Tech center
Citywide initiative aims to increase appeal of Houston to investors and innovators as it connects academics and corporations
›› Houston Exponential to harness startup potential.
The Houston Technology Center, largely considered a founding father of tech startup assistance in Houston, is being folded into a new organization as part of a citywide initiative to boost Houston’s appeal to technology investors and innovators.
The new nonprofit, called Houston Exponential, is the culmination of countless discussions as to why the city has not built a strong infrastructure for such innovative work. Using local studies and successful models from other parts of the country, it will become the central organization connecting Houston’s capital, academics, business accelerators, startups and corporations.
“Houston Technology Center, as it was established, met that existing need at that moment. But look at where we are right now,” Mayor Sylvester Turner said Monday. “And quite frankly, we’ve been losing ground. We’ve got to stop. We’ve got to reverse course. We’ve got to become innovative in our thinking.”
Houston Exponential merges the Houston Technology Center with the Greater Houston Partnership’s technology innovation roundtable and the Mayor’s Technology & Innovation Task Force. The new organization will focus on creating a hub to nurture tech-driven startups with a potential to attract venture capital and to scale quickly.
Its goals are aggressive: to vault Houston among the nation’s top innovation ecosystems by 2022, to create 10,000 new technology jobs over that same period and to lure $2 billion in venture capital investment to Houston-based startups in 2022 alone.
“We have the talent, we have the technology, we have the diversity, and there is no reason why we should not be in the top tier when it comes to startups,” Turner said.
Yet the average annual venture capital investment of $238 million between 2011 and 2015 helped rank the city No. 20, according to a report from Accenture and the Greater Houston Partnership.
A separate report, soon to be released, ranks Houston 39th among U.S. cities in terms of venture capital investment, deals and number of startups with
venture capital funding, according to the McNair Center for Entrepreneurship and Innovation at Rice University’s Baker Institute.
Houston Exponential plans to address such challenges with a venture capital fund that will raise about $50 million from Houston corporations. An investment professional will manage the money by investing in 10 to 12 venture capital funds across the U.S. Similar efforts in other places have shown that connecting corporate investors with venture capitalists brings more investment to the local areas.
Blair Garrou, managing director of Houston-based Mercury Fund, has seen the model work firsthand. The venture capital firm received money from a fund of funds in Detroit and Cincinnati. While it previously invested in those regions, its investments increased after receiving the money. Mercury Fund also formed new relationships.
“VCs will come to Houston because they want relationships with our corporations who will invest in the fund of funds,” Garrou said.
But the right corporations and venture capitalists have to participate, and the fund must provide returns, said Ed Egan, director of the McNair Center.
“They are not a magic bullet. They don’t always work,” he said.
Egan said he’s encouraged by the for-profit and marketoriented incubators, accelerators and hubs that have sprung up in Houston. Funding of these organizations is tied to their ability to produce quality startups, he said, while the nonprofit Houston Technology Center relied more on its 18-year history to raise money.
Former HTC chief executive Walter Ulrich said there’s room for nonprofit and for-profit organizations. HTC supported one company for about seven years, and that company’s products and services are now used by major energy companies. He said a forprofit possibly couldn’t make that kind of time commitment to a single company.
Over its 18 years, the Houston Technology Center has coached more than 1,000 companies, including 277 that went through its acceleration and incubation program through 2016 and raised more than $3.5 billion in funding. This, in turn, has created more than 6,000 new direct technology jobs.
Ulrich said HTC will provide many assets to Houston Exponential, including a globally recognized acceleration program, more than $1 million of equity in HTC clients and a 50,000square-foot-facility in Midtown.
“The Houston Technology Center provides innovative long-term services to Houston’s diverse community and widespread geography,” Ulrich said. “In the enthusiasm to restructure the region’s approach, it is critical that these vital services are not sacrificed for short-term gains that benefit the few.”
The HTC board unanimously supported joining Houston Exponential. Dick Williams, a former HTC chair, will be the interim president and CEO pending a nationwide search.
Lori Vetters, who replaced Ulrich as CEO earlier this year, will stay with the organization through a transition period. She will also lead program development for a new potential contract to accelerate 60 international companies coming to Houston. Finding the best acceleration model will be one of Houston Exponential’s focuses. In the meantime, it will continue assisting current companies at the HTC.
“We have to innovate and we have to pivot,” Vetters said. “And this is the perfect opportunity, I think, to bring all of Houston’s ecosystem together with one strategy and one voice.”
Houston Exponential is also developing committees to identify an innovation district, attract a major tech company to Houston and develop expertise and critical mass around large technology themes — cybersecurity, robotics and industrial internet of things — instead of specialties focused only in energy or life sciences.
“Those are technology themes that are incredibly important to the industries that are already thriving here,” said Gina Luna, chair of the Greater Houston Partnership’s technology innovation roundtable. She will be chair of the governing board at Houston Exponential.
The plan also includes cheerleading.
“We do need an organization to champion Houston,” Egan said. “It’s all very good to have people who succeed locally, but we need to be able to tell the rest of the world about that.”