Houston-based venture capital firm Mercury Fund and Austin-based startup accelerator DivInc brokered a new partnership to further support underrepresented founders in the Houston region.
DivInc, a nonprofit accelerator aimed at promoting diversity and equity in the startup ecosystem, announced plans to expand into the Houston market earlier this year. A $250,000 grant from JPMorgan Chase & Co. allowed DivInc to offer competitive salaries to its Houston employees, and a $175,000 commitment from Verizon enabled the accelerator to offer seed funding to participants of the DivInc Houston program.
Now, a commitment from Mercury Fund, one of the most active venture capital groups in the Houston region, will provide additional resources to DivInc's Houston program and the participating startups. Mercury Fund's financial commitment will provide cash for working capital needs, physical office space until DivInc can move into Midtown "innovation hub" The Ion and direct investments into DivInc startups, said Blair Garrou, co-founder and managing director at Mercury Fund.
DivInc is launching a $3 million capital campaign, of which Mercury Fund is contributing the first 10%, Garrou said.
Around five years ago, Mercury Fund found that most of its deal flow was made up of traditional, venture-backed opportunities, with few investments into women-led or minority-led startups, Garrou said. He had watched other cities growing their startup ecosystems go down the wrong path by catering to the traditional white, male founders. In order to promote diversity of thought on the Mercury team and diversity of deals in the firm's portfolio, Mercury partners with groups taking deliberate action to build an inclusive startup ecosystem for underrepresented founders.
After seeing the work done by DivInc and CEO Preston James in Austin, Mercury wanted to partner with the nonprofit accelerator to take its impact in Houston to the next level, Garrou said.
"What better way to find those deals than to bring what we believe is the No. 1 accelerator in the entire Southwest for the underestimated to town, back it financially with all the horsepower of Mercury and challenge the city to meet us halfway to drive it forward," Garrou said.
Partnering with DivInc will also help Mercury Fund in its mission to identify promising investment opportunities in the Houston region, said Heath Butler, a managing director at Mercury Fund. Butler is also a co-founder of the Houston-based Urban Capital Network, a membership-based investment network aimed at giving a broader range of accredited investors affordable access to quality investment opportunities.
"At Mercury, we believe there is significant untapped talent and resources in the urban communities of Houston, and we are committed to playing a role in helping minority entrepreneurs gain the access, knowledge and resources they need for a successful entrepreneurial journey," Butler said.
DivInc was founded on the fact that underrepresented entrepreneurs have more barriers to entry to access startup education, mentorship, talent pools and financial capital, James said. Since the organization was formed in 2016, DivInc has worked to serve as a bridge over those gaps for diverse founders in Austin. But to take the journey of entrepreneurship further and to give startups a shot at scaling, additional resources need to be implemented, James said. The "dream partnership" with Mercury Fund and the $3 million capital campaign will help deliver more of those resources to founders in the Houston region.
"This is not charitable work we're doing. This is a heavy lift, and it's not, 'Oh, let's just do this for a little while,'" James said. "For the city of Houston, for any city to continue to grow from a socioeconomic standpoint, this is imperative."
A portion of the funds amassed through DivInc's $3 million fundraising effort will go toward offering more seed capital to startups in the DivInc Houston program. Through Verizon's financial commitment, DivInc was able to offer $10,000 to each startup participating in the inaugural Houston cohort. Ashley DeWalt, managing director for DivInc Houston, said the organization hopes that initial total grows with subsequent cohorts.
"For these founders in our cohort, the more capital, the better you're going to help them accelerate," DeWalt said. "We're confident that when they come through our program, we're going to set them up for success, and we're going to leverage the resources that Mercury is providing us to help them level up."
In early April, DivInc announced the 10 companies that comprise the first DivInc Houston cohort. Eventually, DivInc Houston will move into its space within The Ion, a 288,000-square-foot facility being developed by Rice University at 4201 Main St. Until the opening of The Ion, Mercury Fund will provide space for the DivInc Houston team and the cohort companies.
The Ion — December 2020 tour
Garrou noted that Mercury Fund is only a small piece in this big puzzle. It's the firm's hope that additional VCs and corporate and institutional investors will come in to support DivInc's fundraising efforts with resources and expertise, Garrou said.
"There's a contextualization and an education that needs to happen to give the underestimated access to networks and capital and all these things," Garrou said. "And to think we could do that alone and work with those entrepreneurs one on one is naive."
