This VC visiting Houston has eyes on investing locally in disruptive tech startups
The HX Venture Fund is a fund of funds that makes investments as a limited partner in venture capital funds across the country — VC funds that want to add Houston companies to their portfolios. HXVF is is paving the way for those investments by setting up immersive days for venture capitals visiting Houston.
One of these HXVF Engage VC days is taking place this week on Wednesday, April 27. Houston entrepreneurs can hear from partners at Revolution — a Washington, D.C.-based firm with three investment funds and strategies — at a fireside chat kicking off the visit at 8:30 am at The Ion.
Tige Savage, co-founder and managing partner of Revolution Ventures, and Sandy Guitar, managing partner of HX Venture Fund, join InnovationMap for a Q&A about how the two organizations are working together to put funding in the hands of Houston tech entrepreneurs.
InnovationMap: Tige, tell me briefly about Revolution and its family of funds. What types of companies are you looking for?
Tige Savage: We started Revolution about 17 years ago. I co-founded it with Steve Case, the founder of AOL and later the chairman of AOL Time Warner. I ran the venture capital group for that media company — that's how he and I got to know each other. AOL was based in Washington DC, so when Steve and I partnered up to launch our firm, we based it in Washington. We knew that to do the investing of the importance and scale that we had in mind, that it was an idea that was bigger than just Washington DC. So, we hopped on airplanes, and we went to where we thought the most interesting best ideas were. And as we spent our time in the market, we realized that there were a lot of opportunities in a lot of places other than New York City and Silicon Valley — we obviously have nothing against New York City or Silicon Valley, and we make investments in those places. But we realized that there was a lot going on in the country. It really gave us an opportunity to start building ecosystems and investing across the country. We looked back and realized we were generating returns in places like Florida, Washington, DC, and Portland, Oregon, et cetera — and there were great opportunities and great entrepreneurs in those places. And the barriers to building companies in those kinds of places had gotten much smaller than they'd been historically — the internet enabled talent to be in more places we've seen that amplified in a major way through the pandemic.
We started investing, and we raised capital from the outside world — and we did that in three efforts. One is something called the Rise of the Rest seed fund that is a very ecosystem focused investment vehicle. They make hundreds of investments out of their $150 million fund — small investments really to be involved in those communities. Imagine that's a very large top of funnel approach for our organization that allows us to project ourselves in a major way. David Hall is managing director of the fund and will be at this event tomorrow. He's been involved in revolution from the very early days. In fact, he was the very first person I hired.
Revolution Ventures is the fund I'm involved in. We are mostly series A investment effort with a much more concentrated portfolio. We're very focused on this same strategy of investing across the entire country. Then we have a growth fund called Revolution Growth that's sort of a later stage fund — call it series C plus, maybe series D, investor. They take larger stakes, but it's also a concentrated portfolio.
We have a few things that we think are unique about Revolution. One is what we call "place" — it's this geographic approach that we've taken from the start we're real believers that there's opportunity everywhere. We've spent a lot of time, money, capital, et cetera, working on those ecosystems and being in them. That's why places lake Houston are so exciting for us. Secondly, is policy. We're in Washington, it's in the DNA of what we do. It used to be very out of favor for tech companies to say they cared about policy, where we've always known that that's very important. If you go to some of the biggest tech companies today they'll tell you that the most important thing to them and the biggest risk they have is policy and regulatory.
We have a history of investing in billion dollar categories where technology is ripe to make the the business model, the consumer value proposition, the supply chain, the margin structure — something like that — better. That's why we called the firm Revolution, targeting places where technology can revolutionize existing categories, largely for the benefit of consumers.
IM: Sandy, what is it about Revolution that makes it a good fund for Houston companies?
SandyGuitar: We've met with and built relationships with over 400 venture funds, but have to date have only invested in 14. So ours is a super selective process and we are just honored to be limited partners of Revolution. The reasons that make Revolution such a fit are manyfold. One is we seek investment strategies that we think will find deals in Houston. Revolution's strategy of using both the Rise of the Rest at the seed level, but a concentrated portfolio at the series A level is exactly the kind of strategy that we think works. Their generalist approach, but with specific expertise within various technologies means that they can be nimble from a technology point of view, as they look for deal flow in Houston, and they can allow for a force rank that doesn't force them in one tech bucket. We think that's a great advantage to seasoned venture capitalists.
Second of all, we're looking for investment strategies that create high growth companies, which can be innovative to our investors, such as the HEB, Shell, Chevron, Insperity, Lyondellbasell, et cetera. Those investors at HX Venture Fund rely on us to introduce them to opportunities for co-investment at the company or fund level and for opportunities to be customers to the portfolio companies of our VCs. We believe Revolution is producing the kinds companies that are going to be and are of interest to our limited partners as they try to innovate from within. And then third of all, we're looking for really strong track records that show expertise in selecting, growing and exiting companies. We want Houston entrepreneurs to benefit from that kind of acumen. That takes a lot of track record and lot of time in VC to show proof points of all three of those parts of the company formation process, and Revolution has that in spades.
IM: Tige, do you have Houston startups already in your portfolio and how is HXVF helping you grow your presence in Houston?
TS: Across our funds, between the Rise of the Rest fund and Revolution Ventures, I think there are 19 Texas investments, one in Houston. We also have a company called Big Commerce, which is in the growth fund that's a Texas and Australia-based company. Goodfair is an investment of the Rise of the Rest fund. They made an early investment — love the strategy of really trying to make fashion more affordable and more environmentally conscious and more economically achievable.
We are equally fortunate to have HX involved. Not only are they a great investor, but they're also a great facilitator of intersections for firms like ours that are actively interested in deploying capital in interesting places. We're only a handful of folks, so it takes a lot of leverage. Our Rise of the Rest strategy is an institutional effort, but having partners in the market really matters. This is why we're so excited to be partnered with Sandy and the gang there, because we really view that strategy as a unique and interesting one.
IM: Sandy, tell me about these events you’ve been putting on for your portfolio funds at HXVF.
SG: This is our second event this year already, and we've done about half a dozen of these so far of what we call VC engage days. The idea of the VC engage day is to really connect all of our communities together. In the mornings, we like to make sure that the venture capitalist coming in has an opportunity to speak with our ecosystem and that anybody for free can come and listen to these very experienced and successful venture capitalists. From there, we curate one-on-one meetings between select entrepreneurs and venture capitalists that are part of the day. We also do one-on-ones with our limited partners and the venture capitalists. And then, at the end of the day, we have a private dinner to provide more bespoke conversations either with our limited partners or with the Founder's Circle — 20-plus serial entrepreneurs here in Houston that provide a voice to us at HXVF.
TS: What was just described — that's is not a typical thing. LPs don't do that. We're obviously excited about it. It's a thing unique to Houston. HXVF is doing a lot of work to make these things happen.
IM: Tige, as someone looking in from DC into the Houston market, what do you see happening in the Houston market? What are you most excited about getting to tap into on your visit?
TS: Houston is known for a number of industries and is smart to leverage its engineering talent and try to focus that on ways to amplify it in technology. We think that the opportunities around sort of innovative manufacturing or around logistics around climate are particularly interesting to our funds, because when we talk about revolutionizing large categories in ways that make things better for consumers, those are all major elements that can have that kind of impact.
Houston's an extremely multicultural place. The engineering talent is extremely robust. The ability for large corporations to invest in and take advantage of what's going on in tech is extremely exciting. Finding a way for catalytic activity to happen within within these large businesses is sometimes a challenge. What we're most interested in is seeing where that's happening.
The ecosystem is really blooming. This is sort of the bread and butter of what we do. Collaboration, capital, and network density are what we've always thought are the three key things that are differentiators for a market. And those things are all coming together.
This conversation has been edited for brevity and clarity.