Technology growth
A venture capitalist focuses on helping Houston startups prosper.
Blair Garrou has been involved with nearly every big new initiative to help boost Houston’s tech startup scene over the past two decades and now serves as managing partner for Mercury Fund, Houston’s only local venture capital firm. In that post, he’s working with the Greater Houston Partnership to bring more investment dollars to Houston companies, working from a report by Accenture on how to build a better tech industry.
Q: So how did this project get started?
A: I think it was just an overall opportunity, looking at other cities that were building these tech ecosystem hubs that were great at attracting millennial talent but also these high-paying jobs. Some cities do that to diversify their economy. I think other cities do that to allow their own corporations to be on the leading edge.
One of the leading indicators around whether your city is an innovation hub is startup activity and venture capital investment. Houston over the last 10 years has fallen behind in both startup activity and venture investment. And this was brought to the attention of the Greater Houston Partnership, Mayor Turner and others, and they pulled people together to say: “How have other cities solved this problem?” These best practices of things like seed accelerators, “fund of funds” which invest in venture funds, none of these are new ideas. These are ideas that other cities and states have put to work, and some have perfected. Accenture was brought in to wrap all these ideas together and put their stamp of approval on it, and a lot of us are really excited about that report.
Q: This isn’t the first time Houston has tried to nurture tech startups. Why do you think it will work better this time around?
A: I started my entrepreneurial career with a group called the Houston Technology Center, back in 1999, when it was getting off the ground. Then the HTC had a formal report put together by McKinsey, which walked down the pathway of “how do you build a more robust tech ecosystem?” But these were all with what worked back in the ’90s.
Well, fast-forward 20 years. Things are a lot different now. So Houston needed newer infrastructure in order to help the entrepreneurs of the future. And a big piece that we’re focused on now is, how do you fix these corporate innovation gaps? Ever since the financial crisis, these R&D departments have been shed all across the U.S. And so R&D is very difficult to come by. A lot of corporations in these cities have used these tech ecosystems to help supplement that, and that’s what we want to do in Houston.
And it’s not just buying from a startup. Some of this is about their own employees. How do they train them in entrepreneurship, outside of sending them to an MBA program, by immersing them in a tech innovation district with other startups so they can begin thinking differently? I think what’s been missing over these 10 years is a road map that shows us what we have, but also what we’re missing.
Q: The Accenture report recommends a focus on three areas: robotics, the industrial internet of things and cybersecurity. Why those?
A: A lot of times, the internet of things, you think about consumer wearables. But the industrial internet of things talks about all the datapoint coming out of sensors on an industrial plant. Think about all the sensors on a drill site, or at the port, that could be used to get real time analysis to those corporations on how better to run their business.
You could think about the industrial internet of things serving us in the medical complex. Robotics can lend itself in medical devices as well. The one area that the Accenture report underscored is data science. All of our industries are being transformed through data analytics and artificial intelligence. How will data science play a role in moving Houston into the next century?
Q: On that point, were you disappointed to see the University of Texas back off its plan to build a data science center in Houston?
A: I think more education is needed in this city as to the importance of data science. From a strategy office perspective, we are supportive of that and all efforts to bring more data science education to Houston to train the next wave of data scientists. We’re gonna need it. Think back to the movie “The Graduate.” People were telling their kids to be in plastics, polymer science. People should be telling their kids now “data science.”
Q: So explain this “fund of funds” you’re putting together.
A: Corporate fund of funds were pioneered in Detroit by the Renaissance VC fund and a gentleman by the name of Chris Ryzik. And he came up with a model that essentially said, “Let’s have the Fortune 500 companies of Michigan form a fund” because these companies would like to drive these innovation bridges, but they also care about the innovation ecosystem of Michigan. But what is most important is not putting the capital to work but actually having that venture capitalist be active within the community. They’ll come in, they’ll teach classes, they’ll mentor at the local seed accelerators, they’ll start helping companies, they’ll talk about VC from their area of the country. That then informs others how it’s done, and by them being here, getting comfortable, they start putting money to work.
You want smart people who’ve done this before to come to our community and help guide us along. We don’t have enough venture capitalists here to begin with. So how do we import those from the coast to keep things moving? Make sure those venture capitalists are active in Houston, and the big piece is that the corporations that are invested in the fund of funds, the expectation is that they will give innovation liaisons to the VCs for whom the fund of funds invests in. If they know the industry better, they’re more apt to invest into digital oil field solutions. We’ve seen this work really well in Michigan and Ohio.
Q: Why hasn’t the Houston Technology Center been able to foster the growth that you’re looking for? A: Where HTC has had the most success has really been finding entrepreneurs who are spinning out of corporations and giving them the tools they need to do a startup. There’s been a handful of companies that they’ve worked with that have gone on to great success. But perhaps the question about HTC is: “Have they been successful in nurturing transformative or disruptive companies?” The innovation ecosystem that we’re trying to build is one that really nurtures disruptive technologies for the next generation. Currently, the way you build a startup ecosystem is that you have to build entrepreneurial density. You have to pack them in. Density is almost the No. 1 element of what makes an ecosystem work. Houston is spread out. Our space is our liability. So we have to figure out how to draw them together.
Q: So what does that mean for the HTC? A: The one thing about an innovation economy is that you can’t be selective about who the winners and losers are going to be. You need to make room for all comers. And you need to let the market, the entrepreneurs, decide where they find value and where they don’t. For years, Houston has allowed organizations to exist because they exist. When startups are no longer needed because the market says we don’t need your product, they go away. Why shouldn’t startup development organizations go the same way? And I think what you’re seeing in Houston is a transformation from the old to the new.