8 Reasons Houston Will be America’s Startup Hub

1
8 Reasons why Houston Will be America's Startup Hub
Contemporary artist James Turrel's 'Twilight Epiphany' on the Rice University campus. Courtesy of Tafline Laylin | inhabitat.com

Edgy Labs recently sat down with award-winning entrepreneur Tri Nguyen to discuss marketing trends and business development opportunities for 2017.

Co-Founder and Managing Partner of Marketer of the Year startup TKM Labs, Nguyen’s success personifies why Houston has all of the ingredients to be America’s next Startup Hub. We’ll be exploring why the “Space City” is positioned for Next-gen growth in our three-part collaboration with the Houston-based digital marketing entrepreneur.


Houston is one of the largest metropolitan cities in the nation, and is arguably set up to be one of the most successful startup capitals in the world.

Despite the recent recession, they city is still surrounded by deep pockets from the energy moguls of the century before. We are deemed the “Energy Capital of the World” for a reason, and we have the largest medical center in the nation for a reason.

To build a large, fast-scaling company that doesn’t play to the strengths of the city, however, is simply not efficient.

Therefore, we need to focus on our strengths – enterprise, medicine, aeronautics, energy, and Houston’s booming cultural appetite.

Although we may not hear a lot about the success stories of Houston, they are definitely there. Lots of them, in fact: Onit, LiquidFrameworks and Assemble are all examples of successful companies that played to Houston’s strength.

AlertLogic and LiquidFrameworks, for example, focused on enterprise software and with so many oil and gas companies in the city, they easily found a client base to build their revenue.

CS Disco found the same in enterprise legal teams.

Upstarts like Caphin, MYLK, Buff Brew, Assemble and Zodist (tiny plug), have figured out the consumer marketplace.

Whether it’s using Houston as a testing ground for consumer appetite (Caphin, Buff Brew) or as a base for international operations (Zodist), Houston has been a city that’s helped nurture these companies.

Collaboration, as well as centralizing resources, improves business development efficiency exponentially by more quickly validating hypothesizes and reducing the time to market.

If this model were adopted and replicated by older industries in the city, Houston would be the defacto city for starting a company in any of the aforementioned industries. And that’s precisely what we want.

Just like the social media platforms might go to San Francisco to start a company, the human innovation startups focused on solving real world problems would come to Houston.

Let’s look forward to see why Houston is positioned to become a startup capital in its own right – if it focuses on the areas where it is most likely to thrive:

1. Cost-Effective Work Space

Let’s talk about space. Houston has one of the cheapest real estate markets to start a company, and one of the lowest cost of living to support a family.

The city makes starting a business much more cost efficient, with lower salary averages than tech hot spots like San Francisco, Los Angeles, New York and Austin.

From co-working options like Station Houston to private offices with full amenities like Headquarters to full warehouse spaces – there are plenty of options for any company in this city.

Starting a manufacturing company in LA or SF would require raising money to pay for the space alone.  

With less focus on paying for the workspace, entrepreneurs can focus more on allocating it toward product development, staff, booze, or whatever floats your startup boat.  

With many more options for workspaces popping up each month, the challenge will be for these spaces to curate both the tenant and the community that reside in the spaces.

In my opinion, the spaces that focus on a specific niche of tenants will prevail, rather than being a space for everyone and anyone. Each industry and each company will require different amenities that the space can more easily and effectively provide if it has similar tenancy.

“We all have strengths and weaknesses. The best advice is to embrace, focus on, and nurture our strengths.”  – Charles F. Glassman

And while service-based companies aren’t often considered “startups” by startup standards (says who!), they play an important part in the ecosystem, which will be discussed later on.

2. Education

While tenacity and hustle are likely innate traits in most entrepreneurs, nobody is born with the education to be an entrepreneur.

Of course, having the education alone doesn’t make one an entrepreneur, it’s the application of the knowledge in the real world that separates the successful from everyone else.

Building a company from the ground up is never easy, no matter how many times you do it, but the education component reduces the pain of going through it.

Therefore, having two of the most prestigious entrepreneurship programs give the framework, knowledge, and skill sets that help individuals make the proper considerations in building a successful company.

At the undergraduate level, the University of Houston Wolff Center for Entrepreneurship led by Ken Jones is one option, and at the graduate level, the Rice University Education Entrepreneurship Program led by Andrea Hodge is another.

3. Access to High-Quality Research

The Commercialization of IP is one of the coolest and most valuable byproducts of Houston being home to two of the most world-renowned research universities in the world (University of Houston, Rice University).

8 Reasons why Houston Will be America's Startup Hub
Tri Nguyen and his most recent startup, TKM Labs, were recently awarded the American Marketing Association’s Marketer of the Year award for the company’s mini-startup, LureDeals. Just 2 weeks after launch, the experiment had acquired over 4,500 user signups, 250 business leads, and a valuation of $250,000 in immediate revenue.

With patents and decades of industry knowledge backing them coupled with the researchers and experiments supporting the findings, many startups would need to spend millions – if not tens of millions –  in R&D to get to the same results.

Often, the problem with research is that it can be too specific or too specialized; one focus can get so deep in a specific space that the solution only solves 0.00001% of a global problem. That’s where Commercialization comes in.

Having been fortunate to be part of the second class at the University of Houston Wolff Center for Entrepreneurship’s Commercialization of IP Program, we got access to patented technology, and worked with our researchers to find a commercial application for the technology.

If successful, we were able to license the technology from the university, which goes back to supporting additional research.

REECycle, Wavve, and Sensytec are all examples of successful Commercialization efforts at the University of Houston.  

Across the Bayou City, we have Rice University with their own commercializationfforts more oriented towards student research. The university supports students through providing them with legal advice, support and guidance with the patenting process.

4. Talent

One of the biggest complaints from Houston’s tech community is that there isn’t enough tech talent here, but I believe it’s because we’re not looking in the right places.

If ChaiOne can build one of the largest development agencies in Texas, in Houston, then the question is, where should we be looking for talent?  

In building teams, you’re often looking at a compromise between skill, experience, and passion.

Shops like the Iron Yard are producing young tech talent with sufficient skills to become an asset, but will need more experience to become deadly enough to become a senior CTO. Entrepreneurs on the hunt for hungry talent will, therefore, likely need to dig deep to find a combination between the two in order to create opportunities to young talent to gain experience.

5. Capital

Like the city’s talent, some have expressed their frustration that Houston is a dry well where no capital flows, and while a big focus of the conversation goes to addressing the flow of more venture capital into the city.

Again, I personally don’t think that people are looking in the right place.

The issue may lie in the expectation that capital flow in Houston should resemble flows through SF or NY, where million dollar valuations of seed companies are raised overnight. However, as addressed earlier, the type of companies that should be in Houston don’t necessarily need that kind of capital.

If you’re starting a company with the sole purpose of raising a round to continue it, then you have the wrong mindset.

Houston is notorious for weeding out non-revenue generating companies very quickly. Therefore, we need to look for capital methods that are conducive to the types of company that would thrive with starting and staying in Houston.

NextSeed, for example,  is one of the early innovators on the equity crowdfunding methods that is based in Houston, and has done tremendous work in supporting companies that are ideally suited to be in Houston.

With every single deal that they have fully funded, they’ve set an interesting course for both the future of Houston and the companies we will see emerge.

Other “go-to” Houston-based capital initiatives specializing in local startups include Mercury Fund and incubator RedHouse Associates.

Houston is the type of city that wants you to have skin in the game to play the game.

You don’t get the luxury of raising a round, burning it all on parties, and then call it a wash with your investors like in other cities. That’s exactly why our entrepreneurs work so damn hard.

Getting capital in this city is hard, yes, I won’t disagree with that. But if you do, it means you’ve figured out everything else and likely will have a higher probability for long-term success.     

8 Reasons why Houston Will be America's Startup Hub
The Redhouse near Midtown, Houston serves as the main office for angel investor and startup community supporter RedHouse Associates. Image courtesy of RedHouseAssociates.com

6. Third Party Support

When you’re a one-man team or a small group of talented individuals, you each possess a talent that brought you together to execute on a vision.

But, despite how talented each individual is, and collectively as a whole, there will still be many (unanticipated) gaps in the skill set that need to be filled.

Even with the ideal three startup composition of ‘hustler’, ‘designer’, and ‘hacker’, you’ll likely to only fill 80% of the skill gap.

The purpose of the startup triumvirate is to validate an idea and bring it to market as fast as possible. As you grow and scale, however, this isn’t the most sustainable team composition.

This is where you can bring Third Party Support, such as a marketing agency or other companies that focus solely on executing on a competency that you deem missing.

A third party should not replace your core competency, but it should help support it.

For example, don’t try to build an app-driven company by outsourcing your technical expertise to a firm. Instead, third parties can be extremely helpful in bringing expertise that you may not have to shorten the gap to market versus trying to do it yourself.

And, Houston has a strong network of third parties that focus on helping companies and startups in competencies that they shouldn’t necessarily be spending all their time on.

The tradeoff of the monetary cost is that you focus on what your strengths are. Firms like Aleberry Creative (focuses on developing decks for fundraising), TKM Labs (experiential and strategy oriented marketing), Edgy Labs (VR / AR / IoT development), and many others provide the expertise where entrepreneurs may not have.  

7. Mentorship with Deep Industry Knowledge

We don’t underestimate the value of having good mentors in this city.

Most of the leaders in the community are more than happy to give advice if you ask the right question, or connect you to the right person that can help if needed. With such a diverse group of individuals with unique industry expertise, there’s likely someone who can help guide you to make smarter decisions and who would be happy to do so.

8. Community Support

Of course, an individual can only do so much without the support of the community.

Similar to how individual development is influenced by a combination of internal and external factors, startups also fall very much in line with  the “nature versus nurture debate”.

As an individual, regardless of if you think you have all the resources and skills to create a thriving startup, the community around you plays a tremendous role in helping you succeed or causing you to fail.

Unless you’re creating a company in a vacuum, you will need the support of your community to build the thousands of different components that a sustainable, long-term company requires.  

Houston is filled with an extremely diverse group of talented people that spans many different industries and all tackles very different problems. And, despite how big the city is, the community that supports businesses is actually quite small and connected.

We are essentially one or two people away from knowing everyone in the city. As long as you prove to be a hustler constantly working at building a company and not as a “wantrepreneur,” people are more than happy to extend a helping hand however they can.

But, that doesn’t mean there’s not room for improvement. While the community itself is very connected, there’s certainly silos that can be better connected.

Creating a Startup Culture by Connecting the Dots

Bridging the gap between the corporate enterprise community and the startup community will be a big part in spurring further innovation.

And, further connecting the two major feeder institutions – the University of Houston and Rice University –  to non-affiliated entrepreneurs will also play a big part.

Awareness and dissemination of information about the amazing things that are going on here in the city has been a challenge, but there this is actively changing.

Angela Shah with Economy and Joey Martin with BizJournal have been instrumental in tackling this challenge over the last few years, as well as other journalists who focus specifically on the startup and technology sector.

We need more of these champions that connect the dots and spread awareness.  


Stay Tuned for the Part III: How to Create a Startup Culture in Houston

banner ad to seo services page