From friends and family rounds to how to navigate a seed round, here's what you need to know about raising money in Texas. Getty Images

In the vast majority of startups we've worked with across Texas, their "seed round" is not the first money in the door. That money is often called a "Friends & Family Round" and it's usually from people so close to the entrepreneurs that they are willing to take a gamble before there is really even much "there" to invest in. It also might include bootstrap funds put in by the entrepreneurs themselves.

After an F&F Round, Texas startups will pursue a "seed round," which generally includes some angel investors in the local and broader ecosystem. A problem we occasionally run into is that Texas entrepreneurs, including those in Houston, will get bad advice on what the right structures are for this kind of deal; either because they are reading a blog post from Silicon Valley (where things work VERY differently) or they're talking to someone marketing themselves as an "adviser" when their advice doesn't have much substantive deal experience backing it.

If your seed round is under $1 million, you will most likely structure it as a convertible note with a valuation cap and a 2 to 3 year maturity. Convertible notes are extremely slimmed down investment instruments that angel investors across Texas will be very familiar with. Usually, the "deal" in a convertible note round is that investors will get minimal up-front rights, in order to streamline early decision-making and keep legal costs down for negotiation, but they will get back-end protections like debt treatment if the company goes south. They will also almost always get a valuation cap and/or a discount on the price that future VCs pay, as recognition for the extra risk the seed investors are taking relative to later investors.

Once seed rounds get above $1 million, a more robust equity (stock) based investment structure starts to make more sense. There are two types of equity rounds, broadly speaking: seed equity and full VC-style equity. The latter involves a large set of heavily negotiated documents with robust investor protections, and is the structure most often utilized for a Series A (after seed). The former (seed equity) is a slimmed down version of full VC docs designed to give investors some rights, but keep negotiation costs (including legal fees) within a range that's reasonable for the smaller amount of money being raised. Investors vary as to whether they will accept simpler seed equity docs, or require you to give them full VC-style protections.

Given the diversity of investor expectations and contexts you're likely to run into in structuring a seed round, and the very high-stakes (and permanent) implications of the contracts you're going to sign, it's extremely important that advisers you work with have specialized experience in these kinds of deals.

In the case of lawyers specifically, it's also extremely important that they not have conflicts of interest with the investors you are raising money from. We too often see clever investors nudge entrepreneurs toward utilizing the investor's preferred law firm. Anyone with an ounce of honesty and experience can see why that's a problem.

Make sure you understand the high-level concepts and structures that are within the norms of your startup ecosystem, and then work with experienced, trustworthy advisors to translate everything into a deal that makes sense for your company's unique context.

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Jose Ancer is an emerging companies partner at Egan Nelson LLP. He also writes for Silicon Hills Lawyer, an internationally recognized startup/vc law blog focused on entrepreneurs located outside of Silicon Valley, including Texas.

You need a specialized lawyer for your startup — but that's easier said than done in Houston, according to this expert. Getty Images

Lawyers specializing in startups are hard to comeby in Houston — but here's what you need to know

Guest column

One of the worst, and most expensive, mistakes that we see startup founders make in the very early days of their company is not realizing that hiring lawyers is a lot like hiring doctors: when the stakes are high, you need a highly experienced specialist.

Law has numerous specialties and sub-specialties, and hiring legal counsel with the wrong specialty can mean paying to reinvent the wheel, or simply getting advice that is out of sync with the norms of your industry and the expectations of your seasoned investors.

This challenge can be particularly acute for founders of startups located in Houston. The legal market in any particular city tends to mirror the dominant industries of that city. Houston has some of the world's most prominent energy and healthcare lawyers, for reasons that should be obvious to anyone who knows anything about Houston's economy.

Startup lawyers, or more formally —corporate/securities lawyers who are sub-specialized in "emerging companies" — are a different story entirely. Given the nascent status of Houston's startup ecosystem, finding local lawyers who work with emerging technology companies and early-stage funding day in and day out, and know all the norms and nuances, is a challenge.

Very often we see founders get referred to a local lawyer who is a broad generalist that dabbles lightly in many practice areas. Their lack of depth in startup or venture capital work usually leads to clients paying for things that a more specialized lawyer, with a deeper set of precedent forms and institutional knowledge, could simply pull off the shelf. In other cases, founders get referred to very expensive senior corporate lawyers from firms designed for billion-dollar public company representation; totally overkill (and overpriced) for an early-stage startup.

What the smartest Houston founders discover, if they do their homework, is that leveraging the broader "Texas ecosystem" can help not just with sourcing talent for their employee roster or finding venture capital, but with sourcing specialized legal talent as well. In the case of Startup Lawyers, Austin's venture capital and startup ecosystem has produced numerous highly specialized lawyers whose depth of startup/vc experience easily compares with lawyers found in Silicon Valley, but who also regularly interact with investors in the Houston market; and therefore know their expectations. In the case of our firm, Egan Nelson (E/N), a significant number of our clients are located in Houston, Dallas, San Antonio, and other markets in the general regional area.

Historically, businesspeople have assumed that if they really want top-tier, highly specialized counsel, they had to find that counsel at large, multi-national law firms. That is no longer the case. The broader Texas ecosystem has produced a thriving group of specialized, high-end "boutique" law firms that are recruiting top-tier lawyers away from the traditional mega-firms, and leveraging technology to deliver "leaner" legal counsel; saving hundreds of dollars per hour for entrepreneurs.

It is not uncommon for us to see Houston startups utilizing an emerging companies corporate lawyer in Austin, a regulatory specialist lawyer in Houston, and a tax lawyer in Dallas; all from different firms. This is the future for how emerging companies will source their legal talent, without the constraints of geography or old-fashioned "all in one" law firm structures.

This trend really isn't that new. VCs from Austin and other Texas cities (and the coasts) have regularly been visiting Houston to fund companies, and Houston companies have regularly leveraged contacts in other markets to source specialized resources for their companies. The same dynamics have extended to finding legal counsel. "Localism," and an over-preoccupation with hiring everyone in the same city, isn't really just last year, it's more like last century. There is nothing about legal services for startups that requires any of your lawyers to be within your same city. Videoconferencing works great.

The growth of the Texas ecosystem, and the emergence of specialized boutique law firms, mean that Houston entrepreneurs have far more options to choose from for sourcing specialized legal counsel. Leverage those options to avoid engaging lawyers who are insufficiently experienced, or overkill, for the needs of your company. For more resources on finding and assessing the right lawyers for your Houston startup, see Startup Lawyers, Explained.

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Jose Ancer is an Emerging Companies Partner at Egan Nelson LLP. He also writes for Silicon Hills Lawyer, an internationally recognized startup/vc law blog focused on entrepreneurs located outside of Silicon Valley, including Texas.

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Texas Space Commission doles out $5.8 million to Houston companies

On A Mission

Two Houston-area companies have landed more than $5.8 million in funding from the Texas Space Commission.

The commission granted up to $5.5 million to Houston-based Axiom Space and up to $347,196 to Conroe-based FluxWorks.

The two-year-old commission previously awarded $95.3 million to 14 projects. A little over $34 million remains in the commission-managed Space Exploration and Aeronautics Research Fund.

Axiom Space, a commercial spaceflight company, said the new funding will go toward the development of its orbital data center capabilities. By the end of this year, Axiom plans to launch two free-flying nodes in low-Earth orbit to support its orbital data center operations. More nodes are set to go online in the coming years.

“Axiom Space is actively evaluating how our [orbital data center] architecture can enhance critical U.S. capabilities, including the proposed Golden Dome missile defense architecture,” Jason Aspiotis, global director of in-space data and security at Axiom, said in a news release. “In this context, real-time, around-the-clock availability, secure orbital processing, and AI-driven autonomy are vital for ensuring mission success.”

Founded in 2021, FluxWorks provides magnetic gear technology that was developed at Texas A&M University.

In 2024, FluxWorks was one of two startups to receive the Technology in Space Prize, funded by Boeing and the Center for the Advancement of Science in Space (CASIS), which manages the International Space Station National Laboratory.

FluxWorks is testing the performance of magnetic gear in microgravity environments, such as the International Space Station.

“Gearboxes aim to reduce the mass of motors required in a variety of applications; however, the lubricant needed to make them work properly is not designed for use in extreme environments like space,” according to a 2024 news release about the Technology in Space Prize. “Magnetic gears do not require lubricant, making them an appealing alternative.”

The Texas Space Commission granted $25 million to Houston aerospace companies Starlab Space and Intuitive Machines earlier this year. Read more here.

3 Houston startups named most innovative in Texas by LexisNexis

report card

Three Houston companies claimed spots on LexisNexis's 10 Most Innovative Startups in Texas report, with two working in the geothermal energy space.

Sage Geosystems claimed the No. 3 spot on the list, and Fervo Energy followed closely behind at No. 5. Fintech unicorn HighRadius rounded out the list of Houston companies at No. 8.

LexisNexis Intellectual Property Solutions compiled the report. It was based on each company's Patent Asset Index, a proprietary metric from LexisNexis that identifies the strength and value of each company’s patent assets based on factors such as patent quality, geographic scope and size of the portfolio.

Houston tied with Austin, each with three companies represented on the list. Caris Life Sciences, a biotechnology company based in Dallas, claimed the top spot with a Patent Asset Index more than 5 times that of its next competitor, Apptronik, an Austin-based AI-powered humanoid robotics company.

“Texas has always been fertile ground for bold entrepreneurs, and these innovative startups carry that tradition forward with strong businesses based on outstanding patent assets,” Marco Richter, senior director of IP analytics and strategy for LexisNexis Intellectual Property Solutions, said in a release. “These companies have proven their innovation by creating the most valuable patent portfolios in a state that’s known for game-changing inventions and cutting-edge technologies.We are pleased to recognize Texas’ most innovative startups for turning their ideas into patented innovations and look forward to watching them scale, disrupt, and thrive on the foundation they’ve laid today.”

This year's list reflects a range in location and industry. Here's the full list of LexisNexis' 10 Most Innovative Startups in Texas, ranked by patent portfolios.

  1. Caris (Dallas)
  2. Apptronik (Austin)
  3. Sage Geosystems (Houston)
  4. HiddenLayer (Austin)
  5. Fervo Energy (Houston)
  6. Plus One Robotics (San Antonio)
  7. Diligent Robotics (Austin)
  8. HighRadius (Houston)
  9. LTK (Dallas)
  10. Eagle Eye Networks (Austin)

Sage Geosystems has partnered on major geothermal projects with the United States Department of Defense's Defense Innovation Unit, the U.S. Air Force and Meta Platforms. Sage's 3-megawatt commercial EarthStore geothermal energy storage facility in Christine, Texas, was expected to be completed by the end of last year.

Fervo Energy fully contracted its flagship 500 MW geothermal development, Cape Station, this spring. Cape Station is currently one of the world’s largest enhanced geothermal systems (EGS) developments, and the station will begin to deliver electricity to the grid in 2026. The company was recently named North American Company of the Year by research and consulting firm Cleantech Group and came in at No. 6 on Time magazine and Statista’s list of America’s Top GreenTech Companies of 2025. It's now considered a unicorn, meaning its valuation as a private company has surpassed $1 billion.

Meanwhile, HighRadius announced earlier this year that it plans to release a fully autonomous finance platform for the "office of the CFO" by 2027. The company reached unicorn status in 2020.

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This article originally appeared on Energy Capital HTX.

UH student earns prestigious award for cancer vaccine research

up-and-comer

Cole Woody, a biology major in the College of Natural Sciences and Mathematics at the University of Houston, has been awarded a Barry Goldwater Scholarship, becoming the first sophomore in UH history to earn the prestigious prize for research in natural sciences, mathematics and engineering.

Woody was recognized for his research on developing potential cancer vaccines through chimeric RNAs. The work specifically investigates how a vaccine can more aggressively target cancers.

Woody developed the MHCole Pipeline, a bioinformatic tool that predicts peptide-HLA binding affinities with nearly 100 percent improvement in data processing efficiency. The MHCole Pipeline aims to find cancer-specific targets and develop personalized vaccines. Woody is also a junior research associate at the UH Sequencing Core and works in Dr. Steven Hsesheng Lin’s lab at MD Anderson Cancer Center.

“Cole’s work ethic and dedication are unmatched,” Preethi Gunaratne, director of the UH Sequencing Core and professor of Biology & Biochemistry at NSM, said in a news release. “He consistently worked 60 to 70 hours a week, committing himself to learning new techniques and coding the MHCole pipeline.”

Woody plans to earn his MD-PhD and has been accepted into the Harvard/MIT MD-PhD Early Access to Research Training (HEART) program. According to UH, recipients of the Goldwater Scholarship often go on to win various nationally prestigious awards.

"Cole’s ability to independently design and implement such a transformative tool at such an early stage in his career demonstrates his exceptional technical acumen and creative problem-solving skills, which should go a long way towards a promising career in immuno-oncology,” Gunaratne added in the release.