Palo Alto, with its rows of sleek, low-rise office buildings known as Sand Hill Road, has long been the epicenter of Silicon Valley’s (and the world’s) venture capital sector. An investor friend recently told me that Sand Hill Road is now a ghost town, with many of the key partners in Silicon Valley venture funds now working from their homes or vacation homes.
If that’s true, it’s a shame, but not surprising. Commuting is tough, the business is much more remote and global than it used to be, and the venture capital business has always been wild and fun, with a focus on founders and the next big thing, constant movement, alliances and partnerships.
I’ve been in these waves since I started investing during the dot-com boom in 2000. I moved from private equity to venture capital, working in San Francisco at the fund that backed Yellowpages.com and a few others, then co-heading a company I founded in San Francisco doing seed investments and advising funds and investment arms at Macquarie Bank, ConocoPhillips, and Shell. We got in at the beginning of cleantech and did well. This is my third big VC down cycle. There are always opportunities on either side, and the more things change in venture capital, the more they stay the same. Hubs are important because this business relies so much on a critical mass of talent and capital, with a power curve of results. VC and startups are cutthroat, but private equity isn’t. You need partners.
Houston has long lacked any center of gravity, let alone technology — check back to The Economist’s 2001 headline “The Lump That Devoured East Texas” for a humorous take on that — but in technology, things are changing.
Rice University’s Ion Houston Innovation District project grew out of work the Greater Houston Partnership did a few years ago on how to launch a full-fledged tech hub. (I served briefly on the board of Royal Dutch Shell’s GHP-affiliated Houston Technology Center during its renovation.) After a slow start, Ion has begun to fill up with tech startups and real investors writing checks, following a steady barrage of startup programs on the Ion Activation Floor and in the adjacent Greentown Labs Incubation Building.
Chevron Technology Ventures opened a guest office on the third floor on opening day, Houston private equity and crossover VC investor Ara Partners secured space early with its headquarters in a building across the hall, and local fund of funds HX Venture Fund, which emerged from a reinvention of GHP/HTC and also hosts the Venture Houston conference, has relocated to the second floor.
Our fund, Energy Transition Ventures, was the first venture capital fund to relocate to Ion when we launched in 2021, and we are located two doors down from HXVF. My partners and I decided to headquarter in Houston instead of Austin, where our partner Craig Lawrence is based. Lawrence is a former energy tech and solar executive who learned venture investing and ran successful clean tech efforts at Accel Partners in Palo Alto. We are both Texas-educated, Bay Area venture capital alumni, and both practice venture capital in our hometown of Texas. Our third partner, Q Song, relocated to the US from South Korea and chose Houston to join us over Austin and our Bay Area office.
Houston was not an obvious choice, and still is. I felt nostalgia driving through Austin and San Francisco last week and seeing the sheer number of tech companies and VCs wanting to do business with us, but doing things our way is kind of our brand. We chose Ion because VC and startups are participatory, not spectator sports, and for Houston to have a chance to be an investment hub, we needed an actual hub, we needed a place for founders to go to meet VCs. It doesn’t work if all VCs work alone in their homes or in the energy corridor or in a downtown high rise.
In Ion’s hallway, HX Venture Fund, Decarbonization Partners, Energy Transition Ventures, and WaterLens, a water-testing startup spun out of UT years ago, are side-by-side on one end. On the other end is BP Ventures, next to the guest suite of the new ExxonMobil venture capital team. Next to that is INGU, a corrosion-detection software and hardware startup for water and energy pipelines backed by Chevron Technology Ventures, next to Liongard, Houston’s largest venture-backed SaaS company. That means six tech startup founders and 12 investors at all stages in a 125-foot span.
Now the building is home to about 20 startups, with a heavy emphasis on energy. On opposite sides of the floor, Artemis Energy Partners and Veritane, run by Houston energy stalwarts Bobby Tudor and Maynard Holt (two of the three founders of Tudor Pickering Holt), have offices, and between them are Schlumberger and Velostics, a hydrogen-software startup that just raised a seed round. The co-founders of Tierra Climate, a Rice University spinout that also just raised a seed round, work in the co-working space, and Eigen Controls, which makes greenhouse-gas detectors, is just around the corner from the edtech and medtech startups. And Clean Energy Services, a renewable-energy-services startup, has its headquarters just a few feet from the entrance.
Since we moved here, GOOSE Capital, the Houston investment group launched at Rice University at the Rice Alliance Business Competition held at Rice University 20 years ago, has set up an office on the Ion Activation Floor, where you can see Managing Director Andrew Nicholson quietly walking up and down the stairs. Then BP Ventures made the decision in 2022 to move the headquarters of its US venture capital investment team to Ion, just around the corner from us. Chad Vaughn, who manages the US team, sits in a phone booth 100 feet from me, and Chris Spears is listening to a presentation as I write this. And this month, Decarbonization Partners, the BlackRock and Temasek climate growth fund, opened an office with three investment professionals led by former BP Ventures David Hayes next door to my office between us and HX. Now Aramco Ventures, led by former Energy Ventures US head Jim Sledzik, has started holding office hours every Friday morning. Jim is often invited in for casual chats between regular meetings, as are Luis Alcocer and Kemal Ambarci, who hang out in the third-floor offices of Veriten, which just announced an investment fund, and Chevron Technology Ventures, which Artemis recently joined.
Houston’s pool of quality founders and startups has also certainly improved, but there’s still not enough quantity or quality of teams needed for a healthy startup market. Mercury Fund’s Blair Garrow spoke about why he chose Houston when he participated in a recent panel at the Texas Venture Crawl at Aeon with BP Ventures’ Aeon-based Grace Chang. He said that in Mercury’s earlier funds, Houston startups made up 5-10 percent of the fund, and they had to travel far to fill a fund, but in more recent funds, the quality of local teams has improved, pushing the Houston-based ratio closer to 25 percent.
Houston’s venture capital landscape is two orders of magnitude smaller than the Bay Area’s. It’s almost like writing an article questioning whether Silicon Valley is an emerging energy corridor. But it’s fun to have coffee or a beer with neighbors who actually invest in venture-backed businesses, and founders who actually run venture-backed businesses. Founders are learning that Houston’s venture capital and tech scene is now actually home-grown and open for business.
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Neil Dickeman is a venture capitalist and co-founder of seven startups funded by Energy Transition Ventures.