Houston investor outlines how rare VCs are in Houston — and how to find them

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If you feel like it's hard to find venture capitalists in Houston, you wouldn't be wrong, according to this Houston investor. Photo via Getty Images

As a venture capitalist and former startup founder living in Houston, I get asked a lot about the best way to find and connect with a venture capitalist in Houston. My usual advice is to start with a list, and reach out to everyone on that list. But no one has a comprehensive list. In fact, VCs are such a quiet bunch that I’ve yet to meet someone who personally knows everyone on this proverbial list.

So, I got together with a couple of VC friends of mine, and we put together our own Houston venture capitalist list.

There are, by our count, 11 active venture capital funds headquartered in Houston of any size and type, and outside of corporate venture capital and angel investors, there are 30 total venture capitalists running funds.

Houston has always been quite thin on the VC fund front. I’ve jokingly introduced myself for a while as “one of the 13 venture capitalists in Houston.”

Let’s put this scale in some brutal perspective. With 7.2 million people in the Greater Houston Metro Area, the odds of finding a partner level active venture capitalist in Houston is about 1 in 240,000, if you take a most expanded definition of venture capitalist that might come down to 1 in 100,000. We’re the fifth largest metropolitan area in the country with a tremendous economic engine; there is a ton of capital in Houston, but it’s residing in things like institutional fixed income and equities, real estate, wealth management, corporate, private equity, family office, energy and infrastructure Basically, mostly everywhere but in venture capital funds for tech startups.

By comparison, there are almost as many Fortune 500 CEOs in Houston — 24, by our count — as venture capitalists and fewer venture capitalists than Fortune 1000 CEOs, of which there are 43. That means running into a VC in the checkout line at HEB is about as rare as running into the CEO of CenterPoint, ConocoPhillips, or Academy. In fact, as there are 115 cities in the Greater Houston area, you are three times more likely to be a mayor in Greater Houston Area than a partner at an investor at a VC firm, and more likely to be a college or university president. While we’re at it, you’re 400 times more likely to be a lawyer, 250 times more likely to be a CPA, and over 650 times more likely to be a medical doctor.

Our 30 venture capitalists in the Greater Houston Area are spread across 20 firms and all major venture sectors and stages. Venture capitalist is defined for this list as a full time managing director or partner-level investment professional actively running a venture capital fund with limited partners, currently investing in new venture capital deals from their fund from seed to growth stage, and residing in the Greater Houston Metro area.

To get to 31 we added in a couple of people running venture set asides for PE funds, and a number who work from Houston for funds with no office here. We excluded CVCs, as the decision making is more corporate than individual and rarely includes the committed fund and carried interest structure that defines venture capital, and excluded professionals at angel networks, accelerators, and seed funds that provide investment, but don’t manage conventional venture capital funds, as well as PE funds that do the occasional venture deal. We might be able to triple the number if we include venture capitalists at any professional level, and add in those professionals at PE and angel and seed funds, and corporate venture capital teams who are actively investing. But we’ll get to those other sources of funding in the next list.

The 11 venture capital funds headquartered in Houston are: Mercury, Energy Transition Ventures (my fund), Montrose Lane (formerly called Cottonwood), Texas Medical Center Venture Fund, Artemis, New Climate Ventures, Fitz Gate Ventures, Curate Capital, Knightsgate Ventures, Amplo Ventures,and First Bight Ventures.

Another half a dozen firms have a partner level venture capital investor here, but are headquartered elsewhere: Energy Innovation Capital, Decarbonization Partners, 1984 Ventures, Altitude Ventures, Ascension Ventures, Moneta Ventures, and MKB & Co. Two others, CSL Ventures and SCF Partners, are local private equity funds with a venture capital partner in Houston and a dedicated allocation from a PE fund.

Culling these for partner or managing director level currently in Houston, in alphabetical order by first name, LinkedIn profile and all.

We may have missed a couple of VCs hiding in plain sight, as venture capital is a pretty dynamic business.

VCs are just rare. And yes, perhaps more rare in Houston than in California. Something less than 1 in 100 VCs in the country live in Houston. Across the US there are somewhere around 1,000 to 2,000 active venture capital firms, and maybe another 1,000 to 2,000 active US based CVCs — so, plus or minus maybe at most 4,000 to 5,000 currently active partner level venture capitalists in the country excluding CVC professionals (active VCs and VC funds are really hard to count).

Perhaps in the most stunning statistic, the 7,386 elected state legislators in the US today outnumber the total number of American venture capitalists. Luckily for startup founders, the venture capitalists are more likely to return your phone call.

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Neal Dikeman is a venture capitalist and seven-time startup co-founder investing out of Energy Transition Ventures. He’s currently hosting the Venture Capital for First Time Founders Series at the Ion, where ETV is headquartered.

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Montrose Lane managing partners, Ryan Gurney (left) and Jeremy Arendt, have announced a rebrand and the closing of the new fund. Photos via montroselane.com

Houston venture group closes $64M fund and rebrands with new name

money moves

A Houston venture investment group has announced today that it has a new name to go along with the recent closing of its second fund.

Cottonwood Venture Partners, a Houston-based firm focused on funding startups with software solutions for the energy industry, has closed its $64 million Fund II and renamed itself Montrose Lane.

"Our mission is to uphold a creative and fast-moving approach to partnering with software companies that help make energy affordable, safe, and environmentally friendly," says Jeremy Arendt, managing partner, in a news release. "For several reasons, 'Montrose Lane' captures that vision for us."

The new name is effective immediately, and the leadership at the firm is remaining the same. Chicago-based Kirkland & Ellis LLP served as fund formation counsel to Montrose Lane.

Montrose Lane's second fund — which is double the size of its first — included both new and previous investors, as well as strategic corporations. Founded in 2017, the fund has raised about $100 million in commitments.

"We are humbled to have had such supportive partners behind us since we first set out to invest in technology companies changing the way the energy industry does business," says Ryan Gurney, managing partner, in the release. "The global pandemic has only accelerated the need to adopt digital solutions throughout the energy industry. We are excited to pursue the opportunity alongside our existing and new investors."

Last year, Montrose Lane led several Texas energy tech startups' funding round, including Austin-based HURVData Inc.'s $5 million series A round, Dallas-headquartered Trivie Inc.'s $5 million series A round, Houston-based Hitched.com's $5.5 million series A, and Houston-focused Ambyint's $15 million series B.

Trivie has closed a $5 million investment round led by Houston-based Cottonwood Venture Partners. Photo via Trivie.com

Houston investment firm leads Texas startup's $5M series A round

money moves

A Texas-based tech startup that has created an artificial intelligence-enabled tool that gamifies corporate training and education has closed its most recent funding round thanks to a Houston investor.

Trivie as announced its $5 million series A investment round led by Houston-based Cottonwood Venture Partners, an investment firm that has a portfolio of technology companies that are providing digital solutions within the energy industry. Trivie will use the new funds to scale its product and expand across industries, from energy and manufacturing to hospitality, healthcare, consumer goods, and more.

"The Trivie team's success to date has been remarkable and we are humbled to partner with them to expand Trivie's reach as organizations increasingly look to maximize knowledge retention, particularly as it relates to health and safety," says Jeremy Arendt, managing partner of CVP, in a news release.

Now, as more employees are working from home than ever before, relevant training is crucial and at the top of mind for business leaders. Trivie's clients include Subway, Phillips66, Anheuser-Busch, to name a few.

"At Trivie, our mission is to ensure that every employee at every organization can be at their very best because what they have been taught, they remember, and what they have said is understood," says Lawrence Schwartz, CEO, and co-founder at Trivie, in a news release. "We are extremely excited to partner with Cottonwood Venture Partners to help us expand our footprint in the Fortune 1000 and to continue to execute on that mission."

One of Trivie's founders, Leland Putterman, who is based in Houston, first had the idea for a consumer-facing trivia game 18 years ago. When the app rolled out in 2013, it garnered more than three million downloads. As COVID-19 has brought new compliance guidelines to the forefront of every industry, Trivie was quick to make the CDC's coronavirus guidelines available to all of its clients for no additional charge to be used across their entire employment bases.

Additionally, Trivie prioritizing its user's ability to connect in a time of social distancing and working from home.

"The only way to maintain that company culture and close communication with confidence is to use something like Trivie," Putterman previously tells InnovationMap. "There's no feedback loop right now. The only way to bridge that gap is to have something like Trivie that's the glue."

Houston-based Tachyus closed a $15 million Series B round. Photo courtesy of Thomas Miller/Breitling Energy

Houston oil and gas software company closes $15 million round led by local PE firm

Money on the mind

It's pay day for Houston-based Tachyus. the data-driven software company has closed its Series B fundraising round at $15 million. The round was led by Houston-based Cottonwood Venture Partners, a private equity firm that funds companies using technology to solve problems within the energy industry.

Tachyus was founded in 2013 in Silicon Valley and recently relocated to Houston. The fresh funds will go into growing its cloud-based, artificial intelligence-enabled platform.

"In this economic environment, oil and gas operators need disruptive tools to optimize their fields," Tachyus CEO and co-founder, Paul Orland, says in a release. "This investment allows us to reach more customers and accelerate the delivery of new technology that improves our clients' business performance."

The company has already grown its client base and has customers in Argentina, Europe, and Asia. Tachyus joins several other tech-focused energy startups in CVP's portfolio, including Ambyint, Novi Labs, and SitePro. Houston-based Tudor, Pickering, Holt & Co. served Tachyus as its financial adviser.

"As the oil and gas industry evolves in the face of new commercial challenges, operators need to focus on getting the best performance from their assets, and Tachyus' technology has a track record of doing just that," says Jeremy Arendt, managing partner of CVP, in the release. "We are excited to partner with the Tachyus team to expand their reach and empower customers to optimize production across their fields."

Tachyus closed its last round in 2016 with a $4 million investment from Primwest, according to CrunchBase. Before that, the company had raised several million.

Last year, the startup restructured its C-suite. Tachyus co-founder Dakin Sloss transitioned from CEO to chairman, and Orland, who was previously CTO, took the reins, according to a release.

Paul Orland is CEO of Tachyus. Photo via tachyus.com

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Houston expert: How to avoid 'ghost hiring' while attracting top talent

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One of the latest HR terms grabbing attention today is “ghost hiring.” This is a practice where businesses post positions online, even interviewing candidates, with no intention to fill them. In fact, the role may already have been filled or it may not exist.

Usually, an applicant applies for the job, yet never hears back. However, they may be contacted by the recruiter, only to learn the offer is revoked or a recruiter ghosts them after a first-round interview.

Applicants who are scouring job sites for the ideal position can become discouraged by ghost hiring. Employers do not usually have any ill intentions of posting ghost jobs and talking with candidates. Employers may have innocently forgotten to take down the listing after filling the position.

Some employers may leave positions up to expand their talent pool. While others who are open to hiring new employees, even if they do not match the role, may practice ghost hiring when they want a pool of applicants to quickly pull from when the need arises. Finally, some employers post job roles to make it look like the company is experiencing growth.

When employers participate in ghost hiring practices, job candidates can become frustrated, hurting the employer brand and, thus, future recruiting efforts. Even with the tight labor market and employee turnover, it is best not to have an evergreen posting if there is no intention to hire respondents.

There are several ways employers can engage candidates and, likewise, build a talent pool without misleading job seekers.

Network

A recruiter at their core is a professional networker. This is a skill that many have honed through the years, and it continues to evolve through social media channels. While many recruiters lean on social media, you should not discount meeting people face-to-face. There is power in promoting your organization at professional meetings, alumni groups and civic organizations. Through these avenues, many potential candidates will elect for you to keep them in mind for future opportunities.

Employee Referrals

When recruiters want to deepen their talent pool, they cannot discount the employee referral. Simply letting employees know and clearly stating the exploratory nature of the conversation can lead to stellar results. Employees understand the organization, its culture and expectations, so they are more likely to refer the company to someone who would be a good fit and reflect highly on them.

Alternative Candidates

In recent years, organizations and recruiters are more dialed into skills-first recruiting practices. Creating job postings that emphasize the skill sets needed rather than the years of experience, specific college degree or previous job titles, can yield a crop of candidates who may be more agile and innovative than others. Fostering relationships with people who fit unique skills needed within the organization can help you develop a deeper bench of candidates.

Contingent Workforce

Part-time workers, freelancers, and independent contractors are a great way to build connections and the talent pool. These workers and their skills are known entities, plus they know the organization, which makes them valuable candidates for open roles. If their expertise is needed on a regular basis, it is easier to have open conversations about a potential expansion of their duties or offer full-time work.

Internal Talent

Human resources and recruiters need to work with managers and leadership to intimately know what kind of talent lies within their own organization. Current employees may have the strengths, skills, and capabilities to fill new positions or roles. Through conversations with employees and their managers, you can identify who can flex different skills, but even more importantly, the ambition to grow within the company.

In every instance, it is crucial for recruiters and hiring managers to be transparent in their intentions. Communicating within your network that you are always looking for great talent to fill future roles sets the tone. When communicating with candidates, whether there is a pressing job opportunity or not, be clear from the onset regarding your intentions for hire. With a transparent approach to hiring and candidate development, you will keep the employer brand intact and maintain recruiting power.

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Jaune Little is a director of recruiting services with Insperity.

Houston ecommerce scale-up company acquires Amazon advertising partner

all aboard

A Houston tech company has tapped an Amazon partner in a strategic acquisition and is bringing the company's full team on board.

Cart.com acquired Ohio-based Amify, a company that provides optimization and advertising solutions. The terms of the deal were not disclosed but Cart.com will on board Amify’s entire employee base, including its founder Ethan McAfee, CEO Chris Mehrabi, and COO Christine McCambridge.

As chief delivery officer, Mehrabi will take the helm of Cart.com’s professional services business and McCambridge will lead Cart.com’s marketplace services team as vice president of marketplace services operations.

“I’m happy to welcome the entire Amify team to Cart.com and have industry veterans Chris Mehrabi and Christine McCambridge join our leadership team,” Cart.com Founder and CEO Omair Tariq says in a news release. “Amify has been widely recognized for their expertise and technology and we’re excited to leverage their experience to help our customers maximize their potential across channels.”

Cart.com's membership will have access to Amify's proprietary technology platform, including advertising, creative content, supply chain strategy, and analytics. The company, which was founded in 2011, currently supports over 50 global brands and manages approximately $1 billion in gross merchandise value. According to LinkedIn, Amify has over 50 employees.

“We could not be more excited to join Cart.com and leverage the company’s resources and scale to deliver value to both our customers and employees,” Mehrabi says. “I’m honored to step into the role of Chief Delivery Officer and contribute to Cart.com’s incredible growth story and innovative reputation.”

Founded in Houston in 2020, Cart.com provides comprehensive physical and digital infrastructure for online merchants. The company raised a $60 million series C and grown its customer base to over 6,000 users. After making several acquisitions, the company also operates 14 fulfillment centers nationwide.

Earlier this year, Tariq sat down with the Houston Innovators Podcast to share a bit about how the company is currently in scale-up mode.

Houston health tech innovator collaborates on promising medical device funded by DOD

team work

The United States Department of Defense has awarded a grant that will allow the Texas Heart Institute and Rice University to continue to break ground on a novel left ventricular assist device (LVAD) that could be an alternative to current devices that prevent heart transplantation and are a long-term option in end-stage heart failure.

The grant is part of the DOD’s Congressionally Directed Medical Research Programs (CDMRP). It was awarded to Georgia Institute of Technology, one of four collaborators on the project that will be designed and evaluated by the co-investigator Yaxin Wang. Wang is part of O.H. “Bud” Frazier’s team at Texas Heart Institute, where she is director of Innovative Device & Engineering Applications Lab. The other institution working on the new LVAD is North Carolina State University.

The project is funded by a four-year, $7.8 million grant. THI will use about $2.94 million of that to fund its part of the research. As Wang explained to us last year, an LVAD is a minimally invasive device that mechanically pumps a person’s own heart. Frazier claims to have performed more than 900 LVAD implantations, but the devices are far from perfect.

The team working on this new research seeks to minimize near-eventualities like blood clot formation, blood damage, and driveline complications such as infection and limitations in mobility. The four institutions will try to innovate with a device featuring new engineering designs, antithrombotic slippery hydrophilic coatings (SLIC), wireless power transfer systems, and magnetically levitated driving systems.

Wang and her team believe that the non-contact-bearing technology will help to decrease the risk of blood clotting and damage when implanting an LVAD. The IDEA Lab will test the efficacy and safety of the SLIC LVAD developed by the multi-institutional team with a lab-bench-based blood flow loop, but also in preclinical models.

“The Texas Heart Institute continues to be a leading center for innovation in mechanical circulatory support systems,” said Joseph G. Rogers, MD, the president and CEO of THI, in a press release.

“This award will further the development and testing of the SLIC LVAD, a device intended to provide an option for a vulnerable patient population and another tool in the armamentarium of the heart failure teams worldwide.”

If it works as hypothesized, the SLIC LVAD will improve upon current LVAD technology, which will boost quality of life for countless heart patients. But the innovation won’t stop there. Technologies that IDEA Lab is testing include wireless power transfer for medical devices and coatings to reduce blood clotting could find applications in many other technologies that could help patients live longer, healthier lives.

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