Houston Exponential Aims to Bring Venture Investment, Boost Startups

Houston—Houston leaders will officially launch a venture capital fund of funds later this morning, aimed at jumpstarting the city’s innovation ecosystem and elevating Houston into the top tier of startup hubs.

The HX Venture Fund, which will be in the $40 million to $50 million range, will be made up of corporate investments which, in turn, will be invested in venture capital firms around the country. Venture firms receiving investment are not required to invest in Houston startups, though leaders here hope that they will at least take a look. In the meantime, such a fund of funds could also enable greater interaction among multinational corporations seeking new technologies, startups that might be developing those, and venture capital that can help fund those startups.

“This is about taking Houston up the rankings in innovation,” Guillermo Borda, HX Venture’s fund of funds manager, told me in an interview. “We’re looking to attract very significant levels of venture investment in this city.”

Borda, most recently a Bank of America fund of funds manager, says he plans to invest in about 10 to 12 venture firms with innovations in IoT, robotics, advanced materials, healthcare, and manufacturing intelligence, among other sectors, with the first investment closing within a year. Insperity has agreed to be HX Venture’s lead sponsor for runway capital, and Borda says he expects to be able to announce the fund’s lead corporate investor soon.

The new fund of funds is one part of an effort called Houston Exponential, a new civic organization founded from efforts among the Mayor’s Innovation and Technology Task Force, the Greater Houston Partnership, and the Houston Technology Council. Gina Luna, formerly chair of the GHP’s innovation roundtable, will be chair of Houston Exponential. Dick Williams, former president of Shell Wind Energy and former Chairman of the HTC, will be Houston Exponential’s interim president and CEO until a permanent executive can be found. (Lori Vetters had been HTC’s CEO since January.)

These sorts of funds of funds have been used in a variety of regions across the country as a way to supply needed capital to early stage startups after the seed round of funding. In 2013, Wisconsin set up a government-backed fund of funds in which the state put up $25 million as long as fund-of-funds managers contributed $300,000 of their own money and secured at least $5 million from other investors.

But the closest example to what Houston is planning to do is the Renaissance Venture Fund in Detroit. The … Next Page »

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