The low dais at Houston’s TMCx startup incubator, a 3-year-old outgrowth of the Texas Medical Center that houses new health technology companies, is usually occupied by founders delivering pitches to investors.
But on one recent evening, it was investors making the pitch. Their target: other investors.
TMCx and the local accelerator Station Houston are trying to persuade wealthy people looking for investments to take a chance on the region’s startups as they try to spur innovation and develop a Silicon Valley-like tech startup scene where capital mixes easily with new ideas.
“We need you to join us in investing in these companies,” said SnapStream Media founder Rakesh Agrawal, who himself also has made small seed investments in dozens of young businesses. Building a strong startup culture, he said, is a “group sport.”
Recent studies have shown that key missing ingredients in Houston’s entrepreneurial ecosystem are early stage funding to get startups off the ground and venture capital later on to help them grow into businesses that can make it over the long-term. It’s a problem that’s common outside of tech hubs like Austin, Boston, and Silicon Valley.
For Houston, say Agrawal and others working to build a startup scene, the solution is redirecting some to the wealth that abounds here. The goal: Persuade people with money to put it to work locally.
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An audience of well-groomed businesspeople munching on catered hors d’oeuvres listened raptly as successful early-stage investors made the case for putting money into local startups. It was the first in what will become a series of programs on how to invest in very early-stage companies.
A report issued this month by Ed Egan, director of the McNair Center for Entrepreneurship at Rice University, found that startups coming through existing incubators and accelerators in Houston raise venture capital at substantially lower rates than successful institutions in Silicon Valley, such as YCombinator.
Part of the problem is, wealthy people in Houston interested in tech deals are perfectly capable of finding them on the east and west coasts.