Business leaders must focus on risks as much as on profit to ensure business success, according to Rice University research

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When it comes to getting a good return on investment, businesses should be equally focused on mitigating risks as they are on earning a profit. Getty Images

Consider for a moment the race to build the next super computer. Google, Alibaba and other U.S. and China companies are racing to build a machine — called quantum computing — far more powerful than anything the world has ever seen. In this race, China reportedly has the lead.

Given that this kind of technology can protect trillions of dollars in corporate and even national secrets, why do American companies lag behind? If such research and development represents an unknown and is a potential business risk, should U.S. companies be interested in assuming such a task? Rice Business professors Vikas Mittal, Yan Anthea Zhang and a Rice Business Ph.D. student Kyuhong Han, may have answers.

They researched the various ways companies create strategic advantages for themselves. What is the relationship between these strategies and the risks involved? Companies create value through innovation-based activities such as research and development or else via branding and advertisement. As there's no set formula for success, each company has its own approach — which could affect the risk associated with the company's stock price (called idiosyncratic risk).

Typically, the two strategic pillars are examined separately, rather than jointly. But when they compared the two approaches, they found that one presented far more risk than the other.

To reach their conclusions, the Rice team looked at a data set of 13,880 firm-year observations that included 2,403 firms operating in 59 industries over 15 years (2000–2014). The data sets were from the firms' annual operational and financial information from Standard & Poor's Compustat, the University of Chicago's Center for Research in Security Prices and from the Kenneth French Data Library. What the data revealed was the stock price of companies that placed a higher strategic emphasis on marketing and branding (called value appropriation) than companies that focused research and development (called value creation).

If it is less risky for a firm to emphasize branding and marketing over research and development it stands to reason that firms would want to exercise caution in big new research and development efforts. What's the payoff for making a quantum computer or even Space X, after all, if the research and development risks associated with the endeavor are extraordinarily high? In some instances, it may be much safer to rebrand and market. Closer to home, many companies in the oil and gas industry bet big on innovative ventures — costly product features, digitization initiatives and so on that may only increase the risk to their stock price than meet customer needs.

The researchers found that firms that plunge big efforts into research and development have more to worry about than whether their innovations will work. They have to weather the fluctuations of industry demand. When industry demand is volatile, the downside of excessive research and development, at the cost of customer-relevant strategies is even worse.

For the Rice Business researchers, the lessons for managers are clear. The return on investment is intimately linked not only with optimizing potential profits but also minimizing potential risks. Research and development heavy endeavors like Space X and quantum computers may be flashy, but in the event of an unexpected drop in demand, they're also more likely to plummet to earth, creating stock-price volatility.

Managers need to think about the elements that create risk — like demand instability. The more companies create a stable and predictable client base, the less risk that they have to face in the stock market. There is still a tendency among many firms to see advertising and research and development as preceding and guiding customer perceptions, preferences and behaviors. But perhaps the relationship is just the opposite.

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This article originally appeared on Rice Business Wisdom. Vikas Mittal is the J. Hugh Liedtke Professor of Marketing at the Jones Graduate School of Business at Rice University. Yan Anthea Zhang is a Fayez Sarofim Vanguard Professor of Management at the Jesse H. Jones Graduate School of Business at Rice University. Kyuhong Han is a marketing Ph.D. student at the Jones Graduate School of Business at Rice University.

The stock market has been using tech for years — why shouldn't the private sector have the same convenience? Getty Images

Private securities investment company plans to use tech to simplify the process

Digital upgrade

When private companies are trying to raise capital, it's a pretty antiquated process. You take meeting after meeting, exchange dozens of emails, and then, when it's actually time to make an investment, there's a lot of paperwork to do. Seeing this over complicated way of handling things, Rashad Kurbanov thought introducing technology into the process could help simplify the investing for both sides of the equation.

"What we do, and where technology helps us, is we can take the entire process of receiving interest from investors, signing the transactions, issuing the subscription agreements, and processing the payments and put that all online," says Kurbanov, CEO and co-founder of Houston-based iownit.us.

Iownit has been in the works for about 18 months now, and has major growth plans, which includes hiring over a dozen new employees focused on tech and support.

The company is still seeking regulatory approval, but once that happens, the technology and platform will be ready to launch. The platform is a digital site that connects investors to companies seeking money. The investors can review the companies and contribute all online while being encrypted and protected by blockchain.

Diversifying the investment ecosystem
Kurbanov says the convoluted process of private securities investment has meant that startup companies are much more likely to focus on receiving funding venture firms, because they want to have a one-stop-shopping experience. When entrepreneurs add in multiple investors, they end up juggling too much of the logistics side of things, rather than running their company. Iownit's platform simplifies this process, which then allows for a diversity of investments in the ecosystem that's in the past been dominated by huge VCs.

Another way to look at it is that when it comes to investments, public investments has operated in a digital way for years — think of the stock market, for instance. But the private market has been limited to a small amount of accredited investors. The Jobs Act put into effect by Congress in 2012 changed the game a little bit, but the tech hasn't played a role yet.

"We realized there's a big section of the overall capital market that has not necessarily been touched by technology, and that's the space of private securities," Kurbanov says.

Reaching out to underserved communities
Kurbanov is based in New York, but he chose to start his company in Houston because, being focused on diversifying investments, he saw a huge opportunity when you move away from either coast. Houston has a strong corporate environment, access to capital, and great universities, says Kurbanov, but when it comes to the startup companies, it's not as proportional as it is on the East and West Coasts.

"Our goal is to put our technology and platform in use to support the capital formation in the entrepreneurial ecosystems that today don't have easy access to capital."

Every penny counts when you're starting a company. Getty Images

4 financial concerns to keep in mind when launching a startup

Must be the money

You have been working on a new creative technology idea for months, an idea that will solve a problem or make a current process even better. Your innovative idea is ready for the next step, and you, in turn, are prepared to begin your tech startup. Building a company can be stressful and exhausting, but also exhilarating and rewarding. As you begin your product launch, keep these financial tips in mind when starting out.

Consider your funding
Determine how much funding you can use from your personal accounts to jumpstart your business. By investing some of your own money into your company, you show good faith in your business plan and product. This method is appealing to investors because it shows you have a long-term commitment to the company. Next, determine how much you will need from other sources and what those other sources should be. Potential options of funding in addition to traditional bank loans are venture capitalists, angel investors, government grants, and support from business incubators.

Determine your budget
An essential step of starting up is concluding how much funding you need to get started. Establishing a realistic budget is crucial. It can make the difference between having a successful business or joining the 50 percent of small businesses that fail in the first four years. The hiring of employees, leasing office space or lab space, purchasing office equipment, paying for insurance (health and liability) and providing yourself a salary are all items that need to be included in your budget.

Unanticipated extra costs occur from time to time, so overestimate your expenses. Underestimating expenses can sink your startup. Ensure your business is solvent by preparing your budget for more. Additionally, keep in mind different types of expenses, and budget accordingly. For example, you may have one-time costs and on-going costs or fixed costs and variable costs.

Cash flow
According to a U.S. Bank Study, 82 percent of businesses that fail do so because of cash flow problems. Managing your cash flow is crucial to success. Without positive cash flow, you are not able to pay your employees, rent, or taxes. Having profits does not necessarily mean you have positive cash flow. Keep ongoing cash flow work sheets to ensure you have the cash you need to continue on a successful path.

Managing for life
As mentioned earlier, make sure you pay yourself something. It does not have to be a big salary in the beginning, but you need to eat. Additionally, you need to save for emergencies. An old rule of thumb states that an emergency fund should consist of three to six months' worth of expenses. As a result, an emergency fund can make the months where business is slow, or between projects, more sustainable.

Meanwhile, it is a good idea to separate your personal and business banking accounts. Doing so will allow you to stay more organized and help tracking and managing expenses easier. Additionally, separate accounts may be beneficial when paying taxes. Consult a tax professional for additional guidance on taxes. Finally, do not forget to save for your retirement. While it is important to focus on your new business, do not neglect to take care of your personal financial health.

With proper planning and continued financial monitoring, starting your own tech business can be done well and bring years of career satisfaction.

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Joseph Radzwill is senior vice president and a financial adviser with the wealth management division of Morgan Stanley in Houston.

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New TMC partnership aims to grow Houston’s biomanufacturing workforce

workforce partnership

Houston is a frontrunner in the race to introduce and manufacture advanced therapeutics to the medical world. A new agreement between the Texas Medical Center (TMC) and San Jacinto College (SJC) aims to speed more experts and their technologies towards the finish line.

Earlier this month, the world's largest medical center and the nation’s second-ranked community college announced their new partnership that will set students on a path towards careers not only in life sciences in general, but also in pharmaceutical and biomanufacturing specifically.

SJC already has programs in those majors—its first graduates are now joining the workforce—but working with TMC will help the college recruit new students, as well as aid in enrollment and participation. Thanks to this collaboration, SJC students will benefit from more experiential learning and be able to transition more smoothly into the next steps in their training.

“Houston is a premier global hub for life sciences and biotechnology, and the talent we need to advance therapeutic drugs, diagnostics, and cell and gene therapy is already here,” William McKeon, the TMC’s president and CEO, said in a news release. “With more companies choosing to establish their headquarters in Houston and the daily breakthroughs happening across the TMC campus, partnering with San Jacinto College is an important step toward sustaining that momentum and unlocking even greater innovation and growth through the promising talent that already exists within our state.”

The partnership is currently slated to last two years, but the institutions have the option to extend after that.

For students, their journey to becoming scientists will likely start with Biopath @ TMC, a program that introduces high school students to biomanufacturing careers and what it takes to pursue one. Since its inception two years ago, the program has worked with more than 2,000 students around Harris County.

“This partnership exemplifies San Jacinto College’s ability to design and deliver programs that align with current workforce demands while opening doors for untapped talent across the Houston region,” Brenda Hellyer, SJC chancellor, said in the release. “TMC is a key industry leader in our region, and San Jacinto College has a unique global curriculum that provides the foundation and skills required for students to succeed and graduates to thrive in meaningful careers that will contribute to the innovation and advancement of the life sciences.”

Thanks to this new collaboration, more of Houston’s biomanufacturing workforce will soon be locally grown.

Houston legacy planning platform secures $2.5M investment, adds to board

fresh funding

Houston-based Paige, a comprehensive life planning and succession software company, has secured a $2.5 million investment to expand the AI-driven tools on its platform.

The funding comes from Alabama-based 22nd State Banking Company, according to a news release. Paige says it will use the funding to expand automation, AI-driven onboarding and self-service tools, as well as add to its sales and customer success teams.

The company was originally founded by CEO Emily Cisek in 2020 as The Postage and rebranded to Paige last year. It helps users navigate and organize end-of-life planning with features like document storage and organization, password management, and funeral and last wishes planning.

“Too many families are left trying to piece together important information during some of the hardest moments of their lives,” Cisek said in the news release. “This investment allows us to accelerate the next phase of growth for Paige by improving the product and expanding support for our members, our financial institution partners and the communities they serve,”

In addition to the funding news, the company also announced that 22nd State Banking CEO and President Steve Smith will join Paige's board of directors.

“We believe banking should be grounded in relationships and built around the real needs of the people and communities we serve. Paige brings something deeply relevant to that mission," Smith added in the release. "It helps families prepare for the future in a practical and meaningful way, and it gives the banking community new pathways to support customers through important life transitions.”

Paige estimates that $124 trillion in assets will change hands through 2048. Yet about 56 percent of Americans do not have an estate plan.

Read more on the topic from Cisek in a recent op-ed here; or listen to InnovationMap's 2021 interview with her here.

Houston digital health platform Koda lands strategic investment

money moves

Houston-based advance care planning platform Koda Health has added another investor to the lineup.

The company secured a strategic investment for an undisclosed amount from UPMC Enterprises, the commercialization arm of the University of Pittsburgh Medical Center. The funding is part of Koda's oversubscribed series A funding round that closed in October, according to a release.

"UPMC Enterprises’ investment is a meaningful signal, not just to Koda, but to the broader market," Dr. Desh Mohan, chief medical officer and co-founder of Koda Health, said in the news release. "It validates that health systems are ready to invest in infrastructure that makes advance care planning work the way it should: proactively, at scale, and with the human support that these conversations require. Having UPMC Enterprises as a strategic investor puts us in a unique position to prove what's possible."

Koda has raised $14 million to date, according to a representative from the company. Its series A round was led by Evidenced, with participation from Mudita Venture Partners, Techstars and the Texas Medical Center last year. At the time, the company said the funding would allow it to scale operations and expand engineering, clinical strategy and customer success. The company described the round as a "pivotal moment," as it had secured investments from influential leaders in the healthcare and venture capital space.

Koda Health, which was born out of the TMC's Biodesign Fellowship in 2020, saw major growth last year, as well, and now supports more than 1 million patients nationwide through partnerships with Cigna Healthcare, Privia Health, Guidehealth, Sentara, UPMC and Memorial Hermann Health System.

The company integrated its end-of-life care planning platform with Dallas-based Guidehealth in April 2025 and with Epic Systems in July 2025. It also won the 2025 Houston Innovation Award in the Health Tech Business category. Read more here.

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