According to a report, Houston lost over 3,000 innovation jobs between 2005 and 2017. Joe Daniel Price/Getty Images

You've heard of brain drain, the phenomenon of well-educated, highly skilled workers fleeing a geographic area for better opportunities elsewhere. It appears Houston is grappling with a different workforce affliction: innovation drain.

Houston is among several major business hubs in the U.S. — including Dallas-Fort Worth, Los Angeles, Philadelphia, and Washington, D.C. — where tech-dependent "innovation" jobs evaporated from 2005 to 2017, according to report released December 9 by the Brookings Institution think tank and the Information Technology & Innovation Foundation. At those cities' expense, innovation jobs have clustered in Boston, San Francisco, San Jose, Seattle, and San Diego. Those five metro areas accounted for more than 90 percent of job growth in the innovation sector from 2005 to 2017, researchers found.

Today, one-third of innovation jobs in the U.S. are located in just 16 counties, and more than half are concentrated in 41 counties, according to the report.

The report shows the Houston metro area lost 3,281 tech-oriented innovation jobs during that period. Dallas-Fort Worth lost even more (8,969), while the Austin metro area gained 1,200 and the San Antonio metro area picked up 1,472.

Houston's loss represents a slippage of 0.2 percent in the region's share of innovation jobs in the U.S., the report notes. On a percentage basis, DFW sustained an even greater loss (0.5 percent), while Austin's share declined 0.1 percent and San Antonio's didn't budge.

On the positive side, Houston ranked 14th for its sheer number of innovation jobs, with Dallas-Fort Worth at No. 7 and Austin at No. 16. They were among 20 "superstar" metro areas singled out in the report.

In the report, researchers classify innovation jobs as those in 13 R&D-heavy sectors, including aerospace, computer manufacturing, chemical production, and telecom. While the 13 innovation segments account for only 3 percent of U.S. jobs, they represent 6 percent of the country's economic output (GDP), one-fourth of exports, and two-thirds of corporate R&D expenditures, the report says.

Responding to the Brookings analysis, Susan Davenport, senior vice president of economic development at the Greater Houston Partnership, notes the Houston area employs about 150,000 tech workers, many of whom are employed outside the 13 innovation industries mentioned in the report. In fact, she adds, Houston boasts the highest share of tech workers at non-tech companies among the country's 20 largest metro areas.

"That said, we recognize the need to build Houston's digital tech presence, an area where we have traditionally lagged," Davenport tells InnovationMap.

Houston is making headway on that front, though. Davenport cites the expansion of Microsoft Corp.'s local operations, the recent opening of Bill.com's Houston office, and the rise of three Houston entrepreneurship initiatives — The Ion, TMC3, and The Cannon — as examples of this progress.

"Houston continues to gain recognition as a leading tech city," Davenport says. "The region cleared $500 million in venture capital funding this year, a new high for Houston, and tech-related employment continues to grow within the energy industry. We continue working with our partners to grow Houston's innovation ecosystem and are excited for the great momentum in this area."

Investor and entrepreneur Harvin Moore, president of Houston Exponential, a nonprofit that promotes startups and innovation, acknowledges the region's historical lack of focus on the innovation economy contributed to Amazon bypassing Houston as a finalist in 2018 for the e-commerce giant's second headquarters. Despite that harsh reality, Moore says the Brookings report fails to take into account innovation jobs embedded in sectors like Houston's massive energy industry.

"That data issue will always penalize a city with a large energy sector until it is corrected," Moore says. "And as we know, the energy sector is starting to innovate rapidly, as it must. And that innovation draws more employees to those companies and to Houston."

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

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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.

New Houston venture studio emerges to target early-stage hardtech, energy transition startups

funding the future

The way Doug Lee looks at it, there are two areas within the energy transition attracting capital. With his new venture studio, he hopes to target an often overlooked area that's critical for driving forward net-zero goals.

Lee describes investment activity taking place in the digital and software world — early stage technology that's looking to make the industry smarter. But, on the other end of the spectrum, investment activity can be found on massive infrastructure projects.

While both areas need funding, Lee has started his new venture studio, Flathead Forge, to target early-stage hardtech technologies.

“We are really getting at the early stage companies that are trying to develop technologies at the intersection of legacy industries that we believe can become more sustainable and the energy transition — where we are going. It’s not an ‘if’ or ‘or’ — we believe these things intersect,” he tells EnergyCapital.

Specifically, Lee's expertise is within the water and industrial gas space. For around 15 years, he's made investments in this area, which he describes as crucial to the energy transition.

“Almost every energy transition technology that you can point to has some critical dependency on water or gas,” he says. “We believe that if we don’t solve for those things, the other projects won’t survive.”

Lee, and his brother, Dave, are evolving their family office to adopt a venture studio model. They also sold off Azoto Energy, a Canadian oilfield nitrogen cryogenic services business, in December.

“We ourselves are going through a transition like our energy is going through a transition,” he says. “We are transitioning into a single family office into a venture studio. By doing so, we want to focus all of our access and resources into this focus.”

At this point, Flathead Forge has seven portfolio companies and around 15 corporations they are working with to identify their needs and potential opportunities. Lee says he's gearing up to secure a $100 million fund.

Flathead also has 40 advisers and mentors, which Lee calls sherpas — a nod to the Flathead Valley region in Montana, which inspired the firm's name.

“We’re going to help you carry up, we’re going to tie ourselves to the same rope as you, and if you fall off the mountain, we’re falling off with you,” Lee says of his hands-on approach, which he says sets Flathead apart from other studios.

Another thing that's differentiating Flathead Forge from its competition — it's dedication to giving back.

“We’ve set aside a quarter of our carried interest for scholarships and grants,” Lee says.

The funds will go to scholarships for future engineers interested in the energy transition, as well as grants for researchers studying high-potential technologies.

“We’re putting our own money where our mouth is,” Lee says of his thesis for Flathead Forge.

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This article originally ran on EnergyCapital.

Houston-based lunar mission's rocky landing and what it means for America's return to the moon

houston, we have a problem

A private U.S. lunar lander tipped over at touchdown and ended up on its side near the moon’s south pole, hampering communications, company officials said Friday.

Intuitive Machines initially believed its six-footed lander, Odysseus, was upright after Thursday's touchdown. But CEO Steve Altemus said Friday the craft “caught a foot in the surface," falling onto its side and, quite possibly, leaning against a rock. He said it was coming in too fast and may have snapped a leg.

“So far, we have quite a bit of operational capability even though we’re tipped over," he told reporters.

But some antennas were pointed toward the surface, limiting flight controllers' ability to get data down, Altemus said. The antennas were stationed high on the 14-foot (4.3-meter) lander to facilitate communications at the hilly, cratered and shadowed south polar region.

Odysseus — the first U.S. lander in more than 50 years — is thought to be within a few miles (kilometers) of its intended landing site near the Malapert A crater, less than 200 miles (300 kilometers) from the south pole. NASA, the main customer, wanted to get as close as possible to the pole to scout out the area before astronauts show up later this decade.

NASA's Lunar Reconnaissance Orbiter will attempt to pinpoint the lander's location, as it flies overhead this weekend.

With Thursday’s touchdown, Intuitive Machines became the first private business to pull off a moon landing, a feat previously achieved by only five countries. Japan was the latest country to score a landing, but its lander also ended up on its side last month.

Odysseus' mission was sponsored in large part by NASA, whose experiments were on board. NASA paid $118 million for the delivery under a program meant to jump-start the lunar economy.

One of the NASA experiments was pressed into service when the lander's navigation system did not kick in. Intuitive Machines caught the problem in advance when it tried to use its lasers to improve the lander's orbit. Otherwise, flight controllers would not have discovered the failure until it was too late, just five minutes before touchdown.

“Serendipity is absolutely the right word,” mission director Tim Crain said.

It turns out that a switch was not flipped before flight, preventing the system's activation in space.

Launched last week from Florida, Odysseus took an extra lap around the moon Thursday to allow time for the last-minute switch to NASA's laser system, which saved the day, officials noted.

Another experiment, a cube with four cameras, was supposed to pop off 30 seconds before touchdown to capture pictures of Odysseus’ landing. But Embry-Riddle Aeronautical University’s EagleCam was deliberately powered off during the final descent because of the navigation switch and stayed attached to the lander.

Embry-Riddle's Troy Henderson said his team will try to release EagleCam in the coming days, so it can photograph the lander from roughly 26 feet (8 meters) away.

"Getting that final picture of the lander on the surface is still an incredibly important task for us,” Henderson told The Associated Press.

Intuitive Machines anticipates just another week of operations on the moon for the solar-powered lander — nine or 10 days at most — before lunar nightfall hits.

The company was the second business to aim for the moon under NASA's commercial lunar services program. Last month, Pittsburgh's Astrobotic Technology gave it a shot, but a fuel leak on the lander cut the mission short and the craft ended up crashing back to Earth.

Until Thursday, the U.S. had not landed on the moon since Apollo 17's Gene Cernan and Harrison Schmitt closed out NASA's famed moon-landing program in December 1972. NASA's new effort to return astronauts to the moon is named Artemis after Apollo's mythological twin sister. The first Artemis crew landing is planned for 2026 at the earliest.