Here's what venture capital investors look for in Houston health tech

money talks

What are health tech investors looking for these days? Thes VC experts weigh in. Photo via Getty Images

It's been a tumultuous year for health technology — and venture capital investment activity has definitely been affected. Looking toward the future, a group of panelists discussed how they are investing — and what they are looking for.

The panel, which was presented in partnership with the Houston Angel Network and Cooley for Houston Tech Rodeo, featured three investors:

  • Dennis McWilliams, partner at Santé
  • Terri Burke, venture partner at Epidarex Capital
  • Farzad Soleimani, health care partner at 1984 Ventures
Here's what these professionals consider when evaluating a potential deal.

A unique idea

The idea and solution of the med tech device or digital health company is of course of high importance for the investors.

"We really look for that unmet need. What is the innovative technology or med tech that's doing something different?" Burke says. "We try to find things that are breakthrough or disruptive that aren't one of six going after the same thing."

In light of COVID-19, the panelists discussed the advancement of remote care and telehealth. Another concern amid population growth is access to primary care doctors.

"Five years from now, we're going to be short like 60,000 to 70,000 primary care doctors," Soleimani says. "The only way we can close the gap is either to turn regular doctors into super doctors, and that's going to be driven by AI and data. ... Or, enabling other providers to act more like primary care doctors."

This type of innovation is top of mind for investors. What technology can help experts like pharmacists to provide care of this sort?

"We've seen a lot of investment going into enabling other providers to act as primary care doctors," Soleimani says. "They have the training."

A strong team

Much like startups, the people power the product growth. The panelists emphasized the importance of the potential team they'd be investing in, and it's something you learn over the diligence process.

​"You want to work with people you enjoy working with, so finding the right mix of people — whether we build it ourselves and help scale up a new company or a seasoned teams comes to us," Burke says.

For Soleimani, he is specific about making sure companies have someone in the CTO role — not just a part-time developer or contract worker.

"You need to have somebody who can build the technology — I cannot stress that enough," he says. "The process is arduous, and you're not going to get there overnight."

IP and regulatory process

Investors are looking to support protected technology, the panelists say, and most of the times they want an entrepreneur to start that process earlier than you might think.

"Investors actually care and care a lot and go pretty deep to make sure that something in the idea is protectable," Burke says.

The panelists also say they want a team that understands the regulatory process that will get the technology to scale. And investors aren't scared of investing in companies going down these paths.

"The regulatory process is often times misinterpreted — it can be your ally," Soleimani says. "Just because something needs to go through the regulatory process doesn't mean it is less attractive. It just has to be the right process for it."

McWilliams says a few years ago, maybe the process was more confusing, but nowadays companies are familiar with their options.

"For the most part, most devices know what the pathway is going to be," he explains. "If a team is telling you they don't really know what their regulatory strategy is, they probably don't know what they are doing or they don't want to tell you."

The panelists acknowledged that these regulatory processes can be costly, so factoring that into the equation is important. It's also a space where surrounding yourself with the right people is important.

"I think it's important to not only know your pathway, but also what it will take to prove that out," Burke says. "That's where physician advisers can be really valuable, as well as regulatory consultants."

The right valuation

Valuation is another factor investors consider — both valuations that are too high and too low.

"There's always this question of valuation and there's always this desire to maximize your pre-money valuation on a deal, and I would say that this can often times get you in really big trouble," McWilliams says.

Consider the market and where your company capitalization stands, McWilliams adds, and make sure there's always room on either side.

Ultimately, it depends on the investor

The panelists left the audience with advice for entrepreneurs to do their homework when reaching out to potential investors. Both what kind of companies investors fund as well as what stage they contribute to.

"It's important to know what type of investor you're speaking to," Burke says.

Starting those relationships with plenty of time is also important.

"It's hard to build a meaningful, lasting relationship with an investor if you're running of cash in two months and need a decision right away," McWilliams says.

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Houston startup unveils its innovative leather alternative at the rodeo

sustainable fashion

Last month’s Houston Livestock Show and Rodeo stirred up another rootin’ tootin’ time for Houstonians and beyond.

But before the annual event galloped into the sunset, there were quite a few memorable innovations on display, with one notably coming from Rheom Materials.

The Houston-based pioneer of next-generation materials presented its scalable, bio-based alternative known as Shorai, a 93 percent bio-based leather, through two custom, western-inspired outfits that showed off cowboy flair through a sustainable lens.

“I'm a Houstonian, I love the rodeo,” Megan Beck, Rheom’s business development manager, recalls. “We're sitting there talking about it one day and we're like, ‘Okay, we've got to do something with this leather to show people how good it can look in apparel, how easy it is to wear.’”

Buoyed by the idea that their materials are meant to “change your impact, not your life,” Rheom captured the real-life energy of their bio-leather outfits under the rodeo’s neon lights in a short commercial video and photo shoot with models donning the samples, while dancing and enjoying the festivities. Rheom created a skirt, a leather jacket, and then a leather top for the look.

“Houston is such a vibrant city,” Beck says. “There's so much innovation here. I think the rodeo is just a really, really great example of that. And so we wanted to take this opportunity to take some of these garments out there and go on the slide, go on some of the rides, go into the wine garden and go dancing, because if you've ever felt some of the materials in the market in this space, they're very stiff, you can't really move in them, they're a little fragile, they kind of fall apart.”

Not only do the models in the video look fashionable, but they also look comfortable, and the leather looks natural and supple. And to the naked eye, Shorai appears to be like the leather most wearers are accustomed to.

“What we really wanted to showcase in this is the energy and the movement of the leather, and to show people how good it can look in apparel, and how easy it is to wear, which I think we were able to accomplish,” Beck says.

Next up, Beck says Rheom wants to scale production of Shorai, the Japanese word for “future,” at a competitive price point, while also reducing its carbon footprint by 80 percent when compared to synthetic leather. According to Beck, Rheom plans to see Shorai products come to market sometime this year.

“We have companies globally right now that are testing materials, that are prototyping, that are making garments, making handbags and footwear, and making eyewear because we have a plastic, as well,” Beck says. “So, this year, I do believe we'll start seeing those products actually come to market, which is very, very exciting for us.”

And with their large-scale production partner already set up for Shorai, Rheom plans to start its first production run of the product soon.

“In April, we'll actually be starting our first production run,” Beck says. “We'll be doing it at full scale, full width, and a full run of materials. So over the next five years, we're only going to just try to increase that capacity.”

Texas is home to second largest population of millionaires in the U.S.

The Millionaires Club

Tilman Fertitta, Elon Musk, Alice Walton, and Jerry Jones are members of the billionaires club in Texas. But just how many millionaires does the Lone Star State boast?

Altogether, 73,930 Texans were classified as millionaire tax filers in 2022, according to an analysis of IRS data by digital marketing firm Hennessey Digital. (For context, that millionaire count is just a few thousand shy of the entire population of Missouri City.) This figure puts Texas in the No. 2 spot for the country’s biggest population of millionaire taxpayers, behind first-place California.

However, if you crunch the figures a different way, Texas’ millionaire status isn’t quite as impressive, demonstrating that not everything is bigger in Texas. Texas ranks 10th among the states with the highest proportions of millionaire taxpayers, the study indicates. According to Hennessey Digital’s calculations, 27.1 of every 10,000 Texas tax filers reported adjusted gross income of at least $1 million for the 2022 tax year.

“The state’s booming economy, driven by energy, technology, and business-friendly policies, contributes to its wealthy population,” says Hennessey Digital.

Forbes ranked 43 Texans among the 400 wealthiest Americans last year, with Elon Musk topping the list. Houston hospitality king, Rockets owner, and newly appointed ambassador to Italy Tilman Fertitta was the 12th richest Texan and the 99th richest person in the United States, according to Forbes.

Which state comes out on top for the largest share of millionaire taxpayers? Connecticut, with 44.76 millionaire tax filers for every 10,000 filers, the Hennessey study shows. A number of well-to-do Connecticut suburbs are situated just a commuter train ride away from New York City, where bankers, brokers, and others pull in the big bucks. (Connecticut sits two spots above New York state in the millionaire ranking.)

The numbers in the study “highlight the diverse economic landscapes across our nation. States with favorable tax policies and thriving industries tend to attract more high-income earners,” says Jason Hennessey, CEO of Hennessey Digital. “Understanding these patterns can provide valuable insights for businesses and individuals making decisions about where to live, work, or invest.”

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This story originally appeared on our sister site, CultureMap.com.

Remote workers in Houston earn far more than commuters, data shows

by the numbers

In the Houston metro area, it pays to work from home.

Data published recently by the U.S. Census Bureau shows remote workers in the Houston metro earn 40 percent more than their commuting counterparts. For remote workers in the Houston area, median earnings stood at $67,500 in 2023, compared with $48,200 for other workers.

Federal data cited by Visual Capitalist indicates 11.8 percent of the Houston area’s labor pool, or nearly 460,000 people, were remote workers in 2023.

In the Dallas metro area, the difference in median earnings between remote workers and non-remote workers is even more stark. According to Census Bureau data, remote workers there earned $77,000 in 2023 — 50.7 percent more than the $51,100 for traditional workers.

Why the wide gap in pay? The Census Bureau says remote workers are more likely to be older, more likely to be white and less likely to live below the poverty line. All of these traits contribute to higher income.

Among home-based workers in the country’s five biggest metros, median earnings for remote workers were highest in the New York and Chicago areas (over $80,000) and lowest in the Houston area (under $70,000), according to the Census Bureau.

The five-metro comparison also reveals that the Houston area had the highest share (6.8 percent) of all workers, both remote and non-remote, living below the federal poverty level.

In a recent Substack post, urban planner Bill Fulton notes that remote workers in major cities typically earn 50 percent to 80 percent more than other workers do. He declares that “remote workers are far more affluent than everybody else. They are, of course, office workers, not blue-collar or service workers, and they tend to be more highly educated.”
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