Start-Up Guide (Issue Brief)

McNair Project

Start-Up Guide (Issue Brief)
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Under Houston Entrepreneurship umbrella.

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)

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.

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)

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.

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

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