Houston voices

Here's what challenges — and opportunities — Houston startups are facing amid COVID-19

The pandemic has destroyed a good part of the startup ecosystem. Here's how it happened and how startups can pick up the pieces. Miguel Tovar/University of Houston

There are startups struggling to keep their heads above the deluge of a pandemic-induced depression.

Between 2016 and 2018, the global startup economy generated over $3 trillion — a far cry from today's economic value. Today, startups struggle to keep operations running during the pandemic. Web companies throughout Europe have lost close to 400 billion euros during the coronavirus pandemic. Chinese venture capital investing has dipped 50 percent compared to everyone else.

"Startups that are supported by venture capital funds are merely a small part of the startup ecosystem. Startups that don't have venture capital funding, which is the majority of them, stand to lose substantial money during this pandemic-caused shutdown," says Dane Stangler, a business writer for Forbes.

"All across the country, there are startups that, while they may not have hefty venture capital funding, are still significant to the ecosystem because of their job creation," he continues.

These startups face serious setbacks and are expected to see a giant decline of growth during this pandemic. Small businesses are already in a bind because of forced closures and rapidly waning sales.

Far-reaching effects

Startups supported by venture capital have far-reaching effects on the rest of the economy. These high-tech companies generate up to five jobs for every one job they directly create.

"That means that the inevitable economic bodyslam they're about to receive or have already received will be felt by almost every other facet of the job market," explains Stangler.

According to the Startup Genome report, the pandemic will damage startups that were in the process of raising capital and will likely kill the majority of them.

What can be done?

"Federal emergency support for small businesses is certainly the right play here. The deli down the street, the local mechanic, the mom and pop burger joint; they all need help right now," Stangler says.

Tech and science startups need help too — and many of which were in the middle of getting off the ground when the corona crisis crashed the economy.

"Pumping money into them right now is the best thing that can be done to help them in the now."

The low-interest rate climate that has helped boost venture funds has also pushed many startups to survive on debt. We'll have to come to terms with this for now.

"Market momentum isn't necessarily ideal for the time being. Moreover, the "reallocation" forces that you hear entrepreneurs mention a lot has been kiboshed for now," explains Stangler.

Startups struggling to put the pieces of their company back together might see a glimmer of hope on the horizon, though.

Hope is on the horizon

Recessions breed good businesses. Don't believe me? According to the Startup Genome report, over 50 billion dollar tech startups were created during the recession of 2007 to 2009. Fun fact: more than 50 percent of the companies on the Fortune 500 list to date were founded during a recession.

Sure, startups struggling during a national pandemic can paint a demoralizing picture. But there might be some good news peaking through the dark clouds. It's clear that venture capital funding is at a standstill right now. But it could mean that more startups will get funded when things return to somewhat-normal.

The Startup Genome report shows us that during the 2001 and 2009 recessions, the number of companies that were funded by venture capitalists exploded and fast. For example, in the four years after the 2009 recession, the number of venture capital deals spiked by 25 percent every year.

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This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu, the author of this piece, is the writer and editor at UH Division of Research.

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Building Houston

 
 

Planning to open in the coming months, The Ion Houston has made great progress on its construction. Scroll down to view the slideshow. Photo by Natalie Harms

The Ion Houston is expected to open its doors this year, and the building's exterior is close to completion. Now, the construction team is focusing on interiors and then tenant build outs.

The 270,000-square-foot coworking and innovation hub owned and managed by Rice Management Co. is slated to be a convening building for startups, corporations, academic partners, investors, and more. The building is organized as follows:

  • The underground Lower Level will act as academic flex space with a few classrooms and open-concept desks for The Ion's accelerators, including: The Ion Smart and Resilient Cities Accelerator, DivInc, the Rice Alliance's Clean Energy Accelerator, and the Aerospace Innovation Hub and Accelerator. There will also be an event space and The Ion's own programming.
  • On the first, street-level floor, The Ion's restaurant tenants will reside with access from both the greenspace as well as into the building. The Ion's first three restaurant tenants include: Late August, Common Bond, and STUFF'd Wings.
  • Additionally, the first floor will be home to a venture studio and the prototyping lab. There is additional space available for other tenants.
  • On the second floor, there will be 58,000 square feet of coworking space managed by Common Desk. Note: For floors 2 and up of the Ion, tenants will have access cards that allow them entrance. The first and lower floors will not require access cards.
  • The third floor of the building will house eight to 10 tenants each with 5,000 to 10,000 square feet of space. Chevron was announced as the first tenant and will reside on this floor.
  • On the fourth and fifth floors, The Ion will house one to two larger tenants on each level. These levels of the building were added on to the existing structure. The fourth floor features two balconies that tenants will have access to. Microsoft is signed on to have its space on half of the fifth floor.
The Ion is still planning on an open date in late spring or summer. For leasing information, click here. Scroll through the slideshow of construction images and renderings to see the progress of the building.

Exterior nears completion

Photo by Natalie Harms

The building's exterior is almost complete and kept much of the original building's facade. The new materials brought in match the existing color scheme.

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