Here's what the Bay Area can learn from Houston

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When it comes to maintaining a good ecosystem, diversity is key. Houston learned that the hard way. Photo by Tim Leviston/Getty Images

Hello Bay Area! We Houstonians are concerned about you.

We think your economy is becoming overly dependent on Silicon Valley. In 2018, the technology industry accounted for around 62 percent of all office leasing activity in San Francisco. From September 2017 to September 2018, tech companies and realty investors bought $1.43 billion worth of San Jose downtown properties, nearly three times what they spent the year before on property in the city.

Some of your biggest search, social media, and database companies are expanding their headquarters in San Jose, San Francisco, and the rest of Silicon Valley. This is causing the construction industry to become more dependent on tech. But it's not just the construction industry that is becoming attached at the hip with Silicon Valley. According to the Bay Area Council, for every one high tech job created in the U.S., four more are created in industries as varied as education, law, dentistry, retail, and food. That means a lot of jobs in the Bay Area are, and are going to be, dependent on Silicon Valley.

Meanwhile, the Bay Area's high cost of living is pushing low and middle-income people further and further away from the state to places like Colorado, New York, and Texas (thanks for that by the way). The Bay Area had the highest income disparity between those migrating into the area and those leaving it than any major metro area in the country between 2010 and 2016. An economy can't last with just high-salaried tech workers.

We here in Houston have seen what happens when a metropolitan area becomes overly dependent on its dominant industry.

The 1980s were a tough time in Houston's history due to the huge fall in oil prices. In 1986, crude oil prices fell 52 percent to about $27 a barrel in today's dollars. The majority of Houston's economy was centered around the oil business at that time. The industries that were not directly related to energy, such as restaurants, car dealerships, and real estate were in a symbiotic relationship and were in some cases catastrophically hurt. When the oil industry took a hit, the entire economy took a hit. During this time, Houstonians lost 225,000 jobs, or one in eight jobs in the city.

Many young workers in petroleum engineering, geophysics, and other energy positions were laid off, many leaving the industry altogether. Older workers retired. In the mid-2000s, when the shale drilling revolution began, the needed manpower was just not there to meet the demand and it was expensive to hire and train a new workforce.

We were able to recover. Some 175,000 Houstonians are now working in oil production, oil field services, materials, and fabricated metals, and tens of thousands more are working as suppliers and contractors. We're more ethnically and industrially diverse than we ever were before, but it took time.

What did we learn from the 1980s?

First, diversify.

While we still have a vibrant oil and gas business in Houston, we've also expanded further into our other core industries: health care, technology and space. The Bay Area is fortunate in that it has strong banking, agriculture, and tourism industries. It ought to be putting more TLC into these industries or expanding into other fields.

We learned not to keep all of our wealth in the oil and gas companies in which we work. It's far too common for Silicon Valley workers to have too much trust in the companies they work for, hoping that their stock options will propel them to riches one day. As we learned in Houston, this can lead to disastrous results. Diversify your portfolios, but be careful. Houstonians over invested in real estate in the 1980s and miscalculated the future of that industry.

Second, Houston has also learned to keep well-educated professionals trained and capable of finding support for those in between jobs. Luckily this doesn't seem to be a problem for the Bay Area. While the Greater Houston Region keeps roughly 66.1 percent of its four-year college graduates in the area, the Bay Area keeps 65.2 percent of its graduates around. So, Bay Area, never take your universities, like U.C. Berkeley and Stanford, for granted.

We know the Bay Area has seen its own troubles before. The dotcom bust of the early 2000s was devastating to the local economy. We're just especially sensitive to what happened to us in 1980s and we'd hate to see the Bay Area go through something similar again.

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Elizabeth Biar is vice president of Strategic Public Affairs, a government elations and PR/communications firm based in Houston. Sam Felsing is a former reporter and who currently works as a senior account executive at Telegraph, a political consulting and public relations firm based in Oakland, California.

Gabriella Rowe took over as CEO of Station Houston in August. Courtesy of Gabriella Rowe

Station Houston CEO on the future of the city's innovation ecosystem

Featured Innovator

A third-generation educator, Gabriella Rowe vowed she'd never go into the family business, but, she says, never say never.

She instead went into oil and gas and banking before working at a startup that sold after only 10 months. She then worked as a consultant — both for a company and then for herself — assisting high-growth, high-impact industrial companies.

"I realized for the first time that no matter what your size or how long you've been around, you were vulnerable to innovation and change," says Rowe, who is now the CEO of Station Houston, a Houston-based acceleration hub. "Many of the companies we worked with ended up shuttering their operations, which didn't just shut down a company; in most instances, whole towns were destroyed."

While on the road 300 days of the year, enjoying every minute of her job, she fell in love with a client, her now husband, and they decided to settle down to start a family in New York right as her grandfather was taking ill. She stepped in to help run his school.

At that time, New Yorkers were doing outrageous things to get their children into top-tier preschools, one of which happened to be The Mandell School, Rowe's family school.

"So, the first thing I did in my newfound motherhood was to hire a nanny, and then focused on how we could be opportunistic on this market shift in education in New York, so there was born my third startup."

She turned the school around and grew it to two schools in Asia, three preschools in New York, as well as a Kindergarten through eighth grade school — a total of over 700 children across the schools. She sold it in 2013, which led her to Houston to take a position as head of school at The Village School. She grew that school 20 percent in the first year before selling it to private equity.

"I fell in love with Houston and became involved in the tech ecosystem," Rowe says. "I had been involved in New York's tech ecosystem, and I wondered why we didn't have that tech ecosystem in Houston."

Now, Houston's exploding with startups, technology, and entrepreneurs, and Rowe, who took her CEO position at Station Houston in August, is among the leaders bringing Houston to the country's forefront for innovation.

InnovationMap: Coming in as CEO, what were the first things you wanted to do at Station?

Gabriella Rowe: Station is a startup like any other startup. It's thinking: what are we good at that we want to do more of, and what are we doing that someone else does better. And then building out the framework and infrastructure necessary to do what you do well at scale. Having the right people in the right job with the right tools and at the right time is what allows scale to happen. That's what we've been working on for the past three months.

We're going to be doing a huge launch of Station 3.0 in January. It will really allow us to tell the world not just what we're going to be for the next three months, but what we're going to be over the next three years.

IM: What's Station Houston doing differently from other coworking spaces?

GR: Well, we're not a coworking space; we are an acceleration hub for startups. First and foremost, we don't have the space to be a coworking space. We may have functioned like a coworking space in the beginning. We're here to accelerate startups in their growth, and we do that in a variety of ways. We connect them with curated connections to corporations that can help them pilot their ideas. We connect them with capital they need to grow fast. And we connect them with subject matter experts that help them understand how to grow their company. In some instances how to fail fast or pivot in a way that's going to make them the most successful. Our focus is accelerating the startups. It's one of the reasons we take no equity investments, because we don't want to be judging the success of a startup based on whether or not they meet our investment criteria. We want to do what's right for the startup, no matter the type of startup. I don't believe we can do that with a straight face and in good conscience if on the side we are doing investments. That really does differentiate us.

IM: So, how is Station Houston different from an accelerator program?

GR: The real answer is that these things are becoming more closely put together. We are more similar to an accelerator than anything else, but we are not time limited, and we are not hyper selective in a cohort way. A typical accelerator has a theme and cohorts with companies to that theme. We do not yet have a cohort-based accelerator with that specific timing. We apply many of the exact same methodology that they'd get in that time frame, but we carry it over the course of the year. We shift the companies to different buckets of focus. It's really the timing that's different. It might take a company longer to get to specific benchmarks, but we're still working to accelerate them. We're the only one doing this in Houston.

IM: Would you switch to a cohort-based accelerator?

GR: We won't be changing what we do, but we might be adding a specific themed-based cohort for companies at a specific stage of acceleration — an energy-focused cohort, for example, which would be really low-hanging fruit. We are in talks with Rice University to do something like this. My guess is we will launch this type of acceleration as a sub-product of what we do sometime in the first or second quarter of next year.

IM: What's on the horizon for Station, especially regarding Station 3.0?

GR: It all relates, in some way, to our move to the innovation district in 2020. That's what we are focused on. We worked really closely with Rice University on this. We believe that this building needs to open fully functioning and full, at capacity or as close as we can get from day one. The only way for us to do that is to be building that density at our current location here, and just shifting our operations there when the time comes.

IM: What keeps you up at night, as it pertains to your business?

GR: Oh, I've got a long list. The thing that keeps me up at night is 2020 is around the corner. We have a lot of work to do to be ready for this Innovation Hub. And it's not just what's going in the hub. There's going to be a big spotlight shown on us to the rest of the world. We have to know now how to handle that when it comes. It's a lot of collaboration. It's a lot of leaving our politics and our agenda at the door. All of us have to be doing this for Houston. If we do it well, if we do this for Houston, and leave the other stuff aside, then we're all going to benefit. That's the thing I worry about most, that if we have these successes and wins, that maybe some territorial stuff comes into it and that politics creep back into it, and we don't focus on the collaboration.

The other thing that keeps me up at night, when I have the nightmares, is that we turn into a post-industrial ghost town because the energy capital of the world is somewhere else because we didn't innovate the way we were supposed to. That's a nightmare we can avoid by making sure we do what's needed — and a whole lot of that has to do with collaborating with each other.

IM: How is Houston's innovation ecosystem doing?

GR: I think we started to see something when the Crunchbase numbers that came out a couple weeks ago that showed Houston neck and neck with Austin from a VC investment standpoint, which is something we've never even come close to before and, all of the sudden, boom, we're right there. I think that's what we are going to continue to see in Houston. We're not going to see little wins now. We're going to start seeing big wins. The fact that I get a front row seat for that and get to invest my time and energy into something I care so much about makes me one of the luckiest people I know.

IM: What does Houston need to accomplish in the innovation community?

GR: Connective tissue — everyone knowing what's actually happening in Houston. Having resources, like InnovationMap, to tell us what's happening in Houston. I have been astonished for years now how much is happening here. Having resources like InnovationMap to tell us about what's happening here will make a huge difference.

The other piece we need that's on the way is a real focus on talent. We're beginning to see a lot of investment, and we're only going to see more of it over the next 12 months. And that's not just going to affect the talent, but also the types of companies we're attracting to Houston. The quality of life in Houston is phenomenal. That's what a lot of tech companies are looking for. There hasn't been enough yet to bring them to Houston, because we haven't been able to demonstrate the growth of our ecosystem.

We are going to have something big happening with either Google or Microsoft over the course of the next 12 months. That's only going to accelerate things for our startups.

IM: You moved here almost five years ago. What attracts you to Houston?

GR: First and foremost, the people. This is a city filled with some of the most amazing people I've worked with in my entire career anywhere in the world. We should not underestimate that as a city. The sense of humanity in Houston is like nothing I've ever experienced. It's not just what we saw in Hurricane Harvey, but it's exactly what happened in Hurricane Harvey, only it happens all the time in this city, it just isn't on the national news.

In Houston, everyone talks to each other all the time so you make connections all the time; you learn things about the community. I can't tell you how many Uber drivers I've had that have talked to me about their startup and then have ended up coming into the Station — that's the kind of stuff they say only happens in San Francisco, but it happens here for a different reason; it's because they really care. I hope that as we grow our ecosystem that we never forget that.

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Portions of this interview have been edited.

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Houston SPAC announces merger with Beaumont-based tech company in deal valued at $100M

speaking of spacs

A Houston SPAC, or special purpose acquisition company, has announced the company it plans to merge with in the new year.

Beaumont-based Infrared Cameras Holdings Inc., a provider of thermal imaging platforms, and Houston-based SportsMap Tech Acquisition Corp. (NASDAQ: SMAP), a publicly-traded SPAC with $117 million held in trust, announced their agreement for ICI to IPO via SPAC.

Originally announced in the fall of last year, the blank-check company is led by David Gow, CEO and chairman. Gow is also chairman and CEO of Gow Media, which owns digital media outlets SportsMap, CultureMap, and InnovationMap, as well as the SportsMap Radio Network, ESPN 97.5 and 92.5.

The deal will close in the first half of 2023, according to a news release, and the combined company will be renamed Infrared Cameras Holdings Inc. and will be listed on NASDAQ under a new ticker symbol.

“ICI is extremely excited to partner with David Gow and SportsMap as we continue to deliver our innovative software and hardware solutions," says Gary Strahan, founder and CEO of ICI, in the release. "We believe our software and sensor technology can change the way companies across industries perform predictive maintenance to ensure reliability, environmental integrity, and safety through AI and machine learning.”

Strahan will continue to serve as CEO of the combined company, and Gow will become chairman of the board. The transaction values the combined company at a pre-money equity valuation of $100 million, according to the release, and existing ICI shareholders will roll 100 percent of their equity into the combined company as part of the transaction.

“We believe ICI is poised for strong growth," Gow says in the release. "The company has a strong value proposition, detecting the overheating of equipment in industrial settings. ICI also has assembled a strong management team to execute on the opportunity. We are delighted to combine our SPAC with ICI.”

Founded in 1995, ICI provides infrared and imaging technology — as well as service, training, and equipment repairs — to various businesses and individuals across industries.

Report: Federal funding, increased life science space drive industry growth in Houston

by the numbers

Federal funding, not venture capital, continues to be the main driver of growth in Houston’s life sciences sector, a new report suggests.

The new Houston Life Science Insight report from commercial real estate services company JLL shows Houston accounted for more than half (52.7 percent) of total funding from the National Institutes of Health (NIH) across major Texas markets through the third quarter of this year. NIH funding in the Houston area totaled $769.6 million for the first nine months of 2022, exceeding the five-year average by 19.3 percent.

VC funding for Houston’s life sciences sector pales in comparison.

For the first nine months of this year, companies in life sciences raised $147.3 million in VC, according to the report. Based on that figure, Houston is on pace in 2022 to meet or surpass recent life sciences VC totals for most other years except 2021. JLL describes 2021 as an “outlier” when it comes to annual VC hauls for the region’s life sciences companies.

JLL notes that “limited venture capital interest in private industry has remained a challenge for the city’s life sciences sector. Furthermore, it may persist as venture capital strategies are reevaluated and investment strategies shift toward near-term profits.”

While life sciences VC funding has a lot of ground to cover to catch up with NIH funding, there are other bright spots for the sector.

One of those bright spots is the region’s rising amount of life sciences space.

The Houston area boasts more than 2.4 million square feet of space for life sciences operations, with another 1.1 million under construction and an additional 1.5 million square feet on the drawing board, the report says. This includes a soon-to-open lab spanning 25,000 square feet in the first phase of Levit Green.

A second bright spot is the migration of life sciences companies to the region. Two Southern California-based life sciences companies, Cellipoint Bioservices and Obagi Cosmeceuticals, plan to move their headquarters and relocate more than half of their employees to The Woodlands by the first half of 2023, according to the report.

“Houston’s low tax rate and cost of living were primary drivers for the decisions, supported by a strong labor pool that creates advantages for companies’ expansion and relocation considerations,” JLL says.

Here's what Houston startups need to know about internal communications

guest column

Startup founders often focus on outward victories. However, if they look inward and get internal communications right, this can prioritize, inspire, and retain talent, which is the heart of the company.

Consistent internal communication helps employees to understand the company's core values and mission and the evolving internal policies and procedures — health care benefits, reorganizations, remote work — that accompany a young business. Investing in internal communications also supports external public relations efforts because the best company storytellers are well-informed employees.

Consider these tactics for effective internal communications.

Prioritize messaging

In any startup, internal procedures evolve as the company grows. Take control of the narrative while easing employees' minds by prioritizing internal messaging.

Whether transitioning to a more flexible work schedule, updating healthcare benefits, or rolling out a performance review process, planning messages in advance can help team members understand the change, the impact, and how they can contribute positively to the development.

Well-informed employees help mitigate uneasiness and tend to achieve business goals more quickly. Make sure to allow the employees time to reflect and react.

Support managers

Leaders and mid-level managers play an integral role in internal communications by cascading information throughout the organization. They regularly engage with their employees, so it is important that managers feel confident and supported in their communication skills.

Managers can benefit from a common company language, talking points, or communications training for more effective and productive conversations. By identifying, clarifying, and reinforcing common goals and key objectives for managers, companies can strengthen productivity and eliminate confusion, especially if the company changes teams' roles and responsibilities.

Be consistent

Make sure that the drumbeat remains steady, whether this includes a monthly town hall meeting or weekly CEO emails. Since communication is not necessarily one-size-fits-all, use a communication approach tailored to the workforce.

For example, there might be more effective communication methods than email for employees not behind a desk. As a smaller company, take that time to connect with the team directly because as the company swells, that one-on-one experience will become increasingly difficult to manage.

Listen to employees

Delivering top-down messaging that resonates with the workforce remains critical. However, internal communication is a two-way street.

Allow team members to give valuable feedback. Encourage team members to share their thoughts about the company, concerns, and how to improve communications. Issue internal surveys or hold face-to-face meetings to gain useful insight.

Understanding these critical proof points will enable more effective communication and quick action on any issues.

Be a human

Keep humanity at the heart of internal communications. Amid the company's transition, maintain transparency and recognize the emotional toll some changes can have on teammates. The best talent will remain when they feel connected, informed and listened to.

Greater employee engagement can help build a strong company culture of accountability, authenticity and communication, setting up the business for bigger success.