Houston-based energy tech investor Neal Dikeman writes his observations on Houston's venture capital and startup community's growth — in stark comparison of Silicon Valley's recent evolution. Photo courtesy of the Ion

There's stretch of sleek low rise office buildings in Palo Alto — referred to as Sandhill Road — that has long been the center of Silicon Valley (and the world’s) venture capital sector. An investor friend of mine told me recently that Sandhill Road is a ghost town these days, with the key partners at many of the Silicon Valley venture funds largely working from home or at their second homes.

That’s disappointing if true, but not surprising. Commuting sucks, and this business is a lot more far flung and global than it used to be. The venture capital business is always a wild and fun ride, focused on founders and the next big thing, with constant movement and alliances and partnerships.

I’ve been in these waves since I began investing during the dotcom boom in 2000, making the jump from private equity to venture capital in San Francisco at a fund behind Yellowpages.com and a few others, before co-leading a prior firm I founded in San Francisco doing seed investing and advising funds and investment arms of Macquarie Bank, ConocoPhillips, and Shell. We got in on the ground floor of cleantech and did well. This is my third major VC downcycle – there is always opportunity on both sides, and the more things change, the more they stay the same in venture capital. Hubs matter, because the business is heavily a critical mass of talent and capital business, with a power curve of outcomes. Cutthroat as venture capital and startups are, it is not private equity. You do need partners.

Houston has long lacked a center of gravity at all, let alone in tech. You might try rereading the 2001 Economist headline article “The Blob that Ate East Texas” for some humorous color on that score. But in tech, that’s changing.

Rice University’s Ion Houston innovation district project came out of some of the Greater Houston Partnership work a few years ago on how to get a serious tech hub going (I briefly served on the GHP affiliated Houston Technology Center board for Royal Dutch Shell during that revamp). After a slow start, Ion has begun to fill up with tech startups and bona fide check writing investors to go with the constant barrage of startup programming on its Ion Activation Floor and adjacent Greentown Labs incubation building.

Chevron Technology Ventures opened a guest office on day one on the third floor and Houston private equity and sometime crossover VC investor Ara Partners took early space with its headquarters in the building across the hall from them. Local fund of funds HX Venture Fund, which was created out of that GHP/HTC revamp and also puts on the Venture Houston Conference, moved in on the second floor.

Our fund, Energy Transition Ventures, was the first venture capital fund to move into the Ion when we launched in 2021, is located two doors down from HXVF. My partners and I made the call to make Houston our headquarters over Austin where my partner, Craig Lawrence, is located. He’s a former energy tech and solar executive who learned venture investing leading the successful cleantech effort at Accel Partners in Palo Alto. We are both Texas educated, Bay Area venture capital alums who are doing venture capital in Texas because it’s our home. Our third partner, Q Song, moved from Korea to the US, picking Houston over Austin and our Bay Area office to join us.

Houston was not the obvious choice – it still isn’t – I got nostalgia when driving through Austin and San Francisco in the last week seeing the sheer mass of tech and venture capital names to do business with, but doing things our own way is kind of our brand. We chose the Ion, because well, venture capital and startup life is a participation not a spectator sport, and if Houston was ever going to have a shot at being an investment hub, it needed an actual hub, and founders needed a place to go meet venture capitalists, and that won’t work if venture capitalists all work out of their homes or alone in some energy corridor or downtown high rise.

In our hallway of the Ion, you pass HX Venture Fund, Decarbonization Partners, Energy Transition Ventures, and WaterLens, a water testing startup which spun out of UT many years ago, all next door to each other at one end. And at the other end BP Ventures — with a newly added ExxonMobil venture capital team guest suite adjacent — next to water and energy pipeline corrosion detection software and hardware startup INGU, a Chevron Technology Ventures-backed startup, which is adjacent to one of Houston’s largest venture-backed SaaS companies, Liongard. That’s a half a dozen tech startup founders and a dozen investors across all stages in 125 feet.

I can count approximately 20 other startups in the building now, still heavily skewed to energy. Across the floor, Artemis Energy Partners and Veriten, run respectively by Houston energy fixtures Bobby Tudor and Maynard Holt two of the three Tudor Pickering Holt founders, have their offices, with Schlumberger and hydrogen software startup Velostics which just announced its seed round sandwiched in between. The co-founder of Tierra Climate, a Rice spinout that also just announced its seed round works out of the coworking, and Eigen Controls is building GHG detection equipment around the corner a few feet from an Edtech and medtech startup, and renewable energy services startup Clean Energy Services is headquartered a few feet from the entrance.

Since we moved in, GOOSE Capital, a Houston investment group launched out of Rice at the Rice Alliance Business Competition two decades ago, put its offices in the Ion Activation Floor, and you can quietly find their Managing Director Andrew Nicholson trooping up and down the stairs. BP Ventures then pulled the trigger in 2022 – and moved its US venture capital investing team HQ to the Ion — right down the hallway from us. Chad Bown who manages the US team is sitting in a phone booth 100 feet from me and Chris Spears is listening on pitches as I type this. And this month Decarbonization Partners, the climate growth fund of BlackRock and Temasek, opened its office next door to mine in between us and HX, with three investment professionals, led by David Hayes, formerly with BP Ventures. Aramco Ventures, now led by the former Energy Ventures US head Jim Sledzik, began weekly Friday morning office hours. Jim can often be grabbed for a casual chat on his way between meetings on a regular basis, as can Luis Alcoser or Kemal Anbarci who pop in and out of the Chevron Technology Ventures visiting offices on third floor, with Veriten, which just announced an investment fund, and now Artemis joining recently.

The Houston pool of high quality founders and startups has definitely improved as well – though we still don’t have the quantity or quality of teams needed for a healthy startup market. Blair Garrou from Mercury Fund was part of a recent panel for the Texas Venture Crawl at the Ion along with BP Ventures’ Ion based Grace Chan talking about why Houston, and he remarked that in their earlier funds, Mercury was 5 to 10 percent Houston startups, having to go far afield to fill up even one fund - but his recent fund is closer to 25 percent Houston based, as local team quality has improved.

Houston venture capital is two orders of magnitude smaller than the Bay Area – it’s about like writing an article asking whether Silicon Valley is the emerging Energy Corridor. But it’s nice to have coffee and beers with next door neighbors who are actually investing in, and founders who are actually running, venture backed businesses. Founders are learning that Houston’s venture investment and tech scene has an actual home these days, and is open for business.

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

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2 Houston space tech cos. celebrate major tech milestones

big wins

Two Houston aerospace companies — Intuitive Machines and Venus Aerospace — have reached testing milestones for equipment they’re developing.

Intuitive Machines recently completed the first round of “human in the loop” testing for its Moon RACER (Reusable Autonomous Crewed Exploration Rover) lunar terrain vehicle. The company conducted the test at NASA’s Johnson Space Center.

RACER is one of three lunar terrain vehicles being considered by NASA for the space agency’s Artemis initiative, which will send astronauts to the moon.

NASA says human-in-the-loop testing can reveal design flaws and technical problems, and can lead to cost-efficient improvements. In addition, it can elevate the design process from 2D to 3D modeling.

Intuitive Machines says the testing “proved invaluable.” NASA astronauts served as test subjects who provided feedback about the Moon RACER’s functionality.

The Moon RACER, featuring a rechargeable electric battery and a robotic arm, will be able to accommodate two astronauts and more than 880 pounds of cargo. It’s being designed to pull a trailer loaded with more than 1,760 pounds of cargo.

Another Houston company, Venus Aerospace, recently achieved ignition of its VDR2 rocket engine. The engine, being developed in tandem with Ohio-based Velontra — which aims to produce hypersonic planes — combines the functions of a rotating detonation rocket engine with those of a ramjet.

A rotating detonation rocket engine, which isn’t equipped with moving parts, rapidly burns fuel via a supersonic detonation wave, according to the Air Force Research Laboratory. In turn, the engine delivers high performance in a small volume, the lab says. This savings in volume can offer range, speed, and affordability benefits compared with ramjets, rockets, and gas turbines.

A ramjet is a type of “air breathing” jet engine that does not include a rotary engine, according to the SKYbrary electronic database. Instead, it uses the forward motion of the engine to compress incoming air.

A ramjet can’t function at zero airspeed, so it can’t power an aircraft during all phases of flight, according to SKYbrary. Therefore, it must be paired with another kind of propulsion, such as a rotating detonation rocket engine, to enable acceleration at a speed where the ramjet can produce thrust.

“With this successful test and ignition, Venus Aerospace has demonstrated the exceptional ability to start a [ramjet] at takeoff speed, which is revolutionary,” the company says.

Venus Aerospace plans further testing of its engine in 2025.

Venus Aerospace, recently achieved ignition of its VDR2 rocket engine. Photo courtesy of Venus Aerospace

METRO rolls out electric shuttles for downtown Houston commuters

on a roll

The innovative METRO microtransit program will be expanding to the downtown area, the Metropolitan Transit Authority of Harris County announced on Monday.

“Microtransit is a proven solution to get more people where they need to go safely and efficiently,” Houston Mayor John Whitmire said in a statement. “Connected communities are safer communities, and bringing microtransit to Houston builds on my promise for smart, fiscally-sound infrastructure growth.”

The program started in June 2023 when the city’s nonprofit Evolve Houston partnered with the for-profit Ryde company to offer free shuttle service to residents of Second and Third Ward. The shuttles are all-electric and take riders to bus stops, medical buildings, and grocery stores. Essentially, it works as a traditional ride-share service but focuses on multiple passengers in areas where bus access may involve hazards or other obstacles. Riders access the system through the Ride Circuit app.

So far, the microtransit system has made a positive impact in the wards according to METRO. This has led to the current expansion into the downtown area. The system is not designed to replace the standard bus service, but to help riders navigate to it through areas where bus service is more difficult.

“Integrating microtransit into METRO’s public transit system demonstrates a commitment to finding innovative solutions that meet our customers where they are,” said METRO Board Chair Elizabeth Gonzalez Brock. “This on-demand service provides a flexible, easier way to reach METRO buses and rail lines and will grow ridership by solving the first- and last-mile challenges that have hindered people’s ability to choose METRO.”

The City of Houston approved a renewal of the microtransit program in July, authorizing Evolve Houston to spend $1.3 million on it. Some, like council member Letitia Plummer, have questioned whether microtransit is really the future for METRO as the service cuts lines such as the University Corridor.

However, the microtransit system serves clear and longstanding needs in Houston. Getting to and from bus stops in the city with its long blocks, spread-out communities, and fickle pedestrian ways can be difficult, especially for poor or disabled riders. While the bus and rail work fine for longer distances, shorter ones can be underserved.

Even in places like downtown where stops are plentiful, movement between them can still involve walks of a mile or more, and may not serve for short trips.

“Our microtransit service is a game-changer for connecting people, and we are thrilled to launch it in downtown Houston,” said Evolve executive director Casey Brown. “The all-electric, on-demand service complements METRO’s existing fixed-route systems while offering a new solution for short trips. This launch marks an important milestone for our service, and we look forward to introducing additional zones in the new year — improving access to public transit and local destinations.”

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This article originally ran on CultureMap.