Soul-searching in Houston on Energy Innovation as Surge Closes

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not important for us to get behind,” he says. “Houston needs a Tesla. Without Tesla and Google chasing automated cars, do you think GM would care?”

Yael Hochberg, a Rice University professor who studies entrepreneurship and efforts to encourage it, says accelerators need as much as a decade before they are successful financially. “The exit horizons are so long,” she says. “The startups finish but still need seed (money) before a Series A … to get them into the regular VC food chain. It’s a valley of death for startups.”

Surge was especially hampered because of its reliance on the energy industry for funding, she adds. “Most of the money that goes into energy comes from corporate, not from generalist VC funds,” she says. “It’s one of those verticals where it’s much more concentrated. Techstars, for example, can weather downturns better. The investor base is broad; there’s some diversification.”

Essentially, it takes a village to raise an accelerator. “Many accelerator programs that are based outside of core tech ecosystems and are long-running programs have received major support from state/city governments or from corporations,” says Blair Garrou, founder and managing director at venture capital firm Mercury Fund in Houston, which was a Surge investor. “However, local city organizations and corporations were apathetic when it came to stepping up and providing financial support for the program.”

Garrou acknowledges that part of this indifference is an understandable reaction to dropping commodity prices. But he adds that the lack of support for Surge also reflects a worrisome “apathy” in Houston for supporting innovative companies. “Houston has survived for years on the ‘Energy Economy,’ and hasn’t seen a need to invest outside its core,” he says.

Russ Conser for seven years led the Shell GameChanger program, which acts like an angel investment arm for the multinational oil company, and he mentored Surge startups. Houston entrepreneurs are, by and large, in energy and made their money “buying into the Eagleford,” or other oil-and-gas plays. The difference, he adds, is that that sort of entrepreneurship, while undoubtedly successful, doesn’t entail “business model innovation.”

“You’re basically just replicating existing business models and marrying them with novel technologies,” Conser says. “Business model innovation is why Uber exists; it happens to be wrapped … Next Page »

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