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A Conversation with David Franklin, Co-Founder and Managing Director of Houston Health Ventures

A Conversation with David Franklin, Co-Founder and Managing Director of Houston Health Ventures

Houston Health Ventures is a new venture fund and accelerator program designed to provide innovative health IT companies with capital and resources. We sat down with co-founder David Franklin to find out about the big plans for HHV’s future.

Startup Houston: What would you say is the mission of Houston Health Ventures to someone who’s had no exposure to it prior?

David Franklin: I think one of the really interesting facts that a lot of people don’t realize is that Houston actually has the world’s largest medical center. I believe there’s 54 member institutions. There’s a great oil and gas/IT/software accelerator called SURGE, that has proven the model here in Houston for energy software startups. But what we’re doing relates to the fact that there’s a void on the health IT side. And so, we said let’s try to fix that void. Accelerator programs are great, but they’re not truly successful unless there’s a fund behind [them]. That’s really the genesis behind Houston Health Ventures. It’s the fund that powers the NextHIT accelerator program. We hope it’s going to attract a bunch of individuals to stay in Houston and grow their companies here.

SH: How did you end up co-founding Houston Healthcare Ventures? What was that process like, and where do you see the startup in 10 years or 20 years?

DF: My background is actually in biomedical and electrical engineering. Then I went and became a consultant for Accenture in San Francisco for a few years. Then I got back into healthcare by going to work for a company called Davita, which owns and operates a third, at the time, of all the kidney dialysis centers of the country. That was a great experience to work with the c-level executives there at a very large company. We would always see new technologies, and we’d be responsible giving them the first pass. We also tried, unsuccessfully, to really formalize a corporate venture program. That’s really where I got the idea. Then I went back to get my MBA at UCLA, there’s a huge med center there, and huge opportunities. So, from day one of business school, we created a group called DCF Ventures and started working with various professors to try and commercialize their technology, using only our sweat equity. We found one company, we raised some major for that, we worked with a few others. But ultimately, the one we thought would be our winner, the technology failed.

Long story short, what that whole process taught me [was] in order to really do it correctly the next time around, we wanted to raise a fund. So I shelved that idea for a while and went to work for a company called Consumer Media Network, whose chairman actually lived in LA; that’s where the connection was made. He hired me to do some project work for CMN. And that project led to a full time hire which led to me travel from LA to Houston every other week, so I was doing that for about 8 months. It got old, so my girlfriend [now wife] and I moved down to Houston. We were heads down in that company for a few years. But then the love of cool things technology took over. Back in January, [I] started looking for the community, the healthcare community, and I realized that it wasn’t as large as it should be, given the size of the Texas medical center, and that’s really the genesis of Houston Health Ventures.

David Franklin. Photo Courtesy Houston Health Care Ventures.

David Franklin. Photo Courtesy: Houston Health Care Ventures.

SH: What are some examples of projects you guys have funded, and what are the three biggest things you look for?

DF:In terms of projects, we’re really just getting started with the accelerator program. We’ve actually made one investment in a medical device called Adient, and it’s a really cool technology that I’m a big proponent of. On the accelerator side, we’re looking to launch the program in late summer, so we haven’t actually formally marketed the program at all, yet. But that’s kind of in the works. In terms of companies we’re looking for, the primary focus for the accelerator is health information technology.

SH: Do you think Houston as a city, and because the startup community doesn’t really have a centralized location, do you think that contributes to people wanting to move out of Houston, or do you think it’s more on the economic side?

DF: I don’t think it’s on the economic side, because one of the great things about Texas is that there’s no state income tax. And so, I think the biggest issue right now is the startup community, the people that have done this and have the experience, the actual individuals, have kind of tended to gravitate towards the west coast or the east coast. Once they get done with that startup up there, they stay up there. What we don’t have is a plethora of individuals who’ve had startup successes and are now looking for their second opportunity. Those communities, what I’ve observed so far not being from Houston originally, have developed outside of Houston. We need to take that first step in attracting people to stay here, so when those companies exit and those individuals are looking for their second opportunity, their second startup, they’re still here in Houston. But that’s a very long term goal. The short term goal is, ‘how do you attract that talent?’ And I think a lot of that talent attraction comes from the ability to fund the companies and make sure that there’s a peer group that can facilitate those companies’ growth.

SH: Where do you see the intersection between charity healthcare and startup technology intersecting, and what do you envision the role of startups being in the charity work, if at all?

DF: It’s very tough. I think healthy, sustainable companies have the opportunity to do more charity work than startup companies, who are literally in the death-throes of making their company work. Startups that are focused on that social aspect need to find family offices that are interested in donating and helping those specific causes. As an accelerator and investor are looking for companies that can generate a profit. If people come with a business model were that can happen in those areas, I’m all for it. But really, what we’re looking to do is help get those companies started so that we can provide returns to our investors, and hopefully those companies, as they grow and mature and have sustainable cash flows, can really help their people do charity work.

SH: What is your view on mentorship in this entire process, between, say, a company who’s applying to the accelerator program, and a company who’s made it. How do you go about connecting the two together, and making sure that the side that’s just starting up gets the advice and support it needs from the mentoring company.

DF: What we’re looking to do is actually reserve equity in the startup companies for our mentor base. So it’s really important, I believe, that the mentors are engaged and compensated for their activities in the startup, especially those that are bringing a lot of value add to the company. That’s kind of how the ecosystem, in my mind, works. And so, we are constantly on the lookout for individuals, not only investors in HHV, but also other individuals that can bring value to the startups and help grow the entire the pie.

SH: What do you think is the most valuable thing you’ve learned from doing this?

DF: For me, being new to Houston, it has opened the door to the community, and understanding all the people that are here, and trying to facilitate ways to work for each and every one of them. In the beginning, when I was trying to learn all the different organizations, I actually created a website called acceleratehouston.com, and it’s a master calendar of all the different groups and their events. That was extremely helpful to me to nail down who’s who and how does it all relate.

SH: Do you see yourself starting up other organizations or other accelerator programs in the future, or do you you’re just going to stick with HHV?

DF: Yeah actually, so there’s another company out there that we’ve ventured into a partnership with the University of Houston, called Texas Collegiate Regional Center. This is groundbreaking partnership – we believe – that’s focused on two components. One is a real estate play at the energy research park. The first phase will be about a 75,000 sq. foot building. The second is, with leftover funding, a technology venture fund that will invest directly into UH’s technologies, and the university has agreed to co-invest 20% of investments that we make at UH. There’s a website you can check out – texascollegiaterc.com.