This is how an IPO affects a community, according to Houston researcher

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After an IPO, zip codes close to a company's headquarters see certain home prices and consumer spending rise, while more new businesses and jobs are created. Photo via Pexels

A massive company announces plans to bring its headquarters to town, and the locals can't stop grumbling. The added traffic. The noise. The shifts in neighborhood routine as a giant new facility gets up and running.

Then the company files for an IPO.

Over the next two years, the traffic and dust may well be forgotten as residents watch their local economy transform. Anecdotal evidence suggests that the mere change in a company's listing status, along with the liquidity it brings its shareholders, can significantly influence local economies.

That was certainly the case with Facebook in 2012, when CEO Mark Zuckerberg helped create a thousand new millionaires and a dozen new billionaires. In the six months following Facebook's IPO, the newly rich drove up real estate prices in the San Francisco Bay area by more than 15 percent as their previously illiquid stock wealth became liquid. Two and a half decades earlier, Dell's 1988 IPO created "Dellionaires" who got rich off their shareholdings and promptly moved into McMansions in the Austin area, forever changing the city.

But were these spillover effects isolated incidents — or the norm? In a recent study, Rice Business professor Alexander W. Butler set out quantify the impact of spillover effects on local economies.

Collaborating with Larry Fauver of the University of Tennessee and Ioannis Spyridopoulos of American University, Butler found that Facebook's and Dell's impacts were not one-offs: IPOs typically spark significant positive spillovers in local economies. What's more, the team determined that it is the listing decision, rather than actual capital raising, that boosts local labor markets, business environments, consumer spending and real estate.

But why? An IPO doesn't create a new company. It does, however, generate significant liquidity for the firm, for employees and for other shareholders who go forth into the community to spend their new cash. Investors' wealth also rises if a firm's stock price climbs after listing, as does a firm's wealth as it raises new capital.

To be certain that it's not just a firm's raising of capital that causes these spillovers, Butler and his team also looked at the effects of seasoned equity offering (SEO) activity, which doesn't involve a change in a company's listing status. What they found is that the effect of SEOs on local economies is insignificant. So capital raising alone is not enough.

To reach their conclusions, Butler and his colleagues selected 1,365 zip codes that had at least one IPO between 1998 and 2015. (The years 1999, 2000 and 2003 were excluded due to a lack of income data at the zip code level.) They also identified zip codes that were two miles, five miles and ten miles from a newly public company's headquarters.

Then they compared their selected zip codes to control zip codes in the same county using a matching process to compare "apples to apples." The team compared figures such as changes in home prices, the number of new mortgages, zip code business patterns, credit card spending, and income and wages for the two years following an IPO.

Analyzing these data, they found that when an IPO occurs, each $10 million in proceeds leads to an extra 0.7 new businesses in the surrounding area and 41 new local jobs. And while the price of expensive homes in the newly public company's zip code didn't increase, the prices of expensive homes in other zip codes within two miles of headquarters did rise — by $3,900 for the average expensive home valued at $590,000.

Prices were also higher in zip codes two to five miles away from headquarters, but less so. Growth of home prices, they discovered, gets a boost after the lockup period ends and shareholders can sell their stock, supporting the hypothesis that changes in investor liquidity cause that spillover. Further evidence of this came when they found that home prices climb even more when a firm's stock price jumps after the IPO.

But IPOs are not all good news for communities. Findings also showed IPO activity increases the odds that middle- to lower-income residents may have to move to lower-income zip codes. In the years following Facebook's IPO, workers in the Bay area such as police officers, teachers and firefighters were priced out of the housing market and relegated to long commutes to work.

Facebook has taken notice. The Chan Zuckerberg Initiative, a charitable foundation Zuckerberg cofounded with his wife, Priscilla Chan, has donated $3.6 million toward the city's housing crisis.

As future companies go public, leaders could be well served to recognize Butler's team's findings. Yes, when their firm gains better access to financial markets, they're really are helping lift up the local economy — just not everyone who's living in it.

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This article originally ran on Rice Business Wisdom and is based on research from Alexander W. Butler, a professor of finance at Jones Graduate School of Business at Rice University.
This week's innovators to know in Houston includes Kyle Judah of Rice University, and Devin and Peter Licata of Headquarters. Photos courtesy

3 Houston innovators to know this week

who's who

Editor's note: This week's Houston innovators to know are each looking to positively effect Houston's startup and innovation ecosystem. From making innovation more representative starting with on campus to looking to help companies most affected by COVID-19, here's what these innovators are up to.

Kyle Judah, executive director of Liu Idea Lab for Innovation & Entrepreneurship at Rice University

Kyle Judah joins the Houston Innovators Podcast last week. Photo courtesy of Lilie

To Kyle Judah, who recently joined Rice University's Liu Idea Lab for Innovation and Entrepreneurship, establishing Houston's innovation ecosystem as unique and reflective of the city is of extreme importance. From diversity of people to diversity of industry, Judah is hard at work at making Rice's programs reflective of Houston.

"We can't just copy and paste what works for the Bay Area or what works for Boston," he says. "We have to figure out what is going to be the authentic right sort of centers of excellence for Rice and for Houston — areas like energy, health care, space. It just so happens that these areas that Houston and Rice have historically done better at than anyone else — those happen to be the most grand challenges for all of humanity."

Judah joins the Houston Innovators Podcast to discuss this and what else he has on his radar in his new role. Read more and stream the episode here.

Devin and Peter Licata of Headquarters

Headquarters is looking to give away coworking space to two startups affected by the pandemic. Photo courtesy of Headquarters

A brother-sister team, Peter and Devin Licata are running Headquarters, a coworkering space just east of downtown Houston. And, after watching how COVID-19 has affected startups, they are looking to donate space to two deserving companies.

"For Devin and I being local Houstonians," says Peter. "It was very exciting to bring a product to Houston that we had never seen before in the city. When we started the search for a building, we had a very specific idea of how we wanted it to look and feel, and the amenities we wanted to provide."

Headquarters is currently accepting submissions from startups, founders, and entrepreneurs to be considered for free office space through Friday, October 2, with recipients set to be announced the week of October 5th.
Kyle Judah is executive director of Rice University's Liu Idea Lab for Innovation & Entrepreneurship. Photo courtesy of Lilie

New innovation leader at Rice University plans to take campus innovations to the world

HOUSTON INNOVATORS PODCAST EPISODE 50

When Kyle Judah accepted his position as executive director at Rice University's Liu Idea Lab for Innovation & Entrepreneurship, he had spent less than 48 hours in the city of Houston. In fact, his first two months in the role have been spent completely remote and out of town.

Still, his limited in-person interaction with the city and with Rice made an impact.

"One of the things I found so exciting about what's going on in Houston right now that, quite frankly, was incredibly attractive about the opportunity to come and join Lilie and Rice was that Houston has these big pillar companies in energy and health care and all these critical areas that the world, the economy, and the society needs," Judah says on the Houston Innovators Podcast. "That's all in Houston right now."

Judah and Lilie's goal is to help identify the innovation happening on campus at Rice and bring it to the world. And, he says, Rice as a whole has a huge place in the greater Houston innovation ecosystem. The challenge is identifying what industries Houston and Rice have an opportunity to disrupt.

"We can't just copy and paste what works for the Bay Area or what works for Boston," he says. "We have to figure out what is going to be the authentic right sort of centers of excellence for Rice and for Houston — areas like energy, health care, space. It just so happens that these areas that Houston and Rice have historically done better at than anyone else — those happen to be the most grand challenges for all of humanity."

Another priority Judah has leading Lilie, which was founded at Rice in 2015, is to make sure opportunities are available for everyone. This month, the university launched the Rice Experiment Fund — a $500 semesterly stipend available to all students. The funds are meant to be used on early market testing and experiments, which can be prohibitive obstacles for students.

"We want to make sure that the diversity of entrepreneurship at Rice speaks to the diversity of the city in our backyard," says Judah, adding that diversity and inclusion is at the top of mind for programs like this.

Judah shares more on where he plans to lead Lilie and his early impressions on Houston's startup scene in the podcast episode. Overall, he's found it extremely welcoming.

"I found that everyone here wants Houston to win," he says. "We're really playing as a broader collective, and that's incredibly special."

You can listen to the full interview below — or wherever you stream your podcasts — and subscribe for weekly episodes.
Rice has risen to the top again. Photo courtesy of Rice University

Rice University rises to top of Texas schools in prestigious U.S. News & World Report ranking

Head of class

Rice University continues to rise in national surveys. The latest: U.S. News & World Report's 2021 Best Colleges, released September 14, anoints Rice as the best university in Texas. The prestigious Houston school — dubbed the "Ivy League of the South" — ranks No. 16 among national universities, up one spot from last year.

This is in step with last year's U.S. News & World Report's Best Colleges list, which also named Rice the best university in Texas.

The trusted report compared more than 1,400 undergraduate institutions across 17 measures of "academic quality" this year. Acknowledging the ongoing impact of the coronavirus pandemic on students and schools, the publication made several updates to its methodology, notes a release.

For 2021, U.S. News added two new metrics to measure student debt. It also increased the weight of the outcome category, which measures graduation rates, retention rates, and social mobility, and reduced the weights for standardized test scores, high school class standing, and alumni giving. And, for the very first time, the report ranks test-blind schools (those that don't require an SAT or ACT score for admission).

"The pandemic has affected students across the country, canceling commencement ceremonies and switching classes from in person to remote," said Kim Castro, editor and chief content officer, in a release. "Whether students have slightly altered their college plans or changed them entirely, it remains our mission to continue providing students and their families with the tools they need to help find the right school for them."

Now, on to the rankings. Here's how Rice scores in the prestigious report:

  • No. 6 in Best Undergraduate Teaching
  • No. 8 in Best Value Schools
  • No. 18 in Most Innovative Schools (tie)
  • No. 224 in Top Performers on Social Mobility (tie)
  • No. 19 in Best Undergraduate Engineering Programs (tie)

For 2021, the University of Texas at Austin ranks No. 42 nationally, up a significant six spots from 2020. It's also the school's highest ranking on the report since 1985, touts a news release from the university. Among the country's public universities, UT Austin climbed four spots from the previous year, landing at No. 13.

As for Texas' other top schools, Southern Methodist University and Texas A&M University are tied at No. 66 nationwide, while Baylor University and Texas Christian University rank No. 76 and No. 80, respectively.

The lofty U.S. News & World Report ranking is just the latest in accolades for the Owls. Rice was recently named the seventh best college in the U.S. and the best college in Texas by Niche.com.

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This article originally ran on CultureMap.
Calling all clean energy startups — Rice Alliance has announced a new accelerator launching in 2021. Photo via Getty Images

Rice Alliance to launch clean energy accelerator in Houston

New to Hou

The Rice Alliance for Technology and Entrepreneurship has announced its new Clean Energy Accelerator — a 12-week program for early stage energy startups — at the close of the 18th annual Energy Tech Venture Forum.

"Houston truly is the hub of the global energy industry, and it is here where the next generation of energy leaders will create and scale innovations that will change the world," says Bob Harvey, president and CEO at the Greater Houston Partnership, in a press release. "The new Clean Energy Accelerator will build on that legacy and align with the work already taking place in Houston's robust energy innovation ecosystem."

The program joins Rice University's suite of business accelerating programs — including Owl Spark, the annual venture forums, and the Rice Business Plan Competition — and is being supported by Wells Fargo.

"The Rice Alliance Clean Energy Accelerator is poised to increase the quality and quantity of clean-tech startups in the area, which benefits Houston but also has the potential to benefit the greater global economy," says Jenny Flores, head of small business growth philanthropy at Wells Fargo, in the release. "At Wells Fargo, we believe that climate change continues to be one of the most urgent environmental and social issues of our time."

The Clean Energy Accelerator — to be housed at The Ion when it opens — falls in line with the city of Houston's Climate Action Plan, which has a goal of making Houston carbon neutral by 2050.

"It's a very ambitious goal, and it's one the City of Houston, as a municipality, cannot do alone," Mayor Sylvester Turner says in the release. "Today's announcement of the Rice Alliance Clean Energy Accelerator is a great example of what we have been seeking to build in Houston, an innovation ecosystem that can develop creative solutions to address our toughest challenges."

More information is available online, and applications for startups will open in early 2021. The Rice Alliance announced several community supporters for the new accelerator, including BP, Chevron Technology Ventures, Equinor, ExxonMobil, NRG, Saudi Aramco Energy Ventures, Shell Ventures, Sunnova, Total, Tudor, Pickering, Holt & Co., Halliburton Labs, Houston Exponential, the Center for Houston's Future, and Greentown Labs.

"Houston is our home, and we are strong believers in our city," says Brad Burke, managing director of the alliance, in the release. "It is here that some of the greatest minds in energy are innovating. New technologies, many driven by startup companies, have enabled the U.S. to become energy self sufficient for the first time in history, but global energy needs are growing and changing. We need to apply that same entrepreneurial spirit and technology innovation to meet these challenges."


Investors gravitate toward funds ending in the number zero over those ending in the number five, a Rice University researcher finds. Because of this tendency, some investors expose themselves to financial risk and loss of wealth. Photo via Getty Images

Rice University research finds that investors might have a bias towards the number zero

houston voices

When the Dow Jones Industrial Average hit 18,000 a few years back, the nicely rounded number dominated the news. When teens take the SAT, those who just miss scoring a round number are more likely to seek a do-over. And, research shows, major league baseball players are four times more likely to end their seasons with a .300 batting average than a .299.

There's something irresistible about figures ending in zero. But does that extend to our decision-making? Does our instinctive love for round numbers affect our financial plans?

The answer is yes, says Rice Business professor Ajay Kalra. Along with Xiao Liu of NYU Stern and Wei Zhang of Iowa State University, Kalra looked at data from thousands of investors in Target Retirement Funds (TRFs), which generally assume retirement at age 65 and ask employees to pick a fund with a year ending either in zero or five (e.g., 2040, 2045) that is nearest to their planned retirement date.

Investors whose birth year doesn't already end in zero or five must round up or round down to choose their TRF.

The zeros clearly win investors' hearts. Succumbing to what the researchers call "zero bias," investors consistently choose to sink their retirement dollars into funds that end in zero, not five. For many of the investors Kalra and his team looked at, especially older people, men and those with higher incomes, this meant choosing a retirement age of 60 or 70 rather than the standard 65.

The choice was often costly. Many investors who rounded up or down to find a fund year ending in zero exposed themselves to real financial risk.

That's because TRFs are graded portfolios — meaning they start out stock-heavy, move to a mix of stocks and bonds and finally emphasize bonds. Investors who rounded down for a too-young retirement target gave themselves less time to benefit from a stock-dominant portfolio. Investors who rounded up for a too-old retirement target ending in zero contributed less money to their retirement because they assumed they had more time to invest. Investors who rounded down did worse than those who rounded up.

Who is most susceptible to losing hard-earned retirement dollars this way? The researchers looked at people born from the 1950s through the 1980s. Of these investors, those born in years ending between three and seven selected the appropriate fund. The zero bias was prevalent in those born in years ending in eight or nine, who tended to project their retirement age as 60, and those born in years that ended in zero, one or two, who favored retiring at 70.

Overall, the researchers discovered, 34 percent of people born in years ending in eight or nine picked retirement funds that targeted too-early retirement — and ended up financially worse off. Meanwhile, 29 percent of investors born in years ending in the numbers zero, one or two picked later TRFs. With the exception of those who were risk averse, these investors ended up better off than those who chose too-early TRFs. Overall, however, investors who picked funds with mismatched retirement dates (that is, inconsistent with retirement at 65), saw more losses than gains.

The infatuation with zero held up even when the researchers replicated their study in an experimental setting. So they tried something different: they presented participants with math problems to coax a "calculative mindset." It worked. Rather than gravitating to zeros, these investors chose retirement funds that matched their ages. Straight talk in the form of a 30-minute one-on-one financial planning session helped too. At least some investors who got this counseling made better choices.

Rounding up or down to zero can be a nice mental shortcut when stakes are low and time is short. There are good reasons, for example, to go for the zero in calculating sales tax when you're buying a book, or tallying how many party guests want cake.

But when it comes to life savings, instinct-based math can be trouble. Financial firms should be aware of this and discourage preference for the shiny number zero. Advisors should nudge clients toward funds that will truly enhance earnings. Most important, however, investors themselves need to keep their heads, think of the future and resist the allure of round numbers.

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This story originally ran on Rice Business Wisdom. It's based on research by Ajay Kalra, a professor of marketing at Jones Graduate School of Business at Rice University.
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The Ion receives $1.5M economic development grant to go toward Houston accelerator programs

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The Ion — a rising hub for innovation being developed in Midtown by Rice Management Company — has received a $1.5 million grant to go toward supporting its startup accelerator programs.

The grant from the Economic Development Administration is a part of the organization's Build to Scale (B2S) program and will also benefit three accelerators: the Ion Smart and Resilient Cities Accelerator, the Rice Alliance Clean Energy Accelerator, and DivInc Accelerator.

"Receiving this grant is a big win for our city — furthering the Ion's opportunity to bring together leading minds to solve some of our toughest challenges," says Brad Burke, managing director of the Rice Alliance, in a news release from Rice. "We believe that it's a fully collaborative approach that will lead to accelerating energy innovation and sustainable solutions."

All three of these accelerators will be represented in The Ion's Accelerator Hub and will work in collaboration, according to the release, in The Ion, which is expected to open in 2021 with cohorts set to open applications in early 2021.

"We are really excited about working together with DivInc and the Rice Alliance for Technology and Entrepreneurship to realize the full potential of the opportunities that these funds will help unleash," says Jan Odegard, interim executive director of the Ion, in the release.

The Ion Smart and Resilient Cities Accelerator has cycled through two rounds of cohorts — first focusing on resilience and mobility in Cohort 1 then air quality, water purification, and other cleantech in Cohort 2.

The 12-week Clean Energy Accelerator was only recently announced by The Rice Alliance for Technology and Entrepreneurship at the annual Energy Tech Venture Forum earlier this month. The program is established to support Houston Mayor Sylvester Turner's Climate Action Plan.

Meanwhile, DivInc's accelerator comes out of a partnership with the Austin-based nonprofit and The Ion, which was announced in spring of this year. The goal with this program is to increase access to minority entrepreneurs.

"DivInc embodies the mindset that this generation and all the generations of innovators to follow must be inclusive of people of color and women entrepreneurs – who will build successful scalable growth companies to address tomorrow's challenges and opportunities," says Preston James, chief executive officer at DivInc, in the release.

"By removing the barriers that currently exist, we unleash this untapped potential and lift Houston to new economic heights. To do this we must establish strong collaboration with partners like The Ion, Rice University, the EDA and many others."

Houston Independent School District launches new COVID-19 tracker

TRACKING COVID IN HISD

Greater Houston parents have an important date circled and marked on their calendars: October 19. That's the day Houston Independent School District welcomes students back for in-person instruction at all schools.

However, a major point of concern and contention with area parents is the possibility of fellow students contracting, carrying, and spreading COVID-19. To that end, the district has announced a new COVID-19 dashboard to keep the community informed about the impact of the pandemic. Parents can view the COVID-19 dashboard here.

The online dashboard launched Monday, September 28, to track the number of confirmed COVID-19 students and staff cases on campuses, in an effort to display transparency, according to a press release. As of September 28, some 23 active cases are reflected on the dashboard, out of more than 222,000 students and staff.

HISD's new dashboard was developed using Texas Education Agency guidelines for reporting COVID-19. It will be updated daily, allowing users to review student and staff data by location and districtwide, according to the district. The dashboard will also include a map to clearly illustrate and mark active cases throughout the district.

All applicable privacy laws relating to the release of personal health information will be followed, according to a press release.

"As we navigate this pandemic together, we want to ensure that we are transparent as we provide crucial updates," said HISD interim superintendent, Grenita Lathan, in a statement. "This new dashboard will give our staff members and families the information they need in an accessible and easy-to-use way to make informed decisions."

For more information on HISD's reopening plan, visit the official site.

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This article originally ran on CultureMap.

Houston-based 3D printing company plans to change the world — one piece of trash at a time

Houston Innovators Podcast Episode 51

Aside from collecting their plastics throughout the week and dragging the bin to the curb, people aren't usually preoccupied with the recycling of materials. Houston-based Re:3D wants to change that.

The company was founded in 2013 by NASA contractors Samantha Snabes and Matthew Fiedler to tackle to challenge of larger scale 3D printing and give people the power to create things larger than a breadbox. The bootstrapped company has received grants and crowdfunding and grown to a 20-person team with a lab in Clear Lake.

Over the past seven years, Re:3D has evolved its technology, from enhancing its GigaBot 3D printers to print from recycled materials to creating larger devices, like a six-foot-tall 3D printer. A true testament to its growth, Re:3D was recognized as the Company of the Year for 2020 by the Consumer Technology Association.

The company has completed accelerators and pitch competitions and even recently finished The Ion Smart and Resilient Cities Accelerator this year, which has really set the team up for new opportunities in sustainability.

"We're keen to start to explore strategic pilots and partnerships with groups thinking about close-loop economies and sustainable manufacturing," Snabes says on this week's episode of the Houston Innovators Podcast.

Of course, like many startups, the emergence of COVID-19 affected Re:3D's sales cycle, but the pandemic did open a door to an opportunity to 3D print personal protection equipment. Through a partnership with Impact Hub Houston called PPE for the People, Charlotte Craff, who oversees community outreach, Re:3D started a months-long mission of printing PPE for at-risk workers who otherwise couldn't afford it.

"As the pandemic continued, the data was emerging that people of color in Black and Brown communities and underserved communities were at greater risk of critical illness from COVID-19," Craff says on the podcast. "We wanted to specifically target people of color who were working as Texas opened back up its doors."

PPE for the People is still hard at work — and even seeking donations and volunteers to help print and deliver the equipment — as the need to help keep these communities safe continues to be imperative.

Craff and Snabes share more about Re:3D — from its success on TripAdvisor as a top educational tour attraction in Houston to the future of 3D printing — on the episode. The duo even discusses an upcoming virtual tour of the Re:3D lab that's open to anyone on the Re:3D website.

You can listen to the full interview below — or wherever you stream your podcasts — and subscribe for weekly episodes.


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