Start-Up Guide (Issue Brief)
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Under Houston Entrepreneurship umbrella.
Contents
Abstract
Every entrepreneurship ecosystem consists of a delicate balance between innovative thinkers, ambitious business owners, market forces and entrepreneurship institutions. The entrepreneurship institutions, ranging from accelerators and incubators to hubs and co-working spaces, provide key services to aspiring entrepreneurs. After founding a start-up, entrepreneurs require every possible edge they can get in order to maximize their idea's potential. Houston, the largest city in a state with little venture capital, stands in a position to change the narrative of Texan entrepreneurship. Through an analysis of the major entrepreneurship institutions located in Houston, the McNair Center has complied a guide for start-up entrepreneurs, academics, and policy makers to help navigate and better understand the options, successes and failures of the Houston entrepreneurship ecosystem. For this qualitative and quantitative analysis, each institution must provide a "program" for entrepreneurs and their start-ups to enroll in and go through. The qualitative analysis consists of few key parts, namely what the institution considers itself, the services provided by the institution and the entrepreneurship experience level of the institution's directors. The quantitative analysis investigates how many start-ups that participated in an institution's program received venture capital, were acquired, or exited in an initial public offering (IPO). Other considerations such as repeat dealings with venture capital firms, founding date of institution, non-profit status, and quality of venture capital firms dealt with were noted in the data.
Institutions
In order for an entity to be considered an institution for this project, it needed to be located in Houston, provide some kind of "program" for enrollment by start-ups and entrepreneurs, and had to have an easily accessible and published list of all companies which have participated in this "program." All data was collected from institution websites, thus the type of institution, services provided, skill level of directors, and list of cohort companies which have been through a "program" are all self-reported. Data was then aggregated across the board.
Houston Accelerators
An accelerator is a “fixed-term, cohort-based program including mentorship and educational components, that culminates in a public pitch event, often referred to as ‘demo-day’” (Cohen and Hochberg, 2014). The mission of an accelerator, often a non-profit entity, is to provide early stage start-ups with resources, mentorship, and networking needed to gain access to venture capital funding. On average, cohorts stay with an accelerator for 3 months cumulating with a pitch to several venture capital investors. (Fehder and Hochberg, 2014)
HHV's NextHIT
Houston Health Venture's NextHIT accelerator program is a Houston-based, for-profit institution founded in 2014. It advertises a wide array of services, including funding, access to experts, educational programs, mentorship, and office space at the University of Houston. Of the NextHIT program's five directors, two have direct entrepreneurship experience as either an established entrepreneur or serial venture capitalist, and one director has peripheral experience as a repeat investor or member of an advisory board. Of the seven startups which have enrolled in the NextHIT program, none have received venture capital funding. No companies which have participated in HHV's NextHIT program have been acquired or exited in an IPO.
SURGE
TMCx
Houston University Accelerators
University accelerators, like standard accelerators combine mentorship and education in a fixed-term cohort program. Rather than being run by a purely entrepreneurship-focused entity, university accelerators are powered and run through universities. Generally the advising is provided by entrepreneurship and business academics. While entrance costs and expectations are comparatively low, enrollment is generally restricted to those affiliated with the University. The cohort size, time of program and total funding of university accelerators tend to be smaller than than their non-academic counterparts.
OwlSpark
RED Labs
Houston Incubators
Incubators “shelter vulnerable nascent businesses, allowing them to be stronger to become independent” (National Business Incubation Association). Incubators serve as a temporary space for start-ups to develop in their early stages. Unlike accelerators, there is no formal curriculum, cohorts, or duration of stay. Residents of incubators pay fees for both rent and services, and are not offered the breadth of resources found in an accelerator. (Fehder and Hochberg, 2014)
Redhouse Associates
HTC
Other Houston Institutions
Other types of institutions within the Houston area were also analyzed. Co-Founder institutions work to match eligible entrepreneurs with experienced business people and experts in relevant fields. There is an understanding that these more experienced individuals will co-found start-ups with the entrepreneurs, potentially providing funding and guidance as well. Hubs, also known as tech hubs or startup hubs, are entities that serve as an intersection between incubators, accelerators, and co-working spaces to foster an entrepreneurial ecosystem and environment. Hubs serve as leaders in their local entrepreneurial communities, enabling entrepreneurs through a wide variety of programming, events, and benefits. Co-working spaces represent institutions that provide collaborative and shared space for entrepreneurs and fledgling start-ups. Co-working spaces oftentimes offer other services beyond just the physical space such as mentorship, networking and educational programs.
Fannin Innovation Studio (Co-Founder)
Station Houston (Hub)
- Station member companies have raised just under $20 M in funding since March 2016 - Station now boasts over 75 members - Station member Arundo Analytics recently clothes on a $4.9 million funding round - Station closed its seed round of funding - there are other companies currently going through diligence to exit, but I can't provide any details regarding any of those deals - TMCx posted that Johnson and Johnson is making a larger investment in the digital health space in the city - the Texas Workforce Commision has recently made changes to their requirements for coding academies which has resulted in most platforms halting their recreational platforms. I can expand on this as needed - you may want to take a look at what's going on with HP enterprise as I believe they recently had a restructuring if you want to comment on one of the larger enterprise companies here in town - Alert Logic filed their S1 earlier this year towards going public in 2017 - Meshify acquisition in the news - Houston launched company Virtuix raised over $7 million in crowd funding recently, however the team relocated to Austin earlier this year - Kemal Farid, founder of Merrick systems which was one of the Larger software exits in the O&G industry some years ago closed on his first fund which is a Houston/Silicon Valley investment vehicle - $160 M fund - You can search Joe Martin articles for recent funding activities
START Houston (Co-Working Space)
Non-Houston Comparative Institutions
Institutions outside of the Houston area of significant reputation and success were also analyzed as comparative benchmarks for Houston's progress. While Houston's institutions cannot be expected to perform at the exact same standards as these pinnacles of the industry, TechStars, NVC, and YCombinator represent the potential for Houston's institutions and as a target for growth.
TechStars (Accelerator)
NVC (University Accelerator)
YCombinator (Incubator)
Quantitative
Percent of Portfolio to Receive Venture Capital
SDC Session:
Session Details
---------------
Request Hits Request Description
0 - DATABASE: Portfolio Companies (VIPC)
1 38059 Moneytree Deals: Select All Moneytree Deals
2 Custom Report: VCall (Columnar) - Save As:
C:\SDC\4.0.3.1\Platinum\USR\VCall.txt
Billing Ref # : 1964678
Capture File : riceuniv.1964678
Session Name :
Variables Pulled:
Company Name Date Company Received Last Investment Date Company Received First Investment Company Founding Received First Date Total Known Amt Invested in Company ($000) Company City Company Nation
Percent of Portfolio to IPO
Session Details:
Session Details
---------------
Request Hits Request Description
0 - DATABASES: All Public & Private Common Stock, exc. UK & PO (C, CEC,
CNC, EC, ICX, JPC, LAC, OC, R144C, UKC, ANCX, ASPC)
1 212146 Dates: Issue Date: 1/1/1985 to 10/28/2016 (Custom) (Calendar)
2 57663 IPO: Select All IPOs
3 44185 Issuer/Borrower Public Status : V
4 Custom Report: IPOrefined (Columnar) - Save As:
E:\McNair\Projects\Houston\Acc Rank (IB)\Portfolios_updated\SDC
Data\IPOrefined.txt
�
Billing Ref # : 1973273
Capture File : riceuniv.1973273
Session Name :
Variables Pulled
Issuer Industry Principal Amountmil Offer Price Issue Date Filing Date State Nation Gross Spread Gross Spread as Pc of Prncpl Amt in this Mkt Principal Amt sum of all Mktsmil Proceeds Amt in this Mktmil Proceeds Amt sum of all Mktsmil Marketplace Shares Filed in this Mkt Amt Filed in this Mktmil
Percent of Portfolio to be Acquired
Session Details:
Session Details
---------------
Request Hits Request Description
0 - DATABASES: Domestic Mergers, 1979-Present (MA, OMA)
1 - Date Announced: 1/1/1985 to 10/11/2016 (Custom) (Calendar)
2 300607 Target Nation : US
3 258144 Acquiror Nation : US
4 210845 Acquiror Public Status : V, P
5 101382 Target Public Status : V
6 87962 Deal Status : C
7 77311 Percent of Shares Owned after Transaction: 100 to 100
8 Custom Report: RelevantAcquis (Columnar) - Save As:
E:\McNair\Projects\Houston\Acc Rank
(IB)\Portfolios_updated\RelevantAcquis.txt
�
Billing Ref # : 1970397
Capture File : riceuniv.1970397
Session Name : RelevantAcquis.ssh
Variables Pulled:
Target Name Acquiror Name Enterprise Value at Announcement mil Enterprise Value Based on Effective Date mil Equity Value at Announcement mil Date Announced Date Effective Acquiror Industry Sector Target Industry Sector Status Acquiror City Target City
