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

 
 

This week's roundup of Houston innovators includes James Hury of TRISH, Serafina Lalany of HX, and Andrew Ramirez of Village Insights. Courtesy photos

Editor's note: In this week's roundup of Houston innovators to know, I'm introducing you to three local innovators across industries — from space health to virtual collaboration — recently making headlines in Houston innovation.

James Hury, deputy director and chief innovation officer of TRISH

James Hury joins the Houston Innovators Podcast to discuss the role of the Translational Research Institute for Space Health. Photo courtesy of TRISH

Only about 500 humans have made it to space, and that number is getting bigger thanks to commercial space travel.

"If you look at all the people who have gone into space, they've mostly been employees of nations — astronauts from different governments," says James Hury of the Translational Research Institute for Space Health on this week's episode of the Houston Innovators Podcast. "We're going to start to get people from all different ages and backgrounds."

Hury is the deputy director and chief innovation officer for Houston-based TRISH, and he's focused on identifying space tech and research ahead of the market that has the potential to impact human health in space. From devices that allow astronauts to perform remote health care on themselves to addressing behavioral health challenges, TRISH is supporting the future of space health. Click here to read more and stream the podcast.

Serafina Lalany, executive director of Houston Exponential

Serafina Lalany, vice president of operations at Houston Exponential

HX has its new permanent leader. Photo courtesy of Serafina Lalany

Houston's nonprofit focused on accelerating the growth of the local innovation ecosystem has named its new leader.

Serafina Lalany has been named Houston Exponential's executive director. She has been serving in the position as interim since July when Harvin Moore stepped down. Prior to that, she served as vice president of operations and chief of staff at HX.

"I'm proud to be leading an organization that is focused on elevating Houston's startup strengths on a global scale while helping to make the world of entrepreneurship more accessible, less opaque, and easier to navigate for founders," Lalany says in a news release. "My team and I will be building upon the great deal of momentum that has already been established in this effort, and I look forward to collaborating closely with members of our community and convening board in this next chapter of HX." Click here to read more.

Andrew Ramirez, CEO of Village Insights

Andrew Ramirez originally worked on a similar project 10 years ago. Photo via LinkedIn

Innovation thrives on collisions, but how do innovators connect without face-to-face connection? Andrew Ramirez and Mike Francis set out to design a virtual village to promote collisions and innovation, and their platform is arriving at an apt time.

"The world has changed," Ramirez says. "I feel like people are trying to find the right balance of the physical but also the productivity gain from being able to do things digitally."

Ramirez leads Village Insights as CEO and the new platform is expected to formally launch it's Open World platform next month. Click here to read more.

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