Kurth LLP represented Artemis in the deal.

“The Artemis Fund invests in phenomenal female talent modernizing and diversifying wealth. Payverse is poised to transform the payments industry by making it easier and more cost-effective for businesses and consumers to transact globally," says Stephanie Campbell, general partner at The Artemis Fund, in a news release. "We are proud to lead the company’s seed round which includes other top FinTech experts and industry leaders."

Houston public service professional accelerator opens applications for its second cohort

HTXelerator is gearing up for its second cohort. Photo via HoustonTX.gov

With its mission to identify and prepare future-focused leaders for public service, specifically boards, commissions, and city council, HTXelerator, a nonprofit that launched last fall, has opened applications for the second cohort. The three-month program trains class members on the nuts and bolts of city government and ends with a competition known as The Pitch, which enables each participant to put forward a policy platform for a hypothetical race.

“The Houston region continues to grow and subsequently so does the need for public leadership to reflect the city’s dynamic diversity," says Renee Cross, senior director at the University of Houston's Hobby School of Public Affairs, in a news release. "HTXelerator will allow people with an interest in public service to learn from experts in government, non-profit organizations, academia and the private sector. Whether pursuing a leadership position or running for office, HTXelerator graduates will be ahead of the game.”

Applications are due by August 22, and the cohort members will be announced by August 29. There is no fee to apply, but the program costs $250 per participant. Scholarships are available for those that need assistance. The program kicks off with a weekend retreat September 10 and 11 and ends with The Pitch competition on December 7.

Houston startup partners with pet tech giant

Wag, Robinhood, and DonateStock have teamed up on a new initiative. Photo by Jason Briscoe on Unsplash

Houston-based DonateStock, a fintech platform that easily enables stock-based donations, has been adopted by Wag, a mobile-first marketplace for pet services. The company, which also struck a deal with Robinhood. Through these partnerships, the company has launched its Wag! Community Shares Program, a new method of charitable giving for the community of pet caregivers and for domestic pet nonprofit organizations, according to a news release.

Through its SPAC, CHW Acquisition Corp., Wag! will reserve up to 300,000 shares of common stock for the program, to be arranged through and administered by Robinhood. The company goes into more details — including information on how to participate — in the release.

“We are excited to play a key role in this ground-breaking initiative to use common stock to support domestic pet nonprofits at scale,” says Steve Latham, CEO and co-founder of DonateStock, in the release. “Our mission is to democratize charitable stock gifting. By allocating stock to more than 500 pet nonprofits, Wag! is expanding the definition of what that means.”

Annual business competition lifts off

Houston business competition opens applications

Small businesses in Houston can apply for the annual Liftoff Houston competition. Photo via liftoffhouston.smapply.org

The city of Houston's annual business plan competition has kicked off. Liftoff Houston is an entrepreneurial initiative aimed at empowering Houston entrepreneurs mentorship and business support and education.The program's sponsor, Capital One Bank, provides cash prizes totaling $30,000.

To be eligible for the startup program, the applicant:

  • Must be in the start-up phase of your business, which means you either must have a business idea or have a business in operation for less than one year
  • Must have revenue of less than $10,000
  • Must live within the city of Houston limits. Also, if you have a business location, it must be within the city of Houston limits.

Participants can also apply for the 2022 Liftoff Houston Educational Pathway. There are no eligibility requirements for that program, which will support small businesses and provide access to workshops and the final competition event.

There will be three award categories: product, service, and innovation.

  • $10,000 – Awarded for top “Product” Based Business Plan (Retail, resale, merchandise, etc.)
  • $10,000 – Awarded for top “Service” Based Business Plan (Food, labor, consulting, etc.)
  • $10,000 – Awarded for top “Innovation” Based Business Plan (Software, Hardware, inventions, new market businesses, etc.)

The competition will open applications online on July 27 and close August 19. The full schedule is online.

The energy industry is finally prioritizing new technology and greener energy — both in light of and in spite of a global pandemic. Photo via Getty Images

Overheard: Here’s what these energy VCs think of the pandemic’s effect on the energy transition

eavesdropping online

In a lot of ways, venture capital firms are tasked with predicting the future. They put money into tech and business services that are going to disrupt the status quo, and energy VCs are tasked with taking bets on the energy transition.

At a virtual event as a part of the 18th annual Rice Alliance Energy Tech Venture Forum, which is taking place online this week, a group of panelists moderated by Sandy Guitar, managing partner at the HX Venture Fund, discussed how the pandemic has affected the energy transition. The group of experts talked about the future of work, decarbonization, and more.

If you missed the event, here are a few key moments from the discussion.

“The role of digitization is going to be huge. The pandemic really exacerbated just how far oil and gas had been behind in that.”

Sean Ebert, partner at Altira. Ebert explains that when times are good for energy companies, it's hard to get the attention of executives to introduce new technologies. Now, corporations are having to invest in tech that allows their employees to be mobile and remote.

“There’s never been a better time to invest in energy technology. … We are at a point where we can get the type of returns [we look for.]”

George Coyle, managing partner at Energy Innovation Capital. Coyle adds that he's seen the pandemic effect major growth opportunities in energy startups in his portfolio.

“What we have is a sense of urgency that didn’t exist 15 years ago. Public companies virtually all have a sustainability report and need to show some sort of progress."

Cory Steffek, managing director at Ara Partners. He adds, "I really think the opportunity in the near term is de-risking software or hardware technologies and showing people that you can construct assets where they can deploy substantial amounts of capital profitably. If you have that, from a returns standpoint, you have something that should generate significant yield."

“The part we have been focused on is how can you make the conventional more efficient, so energy-on-energy conversion is even better.”

Hossam Elbadawy, managing director at SCF Ventures and technology partner at SCF Partners. He's referring to the question of whether to prioritize new low-carbon innovations or to make conventional methods more sustainable. His observation is that the solution is going to be a hybrid of both.

“When we think about the future of work, we think about what are the capabilities going to be required in the future to be able to improve operations in the field today?”

Ricardo Angel, managing director and CEO of PIVA. Angel adds that, "a lot of activities might be replaced by AI," and he and his firm are thinking about how they can go about "developing the skills for the people who will be working with those tools."

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$100M Houston VC fund launches to back technical founders

show me the money

A new venture capital fund has launched with an initial $100 million mission of supporting founders with innovative critical infrastructure solutions.

Fathom Fund, which is looking to build out a portfolio of advanced computing, material science, climate resilience, and aerospace startups, announced they've launched with an initial close of over $100 million. The fund is founded by longtime investors Managing Partners Paul Sheng and Eric Bielke.

"We believe recent technological advances have accelerated the pace of scientific discovery, increasing the pool of technology companies that can produce venture-scale returns," Sheng says in a news release.

According to the fund, it hopes to bridge the gap for early stage capital for physical innovations and "moonshot" projects.

“What’s lacking in venture is rigorous technical diligence at the early stages and a playbook to scale these innovations at the pace necessary to lead industries," Bielke adds. "With this launch, we are looking forward to supporting founders with some of the most disruptive and novel ideas.”

The founder duo will bring each of the career expertise to their future portfolio companies. Sheng spent decades at McKinsey & Co and was the firm's head of the Global Energy & Materials practice. Bielke is a former director at Temasek’s Emerging Technologies Fund.

Houston is the 4th best U.S. city for Black professionals, report finds

Black History Month

In acknowledgement of Black History Month 2024, a new report compiled by Black employees at online rental marketplace Apartment List has ranked Houston the No. 4 best U.S. city for Black professionals.

Apartment List reviewed 76 cities across four major categories to determine the rankings: community and representation; economic opportunity; housing opportunity; and business environment.

Houston earned a score of 63.01 out of a total 100 points, making it the second-highest-ranked city in Texas for Black professionals, behind San Antonio (No. 3).

The city earned top-10 rankings in three out of the four main categories:

  • No. 3 – Business environment
  • No. 4 – Community and representation
  • No. 10 – Economic opportunity
  • No. 21 – Housing opportunity

Houston is commended for its strong Black business environment and economy, but there is some room for improvement when it comes to housing. Similarly to Apartment List's 2022 report – which also placed Houston at No. 4 – a little less than half (44 percent) of all Black Houston households are spending over 30 percent of their income on housing, which has increased two percent since 2019.

Houston has a larger Black population than San Antonio, at 19 percent, but its Black population share is overall lower than other cities in the top 10.

"Furthermore, the community is well-represented in some critical occupations: 20 percent of teachers are Black, as are 21 percent of doctors," the report said. "Houston is also home to the HBCU Texas Southern University, helping a job market when the median Black income is several thousand dollars above average."

Houston also has the highest rate of Black-owned businesses in the entire state, at 18 percent.

"From the Mitochondria Gallery to Ten Skyncare and Wisdom’s Vegan Bakery, Houston has it all!" the report said.

Here's how Houston stacked up in other metrics:

  • Black homeownership: 42 percent
  • Black lawyers: 14 percent
  • Black managers: 14 percent

Elsewhere in Texas
Texas cities dominated the overall top 10. San Antonio ranked just above Houston, with Dallas (No. 6) and Austin (No. 7) not too far behind.

San Antonio came in less than 2.5 points ahead of Houston with a total score of 65.44 points. The report praised San Antonio's scores across its economic opportunity (No. 2), housing opportunity (No. 7), and community and representation (No. 10). The city ranked No. 20 for its Black business environment.

But like Houston, San Antonio also fell behind in its Black homeownership rates, according to the study.

"While the Black homeownership rate is higher than average at 44 percent, the homeownership gap (Black homeownership rate - non-Black homeownership rate) quite low at -19 percent," the report's author wrote. "Perhaps this could be explained by San Antonio’s overall homeownership rate, which is also lower than the state’s average. Additionally, the lower homeownership gap could explain the cost burden rate also being lower than average at 41 percent."

The top 10 cities for Black professionals are:

  • No. 1 – Washington, D.C.
  • No. 2 – Atlanta, Georgia
  • No. 3 – San Antonio, Texas
  • No. 4 – Houston, Texas
  • No. 5 – Palm Bay, Florida
  • No. 6 – Dallas, Texas
  • No. 7 – Austin, Texas
  • No. 8 – Colorado Springs, Colorado
  • No. 9 – Lakeland, Florida
  • No. 10 – Charlotte, North Carolina
The full report and its methodology can be found on apartmentlist.com.

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This article originally ran on CultureMap.

Houston expert: Can Houston replicate and surpass the success of Silicon Valley?

guest column

Anyone who knows me knows, as a Houston Startup Founder, I often muse about the still developing potential for startups in Houston, especially considering the amount of industry here, subject matter expertise, capital, and size.

For example, Houston is No. 2 in the country for Fortune 500 Companies — with 26 Bayou City companies on the list — behind only NYC, which has 47 ranked corporations, according to Fortune.

Considering layoffs, fund closings, and down rounds, things aren’t all that peachy in San Francisco for the first time in a long time, and despite being a Berkeley native, I’m rooting for Houston now that I’m a transplant.

Let’s start by looking at some stats.

While we’re not No. 1 in all areas, I believe we have the building blocks to be a major player in startups, and in tech (and not just energy and space tech). How? If the best predictor of future success is history, why not use the template of the GOAT of all startup cities: San Francisco and YCombinator. Sorry fellow founders – you’ve heard me talk about this repeatedly.

YCombinator is considered the GOAT of Startup Accelerators/Incubators based on:

  1. The Startup success rate: I’ve heard it’s as high as 75 percent (vs. the national average of 5 to 10 percent) Arc Search says 50 percent of YC Co’s fail within 12 years – not shabby.
  2. Their startup-to-unicorn ratio: 5 to 7 percent of YC startups become unicorns depending on the source — according to an Arc Search search (if you haven’t tried Arc Search do – super cool).
  3. Their network.

YC also parlayed that success into a "YC Startup School" offering:

  1. Free weekly lessons by YC partners — sometimes featuring unicorn alumni
  2. A document and video Library (YC SAFE, etc)
  3. Startup perks for students (AWS cloud credits, etc.)
  4. YC co-founder matching to help founders meet co-founders

Finally, there’s the over $80 billion in returns, according to Arc search, they’ve generated since their 2005 inception with a total of 4,000 companies in their portfolio at over $600 billion in value. So GOAT? Well just for perspective there were a jaw-dropping 18,000 startups in startup school the year I participated – so GOAT indeed.

So how do they do it? Based on anecdotal evidence, their winning formula is said to be the following well-oiled process:

  1. Bring over 282 startups (the number in last cohort) to San Francisco for 90 days to prototype, refine the product, and land on the go-to-market strategy. This includes a pre-seed YC SAFE investment of a phased $500,000 commitment for a fixed min 7 percent of equity, plus more equity at the next round’s valuation, according to YC.
  2. Over 50 percent of the latest cohort were idea stage and heavily AI focused.
  3. Traction day: inter-portfolio traction the company. YC has over 4,000 portfolio companies who can and do sign up for each other’s companies products because “they’re told to."
  4. Get beta testers and test from YC portfolio companies and YC network.
  5. If they see the traction scales to a massively scalable business, they lead the seed round and get this: schedule and attend the VC meetings with the founders.
  6. They create a "fear of missing out" mentality on Sand Hill Road as they casually mention who they’re meeting with next.
  7. They block competitors in the sector by getting the top VC’s to co-invest with then in the seed so competitors are locked out of the A list VC funding market, who then are up against the most well-funded and buzzed about players in the space.

If what I've seen is true, within a six-month period a startup idea is prototyped, tested, pivoted, launched, tractioned, seeded, and juiced for scale with people who can ‘make’ the company all in their corner, if not already on their board.

So how on earth can Houston best this?

  1. We have a massive amount of businesses — around 200,000 — and people — an estimated 7.3 million and growing.
  2. We have capital in search of an identity beyond oil.
  3. Our Fortune 500 companies that are hiring consultants for things that startups here that can do for free, quicker, and for a fraction of the extended cost.
  4. We have a growing base of tech talent for potential machine learning and artificial intelligence talent
  5. A sudden shot at the increasingly laid off big tech engineers.
  6. We have more accelerators and incubators.

What do we need to pull it off?

  1. An organized well-oiled YC-like process
  2. An inter-Houston traction process
  3. An "Adopt a Startup" program where local companies are willing to beta test and iterate with emerging startup products
  4. We have more accelerators but the cohorts are small — average five to 10 per cohort.
  5. Strategic pre-seed funding, possibly with corporate partners (who can make the company by being a client) and who de-risk the investment.
  6. Companies here to use Houston startup’s products first when they’re launched.
  7. A forum to match companies’ projects or labs groups etc., to startups who can solve them.
  8. A process in place to pull all these pieces together in an organized, structured sequence.

There is one thing missing in the list: there has to be an entity or a person who wants to make this happen. Someone who sees all the pieces, and has the desire, energy and clout to make it happen; and we all know this is the hardest part. And so for now, our hopes of besting YC may be up in the air as well.

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Jo Clark is the founder of Circle.ooo, a Houston-based tech startup that's streamlining events management.