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

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

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."
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5 can't-miss innovation events at CERAWeek featuring Houston speakers

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While usually hundreds of energy experts, C-level executives, diplomats, members of royal families, and more descend upon Houston for the the annual CERAWeek by IHS Markit conference, this year will be a little different. Canceled last year due to COVID-19, CERAWeek is returning — completely virtually.

The Agora track is back and focused on innovation within the energy sector. The Agora track's events — thought-provoking panels, intimate pods, and corporate-hosted "houses" — can be accessed through a virtual atrium.

Undoubtedly, many of the panels will have Houston representatives considering Houston's dominance in the industry, but here are five innovation-focused events you can't miss during CERAWeek that feature Houstonians.

Monday — New Horizons for Energy & Climate Research

The COVID-19 pandemic has made vivid and real the risks of an uncontrolled virus. Risks posed by climate change are also becoming more palpable every day. At the forefront of understanding these risks, universities are developing solutions by connecting science, engineering, business, and public policy disciplines. Along with industry and governments, universities are critical to developing affordable and sustainable solutions to meet the world's energy needs and achieve net-zero emission goals. Can the dual challenge of more energy and lower emissions be met? What is some of the most promising energy and climate research at universities? Beyond research, what are the roles and responsibilities of universities in the energy transition?

Featuring: Kenneth B. Medlock, III, James A. Baker, III, and Susan G. Baker Fellow In Energy And Resource Economics, Baker Institute and Senior Director, Center For Energy Studies at Rice University

Catch the panel at 1 pm on Monday, March 1. Learn more.

Tuesday — Conversations in Cleantech: Powering the energy transition

With renewables investment outperforming oil and gas investment for the first time ever in the middle of a pandemic, 2020 was a tipping point in the Energy Transition. Low oil prices intensified energy majors' attention on diversification and expansion into mature and emerging clean technologies such as battery storage, low-carbon hydrogen, and carbon removal technologies. Yet, the magnitude of the Energy Transition challenge requires an acceleration of strategic decisions on the technologies needed to make it happen, policy frameworks to promote public-private partnerships, and innovative investment schemes.

Three Cleantech leaders share their challenges, successes, and lessons learned at the forefront of the Energy Transition. What is their vision and strategy to accelerate lowering emissions and confronting climate change? Can companies develop clear strategies for cleantech investments that balance sustainability goals and corporate returns? What is the value of increasing leadership diversity for energy corporations? Can the Energy Transition be truly transformational without an inclusive workforce and a diverse leadership?

Featuring: Emily Reichert, CEO of Greentown Labs, which is opening a location in Houston this year.

The event takes place at 11:30 am on Tuesday, March 2. Learn more.

Wednesday — Rice Alliance Venture Day at CERAWeek

The Rice Alliance for Technology and Entrepreneurship pitch event will showcase 20 technology companies with new solutions for the energy industry. Each presentation will be followed by questions from a panel of industry experts.

Presenting Companies: Acoustic Wells, ALLY ENERGY, Bluefield Technologies, Cemvita Factory, Connectus Global, Damorphe, Ovopod Ltd., DrillDocs, GreenFire Energy, inerG, Locus Bio-Energy Solutions, Nesh, Pythias Analytics, REVOLUTION Turbine Technologies, Revterra, ROCSOLE, Senslytics, Subsea Micropiles, Syzygy Plasmonics, Transitional Energy, and Universal Subsea.

The event takes place at 9 am on Wednesday, March 3. Learn more.

Thursday — How Will the Energy Innovation Ecosystem Evolve?

Although the cleantech innovation ecosystem—research institutions, entrepreneurs, financiers, and support institutions—is diverse and productive, converting cleantech discoveries and research breakthroughs into commercially viable, transformative energy systems has proven difficult. With incumbent energy systems economically efficient and deeply entrenched, cleantech innovation faces a fundamental dilemma—the scale economies necessary to compete require a large customer base that does not yet exist. How is our clean energy innovation ecosystem equipped to be transformative? What needs to be strengthened? Is it profitable to focus on individual elements, or should we consider the system holistically, and reframe our expectations?

Featuring: Barbara Burger, vice president of innovation at Chevron and president at Chevron Technology Ventures

The event takes place at 7:30 am on Thursday, March 4. Learn more.

Friday — Cities: Managing crises & the future of energy

Houston is the capital of global energy and for the past four decades the home of CERAWeek. Mayor Sylvester Turner will share lessons from the city's experience with the pandemic, discuss leadership strategies during times of crisis, and explore Houston's evolving role in the new map of energy.

The event takes place at 8 am on Friday, March 5. Learn more.

Rice University develops 2 new innovative tools to detect COVID-19

pandemic tech

Rice University is once again spearheading research and solutions in the ongoing battle with COVID-19. The university announced two developing innovations: a "real-time sensor" to detect the virus and a cellphone tool that can detect the disease in less than an hour.

Sensing COVID
Researchers at Rice received funding for up to $1 million to develop the real-time sensor that promises to detect minute amounts of the airborne virus.

Teams at Rice and the University of Texas Medical Branch (UTMB) at Galveston are working to develop a thin film electronic device that senses as few as eight SARS-CoV-2 viruses in 10 minutes of sampling air flowing at 8 liters per minute, per a press release.

Dubbed the Real-Time Amperometric Platform Using Molecular Imprinting for Selective Detection of SARS-CoV-2 (or, RAPID), the project has been funded by the Defense Advanced Research Projects Agency (DARPA), Rice notes. Further funding will be contingent upon a successful demonstration of the technology.

Attacking with an app
Meanwhile, the university announced that its engineers have developed a plug-in tool that can diagnose COVID-19 in around 55 minutes. The tool utilizes programmed magnetic nanobeads and a tool that plugs into a basic cellphone.

First, a stamp-sized microfluidic chip measures the concentration of SARS-CoV-2 nucleocapsid protein in blood serum from a standard finger prick.

Then, nanobeads bind to SARS-CoV-2 N protein, a biomarker for COVID-19, in the chip and transport it to an electrochemical sensor that detects minute amounts of the biomarker. Paired with a Google Pixel 2 phone and a plug-in tool, researchers quickly secured a positive diagnosis.

This, researchers argue, simplifies sample handling compared to swab-based PCR tests that must be analyzed in a laboratory.

"What's great about this device is that it doesn't require a laboratory," said Rice engineer Peter Lillehoj in a statement. "You can perform the entire test and generate the results at the collection site, health clinic or even a pharmacy. The entire system is easily transportable and easy to use."

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This article originally ran on CultureMap.

5 most popular innovation stories in Houston this week

What's trending

Editor's note: Another week has come and gone, and it's time to round up the top headlines from the past few days. Trending Houston tech and startup news on InnovationMap included innovators to know, a guest column responding to Winter Storm Uri, health care professionals overheard at a panel on COVID-19, and more.


4 female Houston innovators to know this week

This week's roundup of Houston innovators includes Dorit Donoviel of TRISH, Anu Pansare of gBETA, and Christine Galib and Courtney Cogdill of The Ion. Courtesy photos

In the week's roundup of Houston innovators to know, I'm introducing you to four innovators across industries recently making headlines — from space tech to startup development organizations. Continue reading.

Unleashing innovation for resilience is more urgent than ever, says Houston expert

Looking back on the past few days of low temperatures, ice, snow, power and water outages, and more, it's time to focus on innovation for resilience. Photo courtesy of ABC13

Greater Houston and all of Texas have faced enough persistent challenges over the past seven years that communities and businesses are at a breaking point. Not just financially and economically, but at societal and emotional levels expected from repeated natural and man-made disasters.

Increasingly, the focus on "resilience" as a call to action has become a buzzword rather than measure of performance by public and private sector decision-makers. Simply, our version of resilience is defined as pre-disaster risk mitigation and investment, not recovery and rebuilding after the fact, which is precisely what is being debated across traditional and social media.

As families, small businesses, larger corporations, neighborhoods, and communities require stability, predictability, and frankly reliability, there is now disappointment and disillusion across party lines for our public agencies, programs, officials. When the last major freeze and snowfall hit Texas, the state's power grid ERCOT and the legislature were warned that unless immediate steps were taken to invest in our electrical grid, an expected collapse of the entire system would leave entire cities and potentially the state in darkness with life-threatening consequences. Review any of the published recommendations from previous disasters and each conclusion identifies necessary and urgent investment, re-engineering, and technological innovation. And yet many of those findings are but another can kicked down the road. Continue reading.

Tech company to grant funds to Houston-area BIPOC small business owners

Comcast is looking out for the one-third of businesses in the Houston metro area that are minority-owned. Photo courtesy of comcast.

Comcast, the telecom, media, and entertainment conglomerate, is awarding $1 million in grants to small businesses in Houston owned by entrepreneurs who are Black, indigenous or people of color (BIPOC).

In all, 100 grants of $10,000 each will be given to BIPOC-owned small businesses in Houston. Local businesses can apply for the grants March 1-14. Grant recipients will be announced in April and awarded in May. Continue reading.

Overheard: Houston health care experts sound off on how tech and COVID-19 have affected the industry

Health care leaders joined a virtual panel to discuss the effects of COVID-19 and more. Photo by Dwight C. Andrews/Greater Houston Convention and Visitors Bureau

There has been an undeniable paradigm shift in the health care industry due to COVID-19 as well as the growth of technology. A group of professionals sat down to discuss what in particular has changed for the industry as a whole as well as at local institutions.

At a panel for Venture Houston, a two-day conference put on by the HX Venture Fund on February 4th and 5th, a few health care professionals weighed in on all the changes to the industry for the startups, investors, corporations, and more who attended the virtual event. Here are some significant overheard moments from the virtual panel — Thinking Past a COVID World. Continue reading.

These 3 Houston researchers are revolutionizing health science innovation

From biomolecular research to oral cancer immunotherapy, here are three researchers to watch out for in Houston. Photo via Getty Images

Research, perhaps now more than ever, is crucial to expanding and growing innovation in Houston — and it's happening across the city right under our noses.

In InnovationMap's latest roundup of research news, a couple local scientists are honored by awards while another duo of specialists tackle a new project. Continue reading.

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