Venture capital investments in the Houston region increased in the third quarter even as the number of deals decreased.
Houston-The Woodlands-Sugar Land metropolitan statistical area saw 22 VC deals with investments reaching $267.26 million during the quarter, according to data from the Q3 2022 PitchBook-NVCA Venture Monitor released Oct. 13. That’s a 17.5% increase from the previous quarter, even though there were 12 fewer deals, per the latest data. However, this quarter’s VC investments is down 64.4% from $520.84 million during the same quarter in 2021.
Fervo Energy had the largest deal in Houston, and the second-largest statewide, raising $138 million in new funding as of Aug. 22. The company develops geothermal energy projects in the West and internationally. Majority, a financial technology company serving migrant workers, raised $38 million in Series B funding, while hydrogen startup Utility Global raised $25 million in Series B capital.
Nationwide, VC activity in the third quarter was below the record highs of 2021 and early 2022 but still above historical averages, the report said. Deal counts declined for the third consecutive quarter at 4,074, while deal value hit a nine-quarter low at $43 billion.
“Q3 saw $43.0 billion invested in VC deals across all stages, a nine-quarter low, cementing a tone of investor hesitancy and increased focus on business fundamentals amid the global economic downturn, even if the numbers remain high on a historical basis,” the report said.
Despite the slow quarter, VC deal value through Sept. 30 has already surpassed the totals of each year since 2012 except 2021, the report shows. Meanwhile, year-to-date VC fundraising hit $150.9 billion, a new all-time high for the first nine months of the year.
There are few bright spots in the exit market, though, as 302 exits deals generated $14 billion in exit value in the third quarter. Annual exit value may drop below $100 billion for the first time since 2016 this year, just one year after VC-backed public listings generated $670.4 billion in exit value, according to the report.
Elsewhere in Texas, investments in the Austin and Dallas regions decreased, but the two areas continue to outpace Houston. The Austin-Round Rock area led all Texas markets with $701.18 million in capital invested, a 19.2% decrease from the second quarter, across 70 deals. The Dallas-Fort Worth-Arlington metroplex saw 38 deals worth $299.55 million this quarter, a 139% decrease from the $1.67 billion invested last quarter, the report shows.
Austin’s VC investment was led by a $145 million debt and equity haul by Founderpath, a company that funds other startups. Tech firm Island led the way in Dallas, raising $115 million in Series B funding and reaching unicorn status with a value of $1.3 billion.
