Expert: How to strengthen Houston’s $555 million medtech sector

guest column

Houston — home to the largest medical center in the world — needs access to more early stage funding for medtech companies. Photo by F. Carter Smith/courtesy of MD Anderson

Houston, an important hub for healthcare and life-science ventures, continues to see significant support for those sectors. And the city’s infrastructure around life-sciences and healthcare continues to grow. Most recently, the Texas Medical Center announced an increase in the size of its TMC Venture Fund to $50 million from $25 million. The Venture Fund was launched in 2017 to invest in Houston-area medical technology organizations and initiatives.

The city is on the leading edge when it comes to investing in digital health startups and the entrepreneurs who launch them. Nationwide, venture capital financing for medtech increased 67 percent from 2017 to 2021, with total financing approaching $20 billion, according to Deloitte’s new study, New Strategies for MedTech Startups. Financing deals for medtech organizations in Texas totaled $555 million during that time. That’s the fourth-largest total in the country, behind California, Massachusetts, and New York.

What investors are paying the most attention to are late-stage diagnostic and digital companies, according to the report. Among the hot spots for funders: AI technologies, at their highest funding level in five years; in-vitro diagnostics (IVD) and healthcare IT, both of which have dominated medtech fundraising over the last decade, raising $48 billion and $36 billion, respectively.

What could use more support are early-stage companies, the kind that get seed and series A funding. The study found that funding for them has dipped to 23 percent of total medtech VC funding in 2021 from 27 percent in 2017. Why? Yields are lower for medtech investors compared to other sectors, and reimbursement for new technologies can be difficult to achieve, meaning companies can’t get paid for their goods or services. Additionally, pandemic-induced factors, such as supply-chain issues, have also impacted funding.

Ever creative, many Houston-area early-stage entrepreneurs are looking to alternative kinds of finance, including pre-revenue IPOs and SPACs to gain entry to public markets as well as build-to-buy, where a medtech incumbent takes an ownership stake with an option to buy the company. They’re also looking to family office investment groups—family-run, generally mission-driven investors who tend to be less formal than VC funds—for financial support.

And venture capital is more than willing to invest in companies, according to the investors interviewed for the Deloitte study. Companies with strong management teams, scalable technologies that address unmet needs for a large market, technologies with low regulatory and reimbursement barriers, and products that can reduce the overall cost of healthcare will catch their attention. Bonus points for efficient, forward-looking companies, too.

Attention to these smaller firms is crucial and necessary, given that 94 percent of the 15,500-plus medtech firms in the United States are pre-revenue or have no revenue at all. Houston is home to plenty of these smaller firms with big potential. Investors would do well to look at them as long-term investments and support them by helping to lay the groundwork for regulatory and reimbursement success, in addition to investing financially.

In adopting this approach, the VC community can make significant strides towards bolstering an already strong medtech ecosystem in Houston.

------

Kevin Wijayawickrama is principal at Deloitte and works on the company's risk and financial advisory team.

Ad Placement 300x100
Ad Placement 300x600

CultureMap Emails are Awesome

Property Showcase

Houston team develops low-cost device to treat infants with life-threatening birth defect

infant innovation

A team of engineers and pediatric surgeons led by Rice University’s Rice360 Institute for Global Health Technologies has developed a cost-effective treatment for infants born with gastroschisis, a congenital condition in which intestines and other organs are developed outside of the body.

The condition can be life-threatening in economically disadvantaged regions without access to equipment.

The Rice-developed device, known as SimpleSilo, is “simple, low-cost and locally manufacturable,” according to the university. It consists of a saline bag, oxygen tubing and a commercially available heat sealer, while mimicking the function of commercial silo bags, which are used in high-income countries to protect exposed organs and gently return them into the abdominal cavity gradually.

Generally, a single-use bag can cost between $200 and $300. The alternatives that exist lack structure and require surgical sewing. This is where the SimpleSilo comes in.

“We focused on keeping the design as simple and functional as possible, while still being affordable,” Vanshika Jhonsa said in a news release. “Our hope is that health care providers around the world can adapt the SimpleSilo to their local supplies and specific needs.”

The study was published in the Journal of Pediatric Surgery, and Jhonsa, its first author, also won the 2023 American Pediatric Surgical Association Innovation Award for the project. She is a recent Rice alumna and is currently a medical student at UTHealth Houston.

Bindi Naik-Mathuria, a pediatric surgeon at UTMB Health, served as the corresponding author of the study. Rice undergraduates Shreya Jindal and Shriya Shah, along with Mary Seifu Tirfie, a current Rice360 Global Health Fellow, also worked on the project.

In laboratory tests, the device demonstrated a fluid leakage rate of just 0.02 milliliters per hour, which is comparable to commercial silo bags, and it withstood repeated disinfection while maintaining its structure. In a simulated in vitro test using cow intestines and a mock abdominal wall, SimpleSilo achieved a 50 percent reduction of the intestines into the simulated cavity over three days, also matching the performance of commercial silo bags. The team plans to conduct a formal clinical trial in East Africa.

“Gastroschisis has one of the biggest survival gaps from high-resource settings to low-resource settings, but it doesn’t have to be this way,” Meaghan Bond, lecturer and senior design engineer at Rice360, added in the news release. “We believe the SimpleSilo can help close the survival gap by making treatment accessible and affordable, even in resource-limited settings.”

Texas among 5 hardest working states and more innovation news to know

Trending News

Editor's note: As we look back at the top Houston innovation news for the first half of September, reports show that Texas is one of the hardest working states, while local startup activity has slowed down. Plus, exciting medical innovation advancements. Here are the most-read InnovationMap stories from September 1-14.

1. Texas is the 4th hardest working state in America, report finds

Texas is home to some of the hardest workers. Photo via Getty Images

It's no secret that Texans are hardworking people. To align with the recent Labor Day holiday, a new WalletHub study asserts that the Lone Star State is one of the five most hardworking states in America for 2025. The report ranked Texas the fourth most hardworking state this year, indicating that its residents are working harder than ever after the state fell into seventh place in 2024. Continue reading.

2. UH receives $1M grant to advance research on rare pediatric disorder

The Cynthia and George Mitchell Foundation has granted $1.1M to the University of Houston to support research on Usher Syndrome. Photo courtesy University of Houston.

The University of Houston has received a two-year, $1.1 million gift from the Cynthia and George Mitchell Foundation to advance research on a rare genetic disorder that can lead to both deafness and blindness in children, known as Usher Syndrome. The current grant will support the research of UH biomedical engineering professors Muna Naash and Muayyad Al-Ubaidi, who work in the Laboratory for Retinal Molecular and Cellular Biology and Gene Therapy in the Cullen College of Engineering. Continue reading.

3. Houston's surge in new startups cools since pandemic peak, study shows

Startup applications in Houston have dipped since their 2021 peak, even as national entrepreneurship hits record highs, according to a new report from The Kaplan Group. Photo via Getty Images.

Startup activity in the Houston metro area has dipped since its pandemic peak, according to a new study. Dating back to 2005, the volume of applications to form new businesses in the Houston area hit its highest level in 2021 (151,804). Since then, though, the application volume has fallen, according to the study, conducted by business debt collection agency The Kaplan Group. Continue reading.

4. TMC lands $3M grant to launch cancer device accelerator

Recent funding from CPRIT will help launch the new Accelerator for Cancer Medical Devices. Photo via TMC

A new business accelerator at Houston’s Texas Medical Center has received a nearly $3 million grant from the Cancer Prevention and Research Institute of Texas. The CPRIT grant, awarded to the Texas Medical Center Foundation, will help launch the Accelerator for Cancer Medical Devices. The accelerator will support emerging innovators in developing prototypes for cancer-related medical devices and advancing them from prototype to clinical trials. Continue reading.

5. 10 Houston billionaires make Forbes' list of richest Americans in 2025

Pictured: Nancy and Richard Kinder, the richest Houstonian, according to the Forbes 400. Photo by Michelle Watson/Catchlight Group

America's wealthiest billionaires are $1.2 trillion richer in 2025, bringing their collective worth to a staggering $6.6 trillion. And Houston's own Richard Kinder has become the richest billionaire in the city, according to the new Forbes 400. The Kinder Morgan chairman is the 11th richest Texas resident and ranks as the 108th richest American. Kinder also dethroned Tilman Fertitta to claim the title as the wealthiest Houstonian. The annual Forbes 400 list is a definitive ranking of the wealthiest Americans, using interviews, financial data, and documentation provided by billionaires and their companies. Continue reading.

Oxy's $1.3B Texas carbon capture facility on track to​ launch this year

gearing up

Houston-based Occidental Petroleum is gearing up to start removing CO2 from the atmosphere at its $1.3 billion direct air capture (DAC) project in the Midland-Odessa area.

Vicki Hollub, president and CEO of Occidental, said during the company’s recent second-quarter earnings call that the Stratos project — being developed by carbon capture and sequestration subsidiary 1PointFive — is on track to begin capturing CO2 later this year.

“We are immensely proud of the achievements to date and the exceptional record of safety performance as we advance towards commercial startup,” Hollub said of Stratos.

Carbon dioxide captured by Stratos will be stored underground or be used for enhanced oil recovery.

Oxy says Stratos is the world’s largest DAC facility. It’s designed to pull 500,000 metric tons of carbon dioxide from the air and either store it underground or use it for enhanced oil recovery. Enhanced oil recovery extracts oil from unproductive reservoirs.

Most of the carbon credits that’ll be generated by Stratos through 2030 have already been sold to organizations such as Airbus, AT&T, All Nippon Airways, Amazon, the Houston Astros, the Houston Texans, JPMorgan, Microsoft, Palo Alto Networks and TD Bank.

The infrastructure business of investment manager BlackRock has pumped $550 million into Stratos through a joint venture with 1PointFive.

As it gears up to kick off operations at Stratos, Occidental is also in talks with XRG, the energy investment arm of the United Arab Emirates-owned Abu Dhabi National Oil Co., to form a joint venture for the development of a DAC facility in South Texas. Occidental has been awarded up to $650 million from the U.S. Department of Energy to build the South Texas DAC hub.

The South Texas project, to be located on the storied King Ranch, will be close to industrial facilities and energy infrastructure along the Gulf Coast. Initially, the roughly 165-square-mile site is expected to capture 500,000 metric tons of carbon dioxide per year, with the potential to store up to 3 billion metric tons of CO2 per year.

“We believe that carbon capture and DAC, in particular, will be instrumental in shaping the future energy landscape,” Hollub said.

---

This article originally appeared on our sister site, EnergyCapitalHTX.com.

View All Listings