NanoTech closed an oversubscribed round of funding, the company announced this week. Photo courtesy of NanoTech

A Houston startup that has developed an innovative coating material that can reduce energy consumption has raised fresh funding for its cross-country expansion.

NanoTech Inc. announced its latest funding news — an oversubscribed funding round that brings onboard a handful of new investors. The details of the round were not disclosed, but NanoTech did release that the round included participation from three institutional investors, two corporate-strategic investors, and seven family offices. These entities join initial investor, Austin-based Ecliptic Capital.

NanoTech's flagship product is a waterproof thermal coating, called the Nano Shield Cool Roof Coat, which began rolling out across the country this year. Not only does the product reduce energy costs for the building owner, but it reduces emissions as well.

"It's crucial to recalibrate the sustainability narrative – environmental responsibility and financial return can go hand in hand," says Mike Francis, CEO and co-founder of NanoTech, in a news release. “We’ve transformed the roof from a cost center to a savings source by reducing energy expenditures while also significantly shrinking the building's carbon footprint.”

"The substantial decline in CO2 emissions and energy costs resulting from reduced reliance on HVAC systems is far more than a fringe benefit — it forms the cornerstone of our long-term strategy to lead the climate-resilient materials market. Beyond corporate objectives, it's a personal source of immense pride to foster a healthier planet for generations to come," Francis continues.

As the first selected company in Houston-based Halliburton Labs, NanoTech continues to benefit from the incubator's industrial scaling resources. Francis and Chief Commercial Officer Carrie Horazeck recently joined the Houston Innovators Podcast to discuss the impact their product is making as they roll out nationwide.

"It's just a coating that can go on top of existing structure — any type of commercial roof," Horazeck says on the show. "We have a pretty good amount of data from 2022 showcasing that we can reduce HVAC consumption within the building by about 30 to 40 percent.

"Our clients really see a immediate benefit in their energy bill, and, of course, if you reduce the HVAC consumption, that automatically translates to a decrease in your scope one emissions," she continues.


Mike Francis, co-founder of NanoTech, joins the Houston Innovators Podcast to discuss his plans to fireproof California. Photo courtesy of NanoTech

With fresh funds, Houston startup plans to represent the future of fireproofing

HOUSTON INNOVATORS PODCAST EPISODE 60

A few years ago, Mike Francis caught a video of a man's hand coated in some sort of material and placed over a fire. Nothing was happening to the man's hand — the coating completely protected it — but something was happening in Francis's brain, and a year ago he founded Nanotech Inc.

Based in Houston, NanoTech' is focused on reducing energy waste by proper insulation within the construction industry — a half inch of NanoTech's material is the equivalent of 30 inches of fiberglass. However, perhaps more important to Francis is the life-saving capability the product provides in terms of fireproofing.

"We're working with all of the major players in the state of California to not only fireproof the utility infrastructure, but eventually homes and businesses," Francis says on this week's episode of the Houston Innovators Podcast. "Our goal, if we're looking into the future, is to fireproof that state — and we're working with the right people and companies to make it happen."

To the best of his knowledge, Francis says NanoTech is the only company this far along working on this goal. Millions of utility poles go up in flames as the forest fires sweep through the state, and coating them with NanoTech could help prevent this damage.

Of course, as the company grows, Francis is lucky to have the support and the funds behind him and his team. Earlier this year, Halliburton selected NanoTech as the inaugural member of Halliburton Labs. For the past few months, NanoTech has been based in the labs, receiving hands-on support, and NanoTech will join the year-long inaugural cohort of 15 or so companies in 2021.

NanoTech also has a new member to its support system — and $5 million — following the close of its seed round led by Austin-based Ecliptic Capital. Francis says he was looking for an investor to bring new expertise the company doesn't have yet, and Ecliptic will be crucial to growing globally.

"Those first investors, especially in your seed round, are critical to your growth," says Francis. "We're so excited to be partnering with Ecliptic — we just trusted them."

Francis shares more about fundraising during a pandemic and what being based at Halliburton has meant for his company's growth. Listen to the full interview below — or wherever you stream your podcasts — and subscribe for weekly episodes.


Houston-based NanoTech Inc. has announced it's closed its seed round of funding. Photo courtesy of NanoTech

Houston startup closes $5M seed round led by Austin VC

Fresh funds

It's payday for a Houston startup that is housed out of the new Halliburton Labs. Nanotech Inc., which material science for fire-proofing and insulation, has announced the close of its $5 million seed round.

According to NanoTech's news release, Austin-based Ecliptic Capital led the investment round. Additionally, the deal also resulted in the conversion of a simple agreement for future equity, or SAFE, that was previously issued to Halliburton Labs.

"The investment from Ecliptic Capital will allow us to scale our business to achieve our mission of fireproofing the world and reducing global energy consumption. Additionally, our participation with Halliburton Labs provides us with the support of a Fortune 500 company." says NanoTech's CEO Mike Francis in the release.

Based in Austin, Ecliptic Capital is a fund focused on early-stage startups and supports a wide range of technologies across neglected geographies and industries.

"Ecliptic is proud to partner with NanoTech as the company's founding institutional investor," says Mike W. Erwin, founder of Ecliptic Capital, in the release. "We're excited to work with the company and leverage our operational expertise to rapidly scale this impactful, world-changing technology. We look forward to a new world where NanoTech accelerates the thermal management market from science-fiction to science-fact."

Halliburton Company chose NanoTech among a round of contenders to be the first participant of their 12-month program located at their Houston headquarters. Halliburton provides Nanotech with its own office space, access to Halliburton facilities, technical expertise, and an extensive network to accelerate their product to market.

'We are thrilled to see a Halliburton Labs participant secure their first round of financing, and congratulate the Ecliptic and NanoTech teams,' says Scott Gale, Halliburton Labs executive director, in the release. 'We are confident in the path forward as they work towards achieving a clean energy future.'

NanoTech's proprietary technology has the ability to be utilized for various industries — including commercial construction, chemical plants, oil and gas, aviation, utilities and much more — for eco-friendly spray-on insulation and fireproofing.

"As a company, we are just scratching the surface on where our technology will be used and can't wait to see the business scale." adds Mike Francis.

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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.

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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.