more access to funding

Houston group launches equitable fund of funds to increase impact at a lower barrier of entry

Urban Capital Network have launched a fund-of-funds to allow investors to tap into later-stage startups at a much lower barrier of entry. Images via urbancapitalnetwork.com

Early stage investing has always been a tried and true way for investors to get in on the ground floor of a tech company for a smaller financial commitment — but it's risky. Urban Capital Network has created an alternative.

UCN was founded to democratize investment opportunities and help investors of color find investment opportunities all while cutting their teeth as novice investors. Lenny Saizan, co-founder of UCN, says that its Horizon Fund II allows for UCN investors to get involved in venture-backed companies at a much lower price tag.

Saizan explains that UCN members are in that lower tier of accredited investors who don't necessarily have $250,000 or $1 million to invest in a fund — but they have $15,000 to $25,000 to invest.

"We allow more people to participate in venture funds or venture-backed opportunities," Saizan tells InnovationMap. "Instead of going into one deal at a very early stage, you’re getting in a later stage where the deal is more de-risked and you have a better chance of returns."

As members start to see returns on these premium investment opportunities, Saizan says, UCN encourages their investors to look at earlier stage within their own communities.

“We recognized that there was still an issue with minority founders getting funded as well,” Saizan says of UCN's mission as a whole. “We thought the best approach would be to create wealth and income within the communities that those founders would be reaching out to.”

Horizon Fund II will deploy capital in up to five funds — each with 15 to 30 portfolio companies. The first two investment opportunities have already been secured: Pegasus Tech Ventures's Pre-IPO Fund and Mercury Fund V, a Houston VC firm. In two years, UCN has seen five exits across its six funds. It's the group's second fund of funds — the first was an investment in Mercury Fund IV.

Eric Tait, co-founder at UCN, says they are looking for variety in the funds they invest in and are targeting top-tier, and highly rated VC firms all over the country that UCN's leadership has connections with.

“We’re relatively agnostic in terms of industry,” Tait says. “We do try to have a portfolio allocation that will create a return threshold that is varied.”

Typically, Tait explains, investing in a VC fund won't garner returns for seven to 10 years. However, UCN specifically targeted Pegasus's Pre-IPO Fund because ROI is expected between years two and four.

Tait says one of the things of focus for UCN this year is to grow the network's reach.

“A big goal for us is to tap into more institutional investors — like family offices, and things of that nature,” Tait says. “What we’ve realized is what we’ve been able to do for individual investors has been locked down, and we can do the same thing on a smaller scale for institutional dollars who are interested in these opportunities but don’t want to put in $1 million.”

Saizan says his team is also looking to give members a tech upgrade when it comes to accessing information and deals on UCN's platform. Additionally, he wants to focus on strengthening the group's network of VCs and how UCN interacts with them. He says firms reach out with interest all the time, and he wants to streamline that process using technology.

“We really want to formalize our network,” Saizan says. “We’re bringing diverse deal flow, diverse investors, diverse talent, and a diverse perspective. So, a lot of times VCs tap us when they are looking for an opportunity — or maybe they have an opportunity and want to know what we think.”

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Building Houston

 
 

VR training startup, HTX Labs, has raised funding from an outside investor for the first time. Courtesy of HTX Labs

HTX Labs, a Houston-based company that designs extended reality training for military and business purposes, announced last week that it has raised its first outside capital.

The company has received a $3.2 million investment from Cypress Growth Capital. Founded in 2017, HTX Labs — developer of the EMPACT Immersive Learning Platform — has been granted funding from the Department of Defense as well as grown its client base of commercial Enterprises. The platform uses virtual and extended reality that "enables organizations to rapidly create, deploy, measure, and sustain cost-effective, secure, and centralized immersive training programs, all within engaging, fully interactive virtual environments," per a news release.

“We have been looking to secure outside capital to accelerate the growth of our EMPACT platform and customer base but we hadn’t found the right partner who provided an investment vehicle that matched our needs,“ says HTX Labs CEO Scott Schneider in the release. “We found everything we were looking for in Cypress Growth Capital. They have a non-dilutive funding model that aligns with our capital expectations and have the level of experience that really makes this smart money.

"Cypress has a decade-long track record of success in helping emerging software and services companies achieve scale," he continues. "It is clear that the team’s collective entrepreneurial and operating experience will be of tremendous benefit to us as we focus on expanding our customer base in a very intentional way.”

The fresh funding will go toward growing and scaling the company's operations — both within the current Department of Defense and expansion opportunities into key commercial markets, like heavy industry, manufacturing, and higher education. Additionally, the funding will support increased customer adoption.

“Scott and his team have built an exceptional business that is poised for dramatic growth,” says Cypress Partner Pat McCaffrey in the release. “HTX Labs’ modern, immersive training solution provides clients with a force multiplier for modernizing training and an unmatched ROI.”

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