Start Houston, Presidio Unveil New Network to Fund Local Tech Startups
Start Houston, a co-working space, is going beyond demo days and other events to support the city’s tech startups: Now it’s going to invest money in them.
Start has partnered with Presidio Venture Capital, also in Houston, to create the Start Investment Network, which will make seed investments of between $25,000 to $50,000 in Houston tech startups. As part of the deal, Presidio bought an undisclosed stake in Start Houston.
“The problem is that tech companies have a very hard time finding capital in Houston,” says Gaurav Khandelwal, who co-founded Start Houston along with Apurva Sanghavi. “They were out hunting everywhere else for capital and many ended up leaving Houston.”
The goal of the funding, Start and Presidio say, is to fill a gap in the current investment pipeline to support early-stage startups to the point where they are suitable for an angel or venture capital investment. The total amount of dollars that Start will put into these companies is not yet finalized.
“There is absolutely the need for this,” says Blair Garrou, co-founder and managing director at Houston venture capital firm Mercury Fund. “This is really helping companies mature to the point where they can take a meeting with a VC.”
The network, in effect, aims to multiply the reach of the monthly demo days Start currently holds which now bring about 200 attendees each time. Early-stage tech startups pitch before investors like Kirk Coburn, founder and executive director at cleantech accelerator Surge, giving them access and feedback otherwise unattainable, Sanghavi says.
He and Khandelwal point to several successful startups that began at a Start demo day, including, for example, RideScout, an app that aggregates ground transportation options, which two months ago was acquired by a subsidiary of Daimler AG. (I happened to be at that demo day last year when I met founder Joseph Kopser for the first time.)
Sanghavi says that the 70 companies that have pitched at Start Houston demo days since 2012 have in total raised $17 million in funding, including GripeO, Illumi, Virtuix Omni. The latter two have had appearances on the television show “Shark Tank” and CS Disco, a legal technology startup, itself recently raised $10 million in venture capital.
“How many other companies are there like that out there that we can’t get to in a demo day?” Khandelwal asks.
James Tao, Presidio’s founder, says he’s seen Start Houston grow since the beginning. “We invested in one of Start’s first tenants two and a half years ago, a Vietnamese iced coffee brand, Caphin,” he says. “The demo days were just picking up. It was sparse, empty. We’ve seen the growth from there and we knew that Start was building something special.”
Tao says he, like Khandelwal and Sanghavi, wants to help boost Houston’s tech startup community. “We’re very similar in our thinking,” he says.
After stints in New York with financial institutions like Barclays, Tao decided to move back home to Houston where he started his wealth management firm in 2009. (That firm started Presidio as a venture arm three years later.)
In the last year, he has invested in two startup-related projects, including a three-way partnership with a fund to boost technologies at the University of Houston and a new accelerator focused on healthcare-related startups.
The Start Investment Network funding is open essentially to any Houston tech startup, though Khandelwal says they will likely support companies in or near sectors in their wheelhouses—mobile for Khandelwal, real estate for Sanghavi. “We’re likely not to support the next Tindr, but instead a mobile company doing the next billing solution,” Khandelwal says. “We’re not venture capitalists. But we’re good at understanding from an operational standpoint. We’re risk-takers and can judge the management team.”
The men will act as the first vet for any startup that comes through. Then, the deal would be opened up to the full Start Investment Network, which contains about 100 members, who would access them through MicroVentures, a crowdfunding platform. Start announced its partnership with the Austin, TX-based company in August.
Start Houston and Presidio are also working on fitting out Start’s new headquarters. Last year, Khandelwal announced that his firm, mobile apps company ChaiOne, would be buying and restoring a gutted Art Deco building, which was built in 1934 to be the first headquarters of the Schlumberger Well Surveying Corporation.
The building, which is scheduled to be ready for occupancy in February, will be home to both ChaiOne and Start Houston. Tao says Presidio is contributing about $150,000 to fitting out the co-working space’s new digs.
The men say these efforts not only boost the Houston startup community but also keeps much-needed engineering and programming talent in Houston. “We don’t have to wait to be 60 years old and have something worth a billion dollars before we can give back,” Khandelwal says. “We want to attract tech talent to Houston now.”