Houston startups named most promising in the life science space at annual event

ones to watch

Eight of the 10 most-promising life science startups named at BioHouston and the Rice Alliance's event are based in Houston. Photo courtesy of Rice Alliance

For the second time this year, Houston life science leaders and startup founders gathered to discuss the future of health care in Houston.

The annual Texas Life Science Forum hosted by BioHouston and the Rice Alliance for Technology and Entrepreneurship was usually held during the fall before the pandemic pushed it off schedule. In February, the two organizations hosted the previous forum, but as of this month, the annual event is back on track.

The day included panels and networking, plus over 50 companies — about half of which are based in Houston — pitched their solutions across medical device, therapeutics, pharmaceuticals, and more to the crowd.

Houston-based Bairitone Health won the Michael E. DeBakey Memorial Life Science Award, established by BioHouston in honor of the groundbreaking Houston cardiovascular surgeon. The company is creating a wearable technology that takes a more innovative approach to sleep apnea and snoring with its SOMNAR platform that detects tissue-born sounds, identifies obstructions, and more. The award was presented by Ann Tanabe, CEO of BioHouston.

Ann Tanabe, CEO of BioHouston, presented the DeBakey Award to Houston-based Bairitone Health. Photo courtesy of Rice Alliance

For the first time, the event also named a people's choice award winner, as voted on by the audience members. Baritone Health also claimed the prize.

At the conclusion of the event, the Rice Alliance and BioHouston named the 10 most promising life science companies selected by investors and presented by the Greater Houston Partnership. This year's selection included the following companies, in alphabetical order.

Autonomize

Austin-based Autonomizeunlocks data and context to enable human health outcomes

bEHR Health Systems

New Orleans-based bEHR Health Systemsdelivers, medical, lifestyle, and social solutions to health for African Americans.

EMPIRI

EMPIRI, based in Houston, is revolutionizing cancer care with a novel technology that accurately predicts each cancer patient's treatment responses empirically, enabling doctors to make the optimal treatment selection for each cancer patient.

InformAI

Houston-based InformAI develops AI-based medical image diagnostic tools and uses large dataset synthesis to develop clinical outcome predictors for physicians, hospitals, and medical imaging/medical device companies

March Biosciences 

Houston-based March Biosciences is impacting the most challenging lymphoma and leukemia.

MRG Health-SmartCare360

MRG Health-SmartCare360, based in Houston, is a determinate of health and disease specific virtual care management technology and services company that improves patient access to care and clinical outcomes for people suffering from one or more chronic disease.

Prana Thoracic

Prana Thoracic, founded in Houston out of JLABS at TMC, is a medical device startup that's innovating for the future of early intervention in lung cancer.

Steradian Technologies

Another med device startup based in Houston,Steradian Technologiesemploys deep-photonics technology to diagnose respiratory diseases in seconds, all for the price of a latte.

TYBR Health

Houston-based TYBR Health makes a hydrogel that protects tendons from scarring after surgery and improves patient outcomes.

Voythos

Voythos, based in Houston, is making medical records work for today's healthcare.

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Check out these conferences, pitch competitions, networking, and more in the month of November. Photo via Getty Images

10+ can't-miss Houston business and innovation events for November

Where to be

Hold onto your hats, Houston. If you thought October was a busy month for business events, November even more exciting and full of pitches, conferences, summits, and more. Here's a rundown of what all to throw on your calendar for November when it comes to innovation-related events.

This article will be updated as more business and tech events are announced.

FEATURED: November 9 — Houston Innovation Awards Gala

Find out what Houston startups and innovators go home with the big win at InnovationMap and Houston Exponential's gala. Learn more about this year's finalists by clicking here.

The event is Wednesday, November 9, at 6 pm, at the Ion. Click here to register.

November 1-3 — Urban Manufacturing Alliance's Houston Gathering

Learn about the unique challenges and opportunities within manufacturing in the current economy, as well as network with Houston manufacturing professionals.

The event is Tuesday, November 1, to Wednesday, November 3, at West Houston Institute. Click here to register.

November 2 — Greentown Labs Climatetech Summit

Hear from the climatetech industry's leaders at Greentown Labs' annual event. The morning features panels and pitches, followed by lunch, networking, and an expo. The summit continues on November 3 in Boston, and both days will be streamed for viewers.

The event is Wednesday, November 2, at 8 am, at Greentown Houston and streaming online. Click here to register.

November 4 — Enventure's 10-Year Anniversary

Join Enventure as we celebrate its 10th Anniversary — from the organization's accomplishments to a look toward what the future brings to Enventure.

The event is Friday, November 4, at 7 pm, at III by Wolfgang Puck. Click here to register.

November 5 — Tech Fest Live in-person Experience at the Ion

The Ion as partnered with Tech Fest Live to bring your family to an engaging Family Tech Day experience, designed with middle and high school students in mind.

The event is Saturday, November 5, at 9:30 am, at the Ion. Click here to register.

November 8 — Texas Life Science Forum

The Texas Life Science Forum, co-hosted by BioHouston and Rice Alliance, is the premier life science and healthtech event in Texas that brings together members from industry, emerging life science companies, academic and investors. Hear pitches from innovative and early stage life science companies, network and enjoy exciting panels, keynotes and speakers.

The event is Tuesday, November 8, at 8:30 am, at Rice University. Click here to register.

November 9 — The Future of Industrial Automation Lunch & Learn with Yokogawa

In this Lunch & Learn, Elbert van der Bijl (Director of Marketing & Solutions Consulting for Yokogawa North America), will talk about the journey from industrial automation to industrial autonomy (IA2IA). He will also speak about how new technologies are being embraced to be able to make this transition. The presentation will highlight some key developments like Open Process Automation (OPA), Artificial Intelligence (AI) and Machine Learning (ML), and mobile Robotics and how they will play a role in the future of Industrial Automation.

The event is Wednesday, November 9, at 11:30 am, at The Cannon-West Houston. Click here to register.

November 10 — Greater Houston Partnership's State of the Port

Join the Greater Houston Partnership at the annual State of the Port featuring Ric Campo, Chairman of the Port Commission of the Port of Houston Authority. Campo will discuss innovations taking place at Port Houston and Project 11. The highly anticipated Project 11 will deepen and widen the Houston Ship Channel and increase economic impact, jobs and address supply chain challenges.

The event is Thursday, November 10, at 10:30 am, at The Omni Riverway. Click here to register.

November 10 — BGV Pitch Tour Houston

The BGV Pitch Tour is coming to Houston November 10th in partnership with Omaze and the aid of our amazing 6 Change Agents to throw a BGV Pitch Competition. Thee BGV Change Agents are amazing Black and/or Brown women-identifying founders who are actively working to uplift and grow the city's ecosystem for Black and Brown founders in their area.

The event is Thursday, November 10, at 6 pm, at The Cannon-West Houston. Click here to register.

November 15 — Lilie's Community Celebration

Celebrate the end of the semester and take a peek into what all the Liu Idea Lab for Innovation and Entrepreneurship community has going on.

The event is Tuesday, November 15, at 6 pm, at the Lilie offices at Rice University. Click here to register.

November 17 — Rice Alliance Clean Energy Accelerator 2022 Demo Day

Rice Alliance Clean Energy Accelerator is hosting a Demo Day to showcase its Class 2 startups who are ready for investment, pilots and accelerating the energy transition.

The event is Thursday, November 17, at 1:30 pm, at the Ion. Click here to register.

November 19 — Pearland Innovation Hub Pitch Competition

Come attend this event open to the community to hear pitches from local small business owners, network, and learn about the Pearland Innovation Hub.

The event is Tuesday, November 17, at 4 pm, at Pearland City Hall. Click here to register.

November 30 — Commercial ZEV Event

This event by Houston-based Evolve is your chance to drive zero-emissions commercial vehicles and learn how you can convert your fleet to save on costs.

The event is Wednesday, November 30, at 8:30 am to 5 pm, at NRG Park. Click here to register.

Here's which life science companies — in Houston and beyond — are ones to watch. Photo by Dwight C. Andrews/Greater Houston Convention and Visitors Bureau

Houston organization names 10 most promising life sciences startups

ones to watch

Last week, the Rice Alliance for Technology and Entrepreneurship gathered over 1,000 life science experts and attendees virtually for thought leadership as well as 40 company presentations.

The three-day 2020 Virtual Texas Life Science Forum was made possible through a partnership with BioHouston and support from Texas Medical Center and Insperity. At the close of the summit, several companies were recognized with awards.

Houston-based Starling Medical won the Michael E. DeBakey Memorial Life Science Award, established by BioHouston in honor of the groundbreaking Houston cardiovascular surgeon. The digital health device company is revolutionizing severe bladder dysfunction management with artificial intelligence.

Every year at the forum, the Rice Alliance names its 10 most promising companies working on developing innovative solutions in medical devices, digital health, diagnostics, pharmaceuticals, and therapeutics. This year, Brad Burke, managing director of the Rice Alliance, says they had more applications to present than ever before. Additionally, the presenting companies — about half of which are Houston-based — have already raised more than $275 million in funding.

The 2020 most-promising life science companies, which were chosen by investors and presented by the Greater Houston Partnership, were:

Droice Labs

Image via droicelabs.com

New York-based Droice Labs, is an artificial intelligence and big data company matches patients to therapies and delivers personalized medicine at scale while reducing costs.

"Our cutting-edge technology seamlessly integrates into clinical workflows, and we continue to evolve unique and powerful applications for our clients and the patients they serve," reads the company's website.

SFA Therapeutics

Image via sfatherapeutics.com

Based in Jenkintown, Pennsylvania, SFA Therapeutics is developing oral drugs for treating conditions of chronic inflammation that have the potential to change the practice of medicine. The company has treatments for Psoriasis, Liver Cancer (Hepatitis B, NASH and HCC), Ophthalmic Diseases, Cytokine Release Syndrome- a side effect in CAR-T, Prevention of Relapse/Recurrence in Leukemias, and other diseases.

Hummingbird Bioscience

Photo via jlabs.jnjinnovation.com

Hummingbird Bioscience, based in Houston's JLABS @ TMC, is tackling challenging targets that play a key role in disease yet have not been effectively drugged. The company has worked on 12 therapies in various stages of development, four of which have the potential to revolutionize their fields.

"At Hummingbird, we believe that modern approaches to systems biology and data science can overcome the challenges of classical methods of therapeutics discovery, and profoundly improve the way we deliver new transformative medicines," reads the company website.

CaseCTRL

Image via casectrl.com

Houston-based CaseCTRL is empowering surgeons with a management platform with software-as-a-service technology that uses AI and logistics to lower operational costs and simplify surgical planning.

"The surgical scheduling process is frustratingly stuck in the past: siloed, paper-based, and too dependent on single schedulers," reads the website. "Surgeons are stressed and overworked. They need a better way to communicate their complex surgical plans, timelines and resource needs."

Perimeter Medical

Image via perimetermed.com

Perimeter Medical, based in Dallas, is driven to transform cancer surgery with advanced, real-time, ultra high-resolution imaging tools including AI to address areas of unmet medical need.

"Perimeter is dedicated to providing solutions that drive better patient care and lower healthcare costs by providing critical information, during clinical procedures," reads the website.

Studio Bahria

Image via studiobahia.org

San Antonio-based Studio Bahia, is developing an accessible model for therapy in addressing mental health crises from the pandemic through virtual reality.

"We are in production of our first two therapies for release in the 4th quarter of 2020. Studio Bahia clients include corporate, retail, and institutional partners who purchase our headsets for $25 in providing mental health therapies and wellness tools to employees, executives, and patients," reads the company's website.

Tvardi Therapeutics

Photo via Getty Images

Tvardi Therapeutics, based in Houston, is a clinical-stage biopharmaceutical company focused on the development of a new class of breakthrough medicines for diverse cancers and chronic inflammatory and fibrotic diseases.

"Tvardi is focused on the development of orally delivered, small molecule inhibitors of STAT3, a key signaling molecule positioned at the intersection of many disease pathways," reads the website.

Koda Health

Image via kodahealthcare.com

Koda Health, Houston, uses AI to help guide difficult conversations in health care, starting with end-of-life care planning.

"You're entitled to protect the healthcare decisions that matter most to you and your family," the company's website promises. "Koda creates Care Plans to ensure that you get the medical care you want."

Immuno Genesis

Photo via Getty Images

Houston-based ImmunoGenesis is a clinical-stage biotechnology company developing therapeutics to catalyze effective immune responses in immunologically "cold" cancers such as prostate, colorectal, and pancreatic.

"Compared to existing immunotherapy drugs, we believe this antibody will both provide more consistent benefit for patients with immune-infiltrated tumors, and, for the first time, will also benefit patients with immune 'cold' cancers," says founder Dr. Michael A. Curran in a press release announcing the company's grant from the Cancer Prevention and Research Institute of Texas.

Ictero Medical

Image via Getty Images

Ictero Medical, based in Houston, is developing the first minimally invasive cryoablation solution to treat patients with gallstone disease. Ictero Medical has created a minimally invasive treatment, called The CholeSafe System, that uses cryoablation to defunctionize the gallbladder without having to remove it.

Log on to one of these informative online events happening throughout the rest of the month. Getty Images

10+ can't-miss virtual business and innovation events in Houston for November​

Where to be online

November is usually the last busy month for business events before the end of the year and ahead of the holidays, and this year — even though events have pivoted to virtual gatherings — is no different.

From panels and ask-me-anything meetings to summits and startup competitions, here are over 10 Houston innovation events you can attend virtually via online meetings. This month in particular there's the return of The Houston Innovation Summit and the brand new awards program called, The Listies (nominate now for those). Be sure to register in advance, as most will send an access link ahead of the events.

November 5 — Dell Technologies Ask Me Anything

Dell Technologies is hosting an "Ask Me Anything" session for the Ion community. During this time, attendees can ask experts anything in regards to IT pain points during these times. Entrepreneurs may also use this time to brainstorm the back end IT Infrastructure of their business.

The event will take place online on Thursday, November 5, at 10 am. Register here.

November 5-6 — Greentown Labs Climatetech Summit

Join Greentown Labs for its first Climatetech Summit for a deep dive into scaling climate action. Across the two days, attendees will engage with Greentown's pillars of climate action — technology, finance, policy, and justice — discover groundbreaking startups and their climatetech solutions, learn from industry experts, and forge meaningful connections with entrepreneurs, investors, business leaders, policymakers, startup support organizations, and other climate champions.

The event will take place online on Thursday, November 5, and Friday, November 6. Register here.

November 10 — Igniting Leadership: The State of COVID Vaccines

Join Ignite Healthcare Network for a special night of discussion hosted by IGNITE Steering Committee member Susan Feigin Harris about the status of COVID19 vaccine development with Dr. Maria Elena Bottazzi, Co-director of Texas Children's Center for Vaccine Development.

The event will take place online on Tuesday, November 10, at 6 pm. Register here.

November 10-12 — Texas Life Sciences Forum

The Texas Life Science Forum is the premier life science event in Texas that brings together members from industry, emerging life science companies, academic, and investors. The 2020 event will be virtual and will still be the "must attend" event for anyone in the life science industry in Texas or affiliated with innovation at the life science academic institutions. This event represents an opportunity to meet investors, learn about promising life science companies, to learn about opportunities for entrepreneurs, investment professionals, big pharma, academics and business executives serving the life science industry.

The event will take place online on Tuesday, November 10, to Thursday, November 12. Register here.

November 12 — Plaza Tec: Funding Fundamentals

Though Latinx-owned businesses and startups make up at least 38 percent of businesses in the Houston area, there is still a lack of access to capital blocking growth and progress for Latinx founders.

In this discussion presented by The Ion, representatives from baMa and NextSeed will join together to discuss angel investing and crowdfunding options for Latinx founders and what challenges one might face when seeking capital.

The event will take place online on Thursday, November 12, at 5:30 pm. Register here.

November 12 — Women in Tech and Biz

If you're interested in hearing from some badass women in tech and business, come to the virtual Women in Tech + Biz event created by the Liu Idea Lab for Innovation and Entrepreneurship. The event will be split into two sections — one focused on entrepreneurship and the other focusing more on software and engineering — followed by networking.

The event will take place online on Thursday, November 12, at 6 pm. Register here.

November 13 — Climathon 2020: Hacking Solutions to Houston’s Climate Challenges

On Earth Day this year, the City of Houston published its first Climate Action Plan. The plan is the culmination of thousands of volunteer time from industry professionals, policy stakeholders, and community advocates. Together the working groups have laid out a concise plan to address the climate challenges that Houston faces along with maintaining a leadership role in the energy transition. This year's Climathon will look to realize some of the goals of the plan through design sprints led by local subject matter experts in the areas of transportation, energy innovation, building optimization, and materials management.

The event will take place online on Friday, November 13, at 1 pm. Register here.

November 16-20 — The Houston Innovation Summit

The Houston Innovation Summit — THIS — celebrates Houston's innovation ecosystem during Global Entrepreneurship Week (GEW). THIS responds to 2020 with a special focus on the intersection of Impact and Innovation, spotlighting Houstonians at the forefront of education, ecosystems, inclusion, and policy. Join Impact Hub Houston and Houston's startup and small business community for a week of exciting programs and connect with the thinkers, doers, makers and innovators driving Houston forward.

The event will take place online on Monday, November 16, to Friday, November 20. Register here.

November 17 — Struggles and Bubbles: Pivoting during a Pandemic

Join General Assembly Houston to listen to a panel of startup founders who will share their journey and entrepreneurial struggles, and what it really takes to launch a startup during global pandemic, and scale a startup.

The event will take place online on Tuesday, November 17 at 5 pm. Register here.

November 17-19 — Capital Factory's Texas Startup Roadshow

For the first time, Capital Factory is taking its roadshow online. For three days, the organization will be introducing investors to the various innovative cities across the Lone Star State.

Houston will be the city of focus on Wednesday, November 18.

The event will take place online on Tuesday, November 17, to Thursday, November 19. Register here.

November 20 — The Listies

Let's toast to the entrepreneurial spirit of Houston in a time when celebrating victories is more important than ever. Introducing the Listies, brought to you Houston Exponential and InnovationMap, commemorating the launch of HTX TechList, Houston's innovation discovery platform.

The event will take place online on Friday, November 20, at 3 pm. Register here.

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Houston hospitals recognized as best in state, nation in annual report

better than all the rest

Houston’s University of Texas MD Anderson Cancer Center has retained its U.S. News & World Report crown as the best cancer hospital in the U.S.

In the same ranking, Houston Methodist Hospital once again came out on top as the best hospital in Texas. Last year, the hospital shared the top spot. Baylor St. Luke’s Medical Center ranked No. 4, followed by No. 5 Memorial Hermann Hospital.

The accolades appear in U.S. News’ 2024-25 ranking of the country’s best hospitals. Each hospital also ranked among various specialties, such as orthopedics; cardiology, heart, and vascular surgery; cancer; and neurology and neurosurgery.

Since U.S. News introduced its annual hospital survey in 1990, MD Anderson has been ranked one of the two best U.S. hospitals for cancer care. It has maintained its No. 1 ranking for 10 consecutive years.

“At MD Anderson, our mission is clear: to end cancer,” Dr. Peter WT Pisters, president of MD Anderson, says in a news release. “This ranking reflects our relentless commitment to excellence in patient care, research, prevention, and education.”

MD Anderson also ranked highly in three specialties:

  • No. 2 for ear, nose, and throat.
  • No. 9 for urology.
  • No. 14 for gastroenterology and GI surgery.

“The consistent top national recognitions [that] MD Anderson receives for delivering compassionate, evidence-based care is a testament to our dedication to those we serve,” Pisters says.

Elsewhere at the Texas Medical Center, Houston Methodist Hospital was named the No. 1 hospital in Texas for the 13th year in a row. Also, it was lauded as one of the country’s 20 best hospitals for the eighth time.

Along with the general ranking, Houston Methodist Hospital scored high marks in 10 specialties. These include diabetes and endocrinology (No. 6), gastroenterology and GI surgery (No. 7), and pulmonology and lung surgery (No. 8).

Meanwhile, four Houston Methodist community hospitals ranked well in Texas:

  • Houston Methodist The Woodlands Hospital (No. 8).
  • Houston Methodist Sugar Land Hospital (No. 9).
  • Houston Methodist Baytown Hospital (tied at No. 18).
  • Houston Methodist Willowbrook Hospital (tied at No. 23).

New app with tips for solo women travelers takes flight from Texas

explore mode activated

We all have that one friend whose office seems to be the nearest airport gate. We go to them for travel advice and hit save on their latest post for that hole-in-the-wall restaurant that had the best local food. That type of advice — especially between women — is indispensable for solo travelers, and now a new travel app based in Austin is helping organize it on a new platform without the social media noise.

Solo travel has gained a lot of momentum in the past few years, and it’s no longer just something one does during a gap year before or after college. It’s become the preferred way to travel for many, and women are at the forefront.

According to Condor Ferries, 72 percent of American women like to take solo trips, and the term “female solo travel” has increased 62 percent over the past three years across all search engines. What if there was a place where women solo travelers could get recommendations and travel itineraries created by other solo women travelers?

This concept is the backbone of Airheart, which aims to revolutionize the travel industry by offering a safe space for solo female travelers to find itineraries and travel guides that were crafted with them in mind.

"Traveling solo as a woman is an empowering act of independence," said Airheart founder Lindsey Renken in a press release. "At Airheart, we celebrate and support this journey, helping women discover new places, connections, and strengths."

The platform includes integrated planning tools, interactive maps, itineraries, and video tips all conveniently located in one place and customizable to the traveler’s preference. Once a user creates an account and accesses the site, the navigation is pretty straightforward.

There’s an explore option at the top of the home screen showcasing all the travel guides available for purchase within the platform, with destinations all over the world. At the moment, most are within the US, Mexico, Western Europe, and Asia. Once the user chooses a guide, a sidebar populates with a list of recommendations or a day-by-day itinerary. The right side of the screen is a map with all the pinned recommendations for easy navigating.

For those wanting to travel more within Texas this summer, Airheart offers a few destinations with a wide range of activities:

  • Big Bend/West Texas: For nature lovers, explore the beautiful mountain desert region of West Texas with a comprehensive guide that includes tips on how to get there and how to choose the best accommodation for your trip — something that becomes more complex in such a remote place.
  • Glen Rose: Escape to this charming small town just an hour-and-a-half Southwest of Dallas-Fort Worth, that is perfect for a weekend getaway full of outdoor adventures. These recommendations come from a local.
  • Fredericksburg: Indulge in the best wineries and restaurants that Central Texas has to offer with an itinerary crafted by a Texas native. This one is ideal for a quick day trip or a fun girls’ weekend.

Airheart, named after the pioneering aviator Amelia Earhart, is also focused on empowering female travel creators by allowing them to act as a type of modern travel agent. They can monetize both new and existing travel content by creating these guides and itineraries, while reaching a new audience on the platform.

“As an avid traveler, I’m always looking for something like this created by expert travelers. I can’t wait to be a seller and consumer,” said Tanna Wasilchak who contributed guides for Waco, Glen Rose, and Georgetown. “Solo traveling as a female can be intimidating at first, but it’s one of the most rewarding experiences I’ve ever had. Airheart is going to be such a game changer for this community.”

Perhaps the only downside for now is that Airheart is limited in what it can offer to its users with only 22 guides published on the site. However, the features and community-based aspect give the platform the potential to stand out in an otherwise saturated market. Guides ($29 each before taxes and fees) are available for users to browse and purchase at airheart.com.

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This article originally ran on CultureMap.

Houston startup adviser on navigating SAFE, convertible notes in funding rounds

guest column

As both a founder and occasional early-stage investor in the Houston ecosystem, I've seen firsthand the opportunities and challenges surrounding seed funding for local startups. This critical first fundraising round sets the trajectory, but navigating the landscape can be tricky, especially for first time founders who may not be familiar with the lingo.

One key dynamic is choosing the right deal structure — SAFEs (Simple Agreement for Future Equity) vs. convertible notes are the most common vehicles early stage startups use to raise capital and are far more founder-friendly than a priced round.

Let's start first with what the have in common:

  • Both allow you to defer setting a valuation for your company until a later (likely priced) round, which is useful in early stages or pre-revenue companies
  • Both are cheaper and faster to execute than a priced round, which cash-strapped early stage founders like
  • Both can have terms like valuation cap, discount, conversion event, and pro rata rights.
  • Both are less attractive to investors seeking immediate equity (especially important if starting the QSBS clock is part of your investors strategy or if the investor is newer to startup investing)
  • Both can create messy cap tables and the potential for a lot of dilution for the founders (and investors) if they are used for multiple raises (especially with different terms)

While as you can see they have similarities, they have some important differences. Let's dig in on these next:

SAFEs:

  • Created by Y Combinator in 2013, the intent was to create a simplified, founder friendly agreement as an alternative to the convertible note
  • Is an agreement for future equity for the investor at a conversion event (priced round or liquidation event) which converts automatically.
  • It's not a debt instrument and does not accrue interest or have a maturity date.
  • Generally have much lower upfront legal costs and faster to execute

Convertible Notes:

  • A debt agreement that converts to equity at a later date (or conversion event like a priced round)
  • Accrues interest (usually 2 to 8 percent) and has a maturity date by which the note must either be repaid or convert to equity. If you reach your maturity date before raising a qualifying round, you can often renegotiate to extend the maturity date or convert the note, though be prepared to agree to higher interest rates, additional warrants, or more favorable conversion terms.
  • More complex and take longer to finalize due to non-standard terms resulting in higher legal and administrative costs

It's worth reiterating that in both cases, raising multiple rounds can lead to headaches in the form of complex cap tables, lots of dilution, and higher legal expenses to determine conversion terms. If your rounds have different terms on discounts and valuation caps (likely) it can cause confusion around equity and cap table structure, and leave you (the founder) not sure how much equity you will have until the conversion occurs.

In my last startup, our legal counsel — one of the big dogs in this space for what it's worth — strongly advised us to only do one SAFE round to prevent this.

Why do some investors tend to prefer convertible notes?

There are a few reasons why some investors, particularly angel investors from developing startup ecosystems (like Houston), prefer convertible notes to SAFEs.

  • Because they are structured as debt, note holders have a higher priority than equity investors in recovering their investment if the company fails or is liquidated. This means they would get paid after other creditors (like loans or credit cards) but before equity investors, increasing the likelihood of getting some of their money back.
  • The interest terms protect investors if the founder takes a long time to raise a priced funding round. As time passes, interest accumulates, increasing the investor's potential return. This usually results in the investor receiving a larger equity stake when the note converts. However, if the investor chooses to call in the note instead, the accrued interest would increase the amount of money owed, similar to a traditional loan
  • More defined conversion triggers (including a maturity date) gives investors more control and transparency on when and how their investment will convert.
  • Can negotiate more favorable terms than the standard SAFE agreement, including having both a valuation cap and a discount (uncommon on a SAFE, which usually only has one or the other), interest rates, and amendment clauses to protect them from term revisions on earlier investors by future investors (called a cram-down), etc.
We'll go over what the various terms in these agreements are and what to look out for in a future article

How to choose:

  • Consider your startup's stage and valuation certainty — really uncertain or super early? Either of these instruments are preferable to a priced round as you can defer the valuation discussion
  • Assess investor preferences in your network — often the deciding factor if you don't have a lot of leverage; most local angels prefer c-notes because they see them as less risky though SAFEs are becoming more common with investors in tech hubs like Silicon Valley
  • Evaluate your timeline and budget for legal costs — as I mentioned, SAFEs are way less expensive to execute (though still be prepared to spend some cash).
  • Align the vehicle with your specific goals and growth trajectory

There's no one-size-fits-all solution, so it's crucial to weigh these factors carefully.

The meanings of these round terms like "seed" are flexible, and the average seed funding amount has increased significantly over the past decade, reaching $3.5 million as of January 2024. This trend underscores the importance of choosing the right funding vehicle and approach.

Looking ahead, I'm bullish on Houston's growing startup ecosystem flourishing further. Expect more capital formation from recycled wins, especially once recently minted unicorns like High Radius, Cart.com, Solugen, and Axiom Space exit and infuse the ecosystem with fresh and hungry angels, new platforms beyond traditional venture models, and evolving founder demographics bringing fresh perspectives.

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Adrianne Stone is the principal product manager at Big Cartel and the founder of Bayou City Startups, a monthly happy hour organizer. This article original ran on LinkedIn.

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