Early-stage companies in the Houston market raised a record $2.3 billion in venture capital investment across 212 deals in 2021, according to a report from Houston Exponential.
That includes $1.89 billion in deals aggregated from Pitchbook data and approximately $450 million sourced through public announcements, interviews with founders and investors, deals through local startup accelerators and HX's own managed database of deal flow in the Houston area, said Serafina Lalany, executive director at HX, a nonprofit formed in 2017.
Last year saw several large fundraising rounds by local companies across a diverse range of industries. Fintech company HighRadius announced a $300 million capital raise last spring. Space technology and infrastructure firm Axiom Space raised a $130 million Series B in 2021. Renewable chemical developer Solugen raised a $350 million round, and e-commerce tech company Cart.com raised $98 million — before moving its corporate headquarters office to downtown Austin.
Meanwhile, 2021 also saw hundreds of millions of dollars in smaller angel, seed and first-round financings for companies in the earliest stages of their growth.
Despite growth in the region's startup scene, Lalany thinks barriers still exist to accelerate venture investment into the Bayou City.
What does record-setting VC investment tell you about Houston's startup ecosystem? I think as an ecosystem, we're starting to get more recognition for our strengths across a couple domains. Of course, the energy transition is a big part of our story, and we saw the materials and resources category really see tremendous growth in the past two years alone.
Also, health tech, med tech and biotech. It just has a lot to do with the infrastructure that's been built around the Medical Center, the access to clinical trials, the access to customers that constitute the entire Texas Medical Center. It's just a no-brainer for startups looking to relocate or establish their operations here in town.
And then, B2B software-as-a-service has always been a core strength of ours, just based on Houston's DNA.
Cart.com was one of Houston's fastest growing companies before relocating its HQ to Austin last year. How can Houston be competitive with a strong tech market like Austin up the road? I think the question is more around how do we collaborate more with cities like Austin, Dallas and San Antonio? Each of these cities has its own specialized talent, and at the end of the day, Houston is going to win at its own game.
[Cart.com's] move to Austin was based on their ability to hire experienced talent in the consumer sector in Austin — [there's] RetailMeNot, Facebook, folks who have been there, done that and can replicate that inside a new environment like Cart.com. And it is true: Senior engineering talent is a bit of a weak point in today's ecosystem in Houston. It's an area for growth.
When it comes to hard sciences, when it comes to the energy transition and folks coming out of IT environments at big corporations that are now solving the pain points they experienced firsthand, that's really where we excel. That's not to say we don't have room for improvement or growth — that's absolutely certain.
How can Houston tackle some of these barriers to growth? Continuing to tell our story, highlighting our founders and the startups that exist here out in the media will definitely be to our aid. That's one.
Investing in more technical talent, and that's going to be upstream. On the downstream side, we need to get better at our talent acquisition. Serial startup talent acquisition, specifically — those who have been there, done that and, again, can replicate it in a new environment.
More on a federal and state level, continuing to invest in creating more opportunities in funding that early-stage growth potential in Houston.
This interview has been edited for length and clarity.
