Editor's Picks: Top 10 Houston startup feature stories of the year

2020 in review

Mobile vet business, virtual reality for space, plant-based biotech, and more — all this innovation and more is coming out of Houston startups. Courtesy photos

Editor's note: As 2020 comes to a close, InnovationMap is looking back at the year's top stories in Houston innovation. This past year, InnovationMap featured profiles on dozens of these Houston startups — from blockchain and software companies to startups with solutions in health care and oil and gas. Here are excerpts of 10 that stood out throughout 2020 — be sure to click through to read the full story.

Houston health tech startup moves into new office amid major growth

BrainCheck has moved to a new office as it grows its team and expands its product. Natalie Harms/InnovationMap

Following a series A round of fundraising, a Houston digital health startup is on a bit of a hiring spree, leading to new office space the company has room to grow into.

BrainCheck, which was founded in 2015 by neuroscientist David Eagleman, is a cognitive assessment startup that has developed a software tool for primary care doctors to use to assess their patients' cognitive health so that they can more quickly diagnose and treat them for maladies like dementia.

The 19-person company headquartered in Houston — with a secondary office in Austin focused on product development — has relocated its operations from coworking space in the Texas Medical Center to an office in the Rice Village area. The move was made possible by an $8 million series A financing round that closed in October.

"It's pretty exciting to have reached this milestone where we need more space," Yael Katz, co-founder and CEO of BrainCheck, tells InnovationMap. "We were pretty much bursting at the seams in our old office." Click here to continue reading.

Houston startup raises $30M, plans to be 'next iconic chemical company' with plant-based alternatives

Solugen, which uses plant-centered biotechnology to produce environmentally friendly chemicals, has raised an additional $30 million and is speculated to soon reach unicorn status. Photo via solugentech.com

While Forbes recently anointed Houston-based Solugen Inc. as one of the next billion-dollar "unicorns" in the startup world, Dr. Gaurab Chakrabarti shrugs off the unicorn buzz.

Chakrabarti, a physician and scientist who's co-founder and CEO of the startup, concedes he doesn't know whether Solugen will be worth $1 billion or not. But he does know that the startup aspires to be a key competitor in the emerging "climate tech" sector, whose players strive to combat climate change. Chakrabarti estimates the climate-tech chemical space alone represents a global market opportunity valued at $1 trillion to $2 trillion per year.

Solugen's overarching goal in the climate-tech market: Replace petroleum-based chemicals with plant-based substitutes.

"I'd love it if we were the poster child that drives climate tech to be the next big, sexy trend," Chakrabarti says.

Chakrabarti acknowledges Solugen's investors, executives, and employees hope the startup succeeds financially. But success, he believes, goes beyond making money and plotting an exit strategy. Instead, Chakrabarti emphasizes "a shift in thinking" on climate tech that he says promises to transform the fledgling sector into a "true niche" that'll be "good for everyone." Click here to continue reading.

Houston mobile vet company plans to roll out services statewide

A Houston vet has seen growth in business for her mobile vet company due to the pandemic. Now, she's planning major growth. Photo courtesy of Rollin' Vets

It's safe to say that the real winners of work-from-home trends that sparked due to the pandemic are our pets. Dogs and cats that were used to not seeing their owners for eight hours every work day now have 24-hour access to attention, treats, and ear scratches.

This increased attention pets are getting from their owners has also meant an increased awareness of pet health, says Katie Eick, founder of Houston-based Rollin' Vets, a startup that has mobilized veterinary services.

"People are home and observing their animals more. They're seeing and recognizing things they might not have if they were at work all day," Eick says.

That's, of course, not the only way the pandemic has affected business for Eick. She founded her company in 2016 and was seeing steady growth as delivery and on-demand services like Uber, DoorDash, etc. increased in use and awareness. Click here to continue reading.

With fresh funds, this Houston entrepreneur plans to scale his industrial e-commerce startup

Tim Neal, CEO of Houston-based GoExpedi, shares how his company plans to scale following its recent series C closing. Photo by Colt Melrose for GoExpedi

Consumers are getting more and more used to picking up their laptops or phones and ordering everyday items in just a few clicks or taps — and seeing those items delivered in just a few days. To Tim Neal, CEO of Houston-based GoExpedi, ordering parts and tools for industrial businesses should be just as easy.

GoExpedi, which just closed a $25 million series C round, has seen rising demand for its e-commerce platform focused on industrial orders, and Neal credits this demand on a change in mindset within the industrial sector. Additionally, he says he's seen clients more and more focused on cutting costs.

Neal shared his company's plans for growth and scale, as well as how fundraising during a pandemic went, in an interview with InnovationMap. Click here to continue reading.

Family-owned composting startup redesigns how Houston disposes of waste

A Houston-area family has made it their business to help Houstonians reduce waste in a convenient, sustainable way. Photo courtesy of Happy Earth Compost

Jesse Stowers has always strived to do his part for the environment. From recycling and making eco-conscious choices, the Stowers were doing everything right, but was it enough?

The family of five was throwing away two trash bags of waste a day that would later end up in landfills until Stowers stumbled on composting as a solution. In May, he launched Happy Earth Compost, a company set on making Houston more sustainable.

If you're unfamiliar with composting, get ready for a crash course. Composting is a sustainable method of decomposing organic solid wastes and turning that waste into compost, a substance that helps plants grow. Food scraps and household items like rice, pasta, meat, poultry, fish, vegetables, fruits, coffee grounds, spoiled food, and tea bags are just a few of the many things that can be composted rather than thrown away.

"Your food waste and compostable waste is anywhere from 25 to 50 percent depending on the family," explains Stowers. According to Happy Earth Compost, one human creates an estimated 1,642 pounds of trash each year. Click here to continue reading.

Houston virtual reality company collaborates with space health organization

Houston-based Z3VR has been granted $500,000 to work or virtual reality applications in space. Photo courtesy of Z3VR

Houston-based startup Z3VR received a $500,000 grant from Baylor College of Medicine's Translational Research Institute for Space Health, or TRISH, last month to continue exploring how the wide world of virtual reality can boost mental and physical health for astronauts on a mission to Mars.

Founded in 2017 by a group of emerging tech enthusiasts, Z3VR discovered its niche in what CEO Josh Ruben calls the "intersection of biosensors and VR" and began consulting with TRISH in 2018. Last year, the company received its first funding from the institution to create virtual reality platforms that promote exercise and provide additional sensory experiences for isolated Mars-bound astronauts.

This new grant, however, takes Z3VR's mission one step farther. The year-long grant will allow Z3VR, in partnership with NASA labs in California and Houston, to further develop their VR platform to use eye movement tracking to identify cognitive, psychiatric, or ophthalmological issues before they arise.

Getting out ahead of issues is more important than ever on the Mission to Mars. Because of the duration and distance of the mission, these astronauts will be uniquely isolated and will face a communication lag of up to 45 minutes between space shuttle and command center.

"What that means from a health care perspective is that pretty much everything you need to treat and diagnose these astronauts needs to be self contained on the spacecraft itself," Ruben says. "The system that we are building is sensitive enough to pick up on these cognitive, ophthalmological, and psychiatric conditions well before they become clinically relevant. It'll be long before the astronaut knows there's a problem. That's the hope." Click here to continue reading.

Houston startup — buoyed by Halliburton — plans to scale

Houston-based Nanotech was the first company to be selected for Halliburton Labs, a recently announced startup incubator. Photo via halliburtonlabs.com

A Houston-based material science startup that uses nanotechnology for thermal insulation and fireproofing has been chosen as the first participant of Halliburton Labs, an innovation incubator, announced late last month by the oil and gas giant.

Halliburton Company chose Nanotech Inc., among a round of contenders to be the first participant of their 12-month program located at their Houston headquarters. Halliburton will provide Nanotech with its own office space, access to Halliburton facilities, technical expertise, and an extensive network to accelerate their product to market.

"With Nanotech's shield material we can have fireproofing infrastructure, saving lives and helping save the planet," says Mike Francis, CEO of Nanotech. "But it's tremendously difficult to scale our small lab to take our product globally, so when we heard about this opportunity with Halliburton Labs, we jumped immediately on it."

Nanotech Inc., started with a singular technology and a simple mission to fireproof the world and reduce energy consumption globally. The base nano shield, flex shield, and forged shield products contain nanoparticles ranging from 1 micrometer to 1 nanometer in a water-based solution with other inorganic compounds. The coating is heat resistant, non-flammable, and the nontoxic properties ensure it is sustainable for the environment. Click here to continue reading.Click here to continue reading.

This Houston tech startup is helping businesses find the funds during COVID-19 crisis and beyond

Houston startup Grant Source, which helps its clients find the right grants to apply for, has seen a surge in business amid the coronavirus shutdown. Getty Images

Since 2015, Grant Source has perfected the art of helping businesses, foundations, and organizations find and secure grant funding — and now their expertise has become vital to COVID-19 response initiatives.

With the devastation caused by the novel coronavirus, America's medical organizations have been scrambling to obtain the funds required to purchase the testing kits, masks, PPE, and other life-saving products needed to help curb the effects of the global pandemic and now, thanks to the mobile and web platform, they're getting the assistance they need to accomplish that goal.

"COVID-19 response is actually our claim to fame right now," says Allen Thornton, founder and CEO of Grant Source. "We have probably done more business in the last few months than we have since we started. Simply because we are helping people find grants with the CARES Act. There's over $500 billion out there, which has created overnight a $40 billion market opportunity for us."

Grant Source has worked extensively with city, county, state, and government agencies to secure grant funding, which is why they have become a game changer for those that need emergency capital to combat COVID-19's challenges. Click here to continue reading.

Houston energy tech startup raises $11M to grow its team locally

Houston-based Datagration Solutions Inc. has raised millions in its latest round — led partially by a local VC firm — to grow its local presence. Photo via Datagration Solutions/Facebook

An $11 million round of funding will fuel national and international growth at Houston-based Datagration Solutions Inc., whose cloud-based software aggregates data to improve workflows and analytics at upstream oil and gas operators.

Houston-based venture capital firm Quantum Energy Partners LLC and New York City-based venture capital firm Global Reserve Group LLC led the round. Datagration represents the sixth investment in energy tech involving the duo of Quantum Energy Partners and Global Reserve Group.

Braxton Huggins, chief marketing officer at Datagration, says the new capital will enable the company to build a technology team in Houston; add to its operations, sales, and marketing team in Houston; and supplement its development team in Austria. These new hires will help Datagration expand its national and international market presence, he says.

Huggins says Datagration aims to more than double in size by the end of 2021. The startup currently employs more than 30 people. Click here to continue reading.

Houston startup uses artificial intelligence to bring its clients better business forecasting calculations

Houston-based Complete Intelligence was just recognized by Capital Factory as the "Newcomer of the Year." Photo via completeintel.com

The business applications of artificial intelligence are boundless. Tony Nash realized AI's potential in an underserved niche.

His startup, Complete Intelligence, uses AI to focus on decision support, which looks at the data and behavior of costs and prices within a global ecosystem in a global environment to help top-tier companies make better business decisions.

"The problem that were solving is companies don't predict their costs and revenues very well," says Nash, the CEO and founder of Complete Intelligence. "There are really high error rates in company costs and revenue forecasts and so what we've done is built a globally integrated artificial intelligence platform that can help people predict their costs and their revenues with a very low error rate."

Founded in 2015, Complete Intelligence is an AI platform that forecasts assets and allows evaluation of currencies, commodities, equity indices and economics. The Woodlands-based company also does advanced procurement and revenue for corporate clients.

"We've spent a couple years building this," says Nash. "We have a platform that is helping clients with planning, finance, procurement and sales and a host of other things. We are forecasting equity markets; we are forecasting commodity prices, currencies, economics and trades. We built a model of the global economy and transactions across the global economy, so it's a very large, very detailed artificial intelligence platform."

That platform, CI Futures, has streamlined comprehensive price forecasting and data analysis, allowing for sound, data-based decisions.

"Our products are pretty simple," says Nash. "We have our basic off the shelf forecast which is called CI Futures, which is currencies, commodities, equities and economics and trade. Its basic raw data forecasts. We distribute that raw data on our website and other data distribution websites. We also have a product called Cost Flow, which is our procurement forecasting engine, where we build a material level forecasting for clients." Click here to continue reading.
A Houston-area family has made it their business to help Houstonians reduce waste in a convenient, sustainable way. Photo courtesy of Happy Earth Compost

Family-owned composting startup redesigns how Houston disposes of waste

don't worry, be happy

Jesse Stowers has always strived to do his part for the environment. From recycling and making eco-conscious choices, the Stowers were doing everything right, but was it enough?

The family of five was throwing away two trash bags of waste a day that would later end up in landfills until Stowers stumbled on composting as a solution. In May, he launched Happy Earth Compost, a company set on making Houston more sustainable.

If you're unfamiliar with composting, get ready for a crash course. Composting is a sustainable method of decomposing organic solid wastes and turning that waste into compost, a substance that helps plants grow. Food scraps and household items like rice, pasta, meat, poultry, fish, vegetables, fruits, coffee grounds, spoiled food, and tea bags are just a few of the many things that can be composted rather than thrown away.

"Your food waste and compostable waste is anywhere from 25 to 50 percent depending on the family," explains Stowers. According to Happy Earth Compost, one human creates an estimated 1,642 pounds of trash each year.

When looking at striking statistics, it's clear composting has a direct impact on the future of our environment. In Houston, 81 percent of waste ends up in landfills that pile high, and the city exceeds the national waste average by 25 percent. While the smell of landfills may make you wince, the repercussions of exhausting those landfills are even more displeasing.

Not only are the plots of land permanently lost from agricultural and home development, but the landfills also emit methane gas, a greenhouse gas that's 28 times more potent than carbon dioxide, according to The Independent.

What started as the Stowers family's resolution to be eco-friendly became a full-blown business plan. After Stowers attempted to compost at home for his own family, he soon partnered with New Earth Compost in Fulshear, Texas, as a drop-off location for the waste and did a test drive of the service with his neighbors back in March. Happy Earth Compost now serves 350 homes in the Greater Houston-area and has plans to expand to College Station.

Happy Earth Compost has created a service, with pricing ranging from $15 to $35, that provides Houstonians with the bins to compost and picks up the waste from your door. The buckets can be picked up weekly, bi-weekly or monthly while the company does all of the labor and dirty work to help you compost. A new $5 drop-off option is also available for Houstonians who are willing to drive to one of the applicable farmers' markets.

Subscribers can also get free compost to use in their gardens, what gardeners often call "black gold" because of its value and benefits, says Stowers.

Members receive equipment and instructions upon registration. Photo courtesy of Happy Earth

The family-owned business' typical week involves picking up buckets from 300 houses, dropping off compost, cleaning those buckets, and starting the process all over again.

"It's not the most glamorous thing, but it's getting people set up to do it. We're trying to make things easy for everybody by doing the hard work on our end," he says.

Ease is a key feature that helps the service stand out to Houstonians. Composting in Houston no longer requires the personal labor of investing in a compost bin, balancing the mixture of materials, measuring the temperature of your compost, and ordering worms to help accelerate the process (you read that right).

At various farmers' markets around Houston, Stowers is quick to point out the convenience of the program he's created. "It's hard to convince people to compost. It's easier to convince them to try something that's beneficial and simple," he explained.

Jenna Arbogast, a Happy Earth Compost customer, had dabbled in composting on her own but never committed to maintaining it at home. "When I found out about Happy Earth Compost, I so excited that someone was taking the initiative to extend this city-wide. Being that we are such a large city, we have such a great opportunity to heal our environment," says Arbogast. "I really love contributing to something as a collective. Even though I could compost at home, I really wanted to support this initiative," she says.

To Arbogast, who has been using the service for three months, convenience and transparency have made Happy Earth Compost a joy to work with. "You get all the benefits of composting without the maintenance, and you're supporting a good cause," she says.

Since its May launch, the Happy Earth Compost Instagram has grown by over 1,900 fans. The Stowers family has been amazed by the response and hopes to expand to more households in Houston.

"I think there's definitely a movement to be more sustainable to actually consider what we're doing and take care of our stuff, including the earth," says Stowers. He envisions a future where composting is taught to future generations as a fundamental need for the environment.

"It may not cost us now, but it will cost us eventually. What can we do now to make a difference now?" asks Stowers.


Jesse Stowers started his family business in May. Photo via happyearthcompost.com
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Energy transition innovator shares how Houston could be a biomanufacturing hub​

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Moji Karimi and his sister Tara had the idea for a company that could transform carbon emissions and mitigate new damage to the environment. Only, it seems, they were a bit ahead of their time.

Houston-based Cemvita Factory, founded in 2017, uses synthetic biology and take carbon emissions and transform them into industrial chemicals. However, it's only been since recently that the conversation on climate change mitigation has focused on carbon utilization.

"I think people are realizing more about the importance of really focusing on carbon capture and utilization because fossil fuels are gonna be here, whether we like it or not, for a long time, so the best thing we could do is to find ways to decarbonize them," Moji Karimi, co-founder and CEO, tells InnovationMap. "There's been this focus around carbon capture and storage, and I think the next awakening is going to be utilization."

Karimi joins InnovationMap for a Q&A about what the next year has in store for Cemvita and why Houston has some of the ingredients to become a hub for this type of innovation.

InnovationMap: You recently closed your series A round. What does that mean for Cemvita and what’s next when it comes to your funding journey?

Moji Karimi: With the series A in the bank, we started allocating that to expand the team and the footprint of our operations in Texas Technology Park off Kirby. This is where we had our initial lab and office space, which was about 6,000 square feet. And now we're expanding with an additional 3,000 square feet just for the office space and turning our initial 6,000 square feet into a big lab to support some of the new projects we're onboarding.

Another big part of that use of funds was establishing our Denver operations for biomining. That office went from having one person to a team of six. Our facility there is about 5,500 square feet with lab and office space to support new projects that we're getting.

The rest of the series A will be utilized for the new space and new people to accomplish the goals that we have for 2022. Toward the end of 2022, we'll launch the campaign for our series B.

IM: With the expanded offices and growing team, what has that meant in terms of Cemvita's capabilities?

MK: We have established our biofoundry, which is basically the engine for what we do. It's where we engineer the microbes and where we do a lot of the screening — small scale testing and fermentation and where we streamline our scale up process. What that allows us to do is, when we take on new projects, more efficiently go from engineering the microbe and doing tests in a test tube, to testing from one liter, 10 liters, 100 liters, and then even 1,000 liters all within our facilities.

Part of what's unique about Cemvita is to be able to do this scale up. A lot of our competitors engineer the microbes and then they just give the licensing to the client. For our customers, we need to also do their scale up. We have the right setup for the products that we have right now, the main one being bio ethylene, and the big milestone for this year is to have that pilot plant and to get to that one ton per month of ethylene production.

IM: You've recently grown your team significantly — are you still hiring?

MK: We're about 35 people right now. The last time we talked, we're like 15 or 20 or something. That's full-time people and there's another 10 to 15 contractors and part-timers as well. I think before our series B, we'll probably add another 10 to 15 people, but then we'll slow down before the series B. We have about 28 to 30 people in Houston and the other five or six are in Denver.

We are hiring for the biofoundry — so, microbiologists, molecular biologists, bioinformatics. Outside of the biofoundry, we're hiring for business development, process engineers, commercialization, and technical economic assessment. We're gonna have a position for an analyst coming up. On the Denver team, we have positions for about the same skill sets.

IM: 2021 seemed to be a year of great accomplishment on a national scale, from recently being a finalist in the COP26 Pitch Battle to winning last summer’s GS Beyond Energy Innovation Challenge. What’s 2022 going to be defined by for you?

MK: I think 2021 was a great year for us, even though it did slow us down a little bit in COVID and not being able to get deals done faster, so took a bit longer than expected.

Now going into 2022, what I characterize where we are right right now is the end of the beginning. From here on is really the growth chapter. We're done with the early stage stuff, and we are starting to graduate out of being a startup and into a real company. This year we have a lot of goals to accomplish, including our pilot with Oxy. We also are going to be more active in working with the Department of Energy to get some grants and expand our customer base.

We've been, in some ways, selective because, you know, we're not a B-to-C company, so we don't need 200 customers. We just need a few who are both innovative companies that are truly thinking about 2030 and 2050, but also those who are a good fit for our technology and scale up. This year, we're also gonna focus heavily on the IP for a lot of these applications that we're focused on are still pretty nascent. We want to make sure that we protect IP, especially now that we have good amount of resources from our series A.

In February, we're launching a new solution for hydrogen during the 2nd American Hydrogen Forum in Houston. That's going to be really exciting. We're also doing a lot internally in terms of how our lab runs. We're developing processes for being more efficient in candidate screening methodology, and also for high throughput sequencing.

IM: When we originally spoke years ago in the early days of both Cemvita and InnovationMap, one of the things I remember talking to you about is how nascent the CO2 utilization industry was. How has that changed over the years and what does that evolution mean for you?

MK: That's a really good question, especially the way that you framed it. I think it's been really interesting the past two years. The energy transition went from people thinking that solar and wind are going to solve all these problems to then having a bit of a reality check. Throughout last year, people have realized, "oh, I guess we need fossil fuels anyways. We need to find ways to work with the oil and gas industry." At the end of the day, this is not the "energy switch," right? This is the "energy transition." Alongside that, there's been more of an education around the role that nuclear and geothermal are going to play. People are like a lot more open minded, especially for nuclear just over the past few months.

I think people are realizing more about the importance of really focusing on carbon capture and utilization because fossil fuels are gonna be here, whether we like it or not, for a long time, so the best thing we could do is to find ways to decarbonize them. There's been this focus around carbon capture and storage, and I think the next awakening is going to be utilization. At the end of the day, these companies are spending money to store CO2 — they don't make money doing that. Whereas if you could figure out how to use CO2 as feedstock and turn that into a valuable chemical, they could sell it and have that revenue, and also close that carbon loop. That's really the, the end goal and holy grail. That's been our vision and mission.

I think it's true by your observation that we were a bit mistimed in the market. We were a bit ahead of what people were asking for, but then again, that's part of having a vision.

IM: One thing you've been passionate about is establishing Houston as a biomining and biomanufacturing hub. Why does Houston make sense for this type of hub and what exactly needs to occur to make it happen?

MK: Houston has its Climate Action Plan that the city published, and just think about how many chemical plants and refineries that we have. Plus, we already know that a big part of the future of chemical manufacturing is going to be biomanufacturing. Chemical reactions use so much heat and electricity, and that's why we have high scope of emissions. A lot of these processes are going to be replaced by biomanufacturing and using microbes to make the chemicals — and microbes do that under ambient pressure temperature. It's more sustainable. That's really what Solugen is doing. You would think that Lyondellbasell, Chevron, Exxon, Oxy and more would all sit together say, "Hey guys, what are we doing about this? How could we start some initiatives for this?" Rice University has a program around synthetic biology and University of Houston has a lot of bioprocessing. But what happens is those guys graduate and then they leave Houston. They go find a job in Boston. I think that's something we have to work on that on for companies to think about their strategic direction and be involved with the city, with the academic institutions, and with the startups like us.

For chemicals, Houston plays a big role. The way to decarbonize, in part, is by biomanufacturing. It does make sense for Houston to be more proactive about that.

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This conversation has been edited for brevity and clarity.

University of Houston: How to spin out university research into a startup as faculty

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Most inventors, whether they are university faculty or not, want to eventually start a company and capitalize on their inventions and research. For university faculty, this could be, or at least seems like a much more difficult thing to do. Why? Well, they already have a full-time job as a professor.

There are several things faculty need to think about before even considering spinning out their research. In his blog post on Y Combinator, Jared Friedman, the Managing Director, Software and Group Partner at Y Combinator and co-founder of Scribd, suggests to first decide if you should spin out and when.

“In a typical spin-out situation, there are several people who worked on the research, including a mix of students, post docs and faculty. The first thing you need to decide is who is going to work on the company and who is going to stay at the university,” Friedman said.

Friedman suggests that the “ideal situation” is for one or more people, who were originally involved in the research and lab work, to leave and start the company as co-founders. “One full-time founder is also ok. One of the people who leave to start the company should be the CEO.”

The others who stay behind at the university usually still want to be involved. Friedman said that this is fine. They are often call “academic cofounders” or “scientific cofounders”.

Leaving something you’re comfortable with, like your university position, can be scary but Friedman says, don’t wait too long, eventually being at a university will start to slow your progress down.

“In the early stages of developing a new technology, you’ll make faster progress still at the university, taking advantage of university resources. It’s the ideal place to do the initial experiments to prove that your idea could work. There’s a temptation to make the technology perfect before spinning out, and there’s always ‘one more experiment’ you could do. If you don’t stop this cycle, you’ll never leave,” Friedman said.

So, after you’ve decided you want to spin your research out and when, what do you do next?

Split the equity

Friedman offers two rules on how you should do this.

1) Founders who will be working on the company full-time should get equal or nearly equal amounts of equity.
2) Founders who will be leaving their job to work at the company full-time should get much more equity than founders who are going to remain in academia. Academic cofounders should typically own no more than 10% unless they are going to continue to be hands-on.
Jared Friedman, “How to spin your scientific research out of a university and into a startup”

The point of allocating equity is not to reward past contributors from the university but instead to anticipate new ones. It’s going to take an exceptionally long time to make a new company successful. The academic founders may have been helpful at first, but it’s those full-time founders that will take the company all the way. “The equity split between founders has to reflect the expected contributions over time.”

Sometimes, this means “the founders who leave will end up with much more equity than their former boss. This can be an awkward conversation, but it’s entirely sensible.”

Connect with your transfer office

If you want to commercialize the research that you started at your university, you will need to negotiate the right to the intellectual property with the university’s office of technology transfer.

Friedman mentions FOUR “key terms” in these types of agreements.

Equity

“Typically, the university will get equity in the company. This is ok as long as it is not too much. 3-5% is typical. Above 10% will cause problems.”

Royalty

“This means that you pay a percentage of revenue or profits to the university. If this is too high, it can affect the viability of the company to raise money and operate. Ideally you would make this zero. If you can’t do that, try to keep it < 5%, and to have it terminate after a certain number of years and/or a certain level of payments.”

Milestone Payments

“I.e., ‘You owe us $250K when the company raises its first $10M,’ or ‘You owe us $500K when you reach Phase II clinical trials.’ Because cash is scarce in the early days of a startup, you want to keep these as low as possible. You should never need to spend more than a few percent of the money you raise.”

Exclusivity

“If a license is not exclusive, the university could theoretically turn around and license the same IP to a big company to go compete with you. This sounds like a real problem, but often it’s not. For many inventions, in practice other companies won’t know how to use the IP and won’t value it until you’ve done years of work further developing it (at which point the university-owned IP isn’t sufficient). It may be optimal to have a non-exclusive license initially with an option to make it exclusive later, or a right of first refusal clause.”

Friedman also offers some advice on how to negotiate these agreements. First, start talking with these offices ASAP. This will give you more time to work out an agreement that you like, and you can learn how the tech transfer office works.

Also, “don’t wait for the agreement to start the company. Getting an agreement can take 6 months or longer. Many investors will fund companies before they have an agreement in place. The more progress you make on the company, the more leverage you have in the negotiation,” Friedman said.

Most importantly, get advice from other founders that have agreements with the same office to see what worked for them. You can also ask inventors, lawyers and other advisors what your best course of action is.

After spinning out

Friedman said, the first thing to do, once you’ve spun out, is to incorporate your company. He also said that it would probably make sense to keep collaborating with your university.

“In some cases, you may want to continue doing experimental work using university labs. University core facilities are commonly available to companies, albeit for higher fees. It’s possible to save a lot of money using university resources instead of buying equivalents commercially. That’s fine, as long as it isn’t slowing you down significantly and doesn’t create IP issues. Unfortunately, there is often a tradeoff between speed and cost,” Friedman said.

The big idea

The adjustment from academia to running a company is big and there are plenty of things to consider before even getting to that point. You should determine if you should even spin your research out of the university. If you decide you should, then decide when.

Once you’ve done that, then you must consider how to split the equity, negotiate with your university’s tech transfer office and continue collaborating with your university even after the spin out is successful.

A full understanding of everything that should be done when starting a business is the best way to set yourself up for success.

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This article originally appeared on the University of Houston's The Big Idea. Cory Thaxton is the communications coordinator for The Division of Research.

Shell forms $5M carbon capture research partnership with Houston-area university

struck a deal

Houston-based Shell Global Solutions and Prairie View A&M University signed a $5 million partnership this week that aims to foster innovative and effective carbon dioxide utilization and carbon capture methods.

The five-year research agreement will be headquartered out of the Historically Black University's College of Agriculture and Human Sciences. A portion of the $5 million will go toward building new infrastructure and state-of-the-art greenhouses on the university's nearly 700 acres of land devoted to farm research.

Shell staff members are also slated to collaborate on research projects developed at the site.

In addition to the $5 million partnership, Shell also pledged another $1 million to create a career pipeline for PVAMU students. The funds will go toward university infrastructure, retention programs, and work experience opportunities.

"[Shell's] comprehensive approach — involving infrastructure, research collaboration, internships and ongoing staff involvement — is especially welcome," Ruth J. Simmons, president of PVAMU, said in a statement.

The new research program is funded through Shell's Projects & Technology organization, which "helps to ensure that neither people nor nature are harmed during the construction and operation of Shell’s facilities, and it supports Shell’s carbon-management activities," according to the company's website.

Shell has launched more than 220 research and development projects through this branch of the organization over the years.

In 2019, the energy giant committed to a $10 million arrangement to launch the Carbon Hub at Rice University, a research initiative aimed at developing zero-emissions technologies. The hub made its first seven seed grants in August.

Shell is also an industry partner on the University of Houston's Data Science for Energy Transition project.

The partnership also marks a milestone for PVAMU as the first significant partnership under the university's new classification as a Research 2 Institution, according to PVAMU's website. The university attained its R2 Carnegie Classification, the second-highest ranking for research and higher education institutions in the country, earlier this month.

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