Archive for the 'General' Category

Oct3rd2008

Houston Startups in the News

Published
by
Josh Tabin
on October 3, 2008
in General
. 2 Comments

Now that Ike is pretty much behind me, I’ve been able to catch up on a few things, mostly e-mail and blog posts. Here are a few items of note regarding Houston technology startups:

  • Houston-based MarineCFO, a developer of software for managing marine fleet operations, said last week that it has raised a Series A funding round. Amount of the investment was not disclosed. The round was led by EmergingISV Capital Partners, as well as undisclosed customers and individuals in the transportation and energy industry. MarineCFO said the funding will go to accelerate sales and marketing, plus towards new versions of the firm’s software (courtesy of Texas Tech Pulse);
  • Houston-based Ingrain, which develops technology used in the oil and gas exploration industry, said Thursday that it has raised $15M in a second round of funding for the firm. According to Ingrain, it received the funding from Energy Ventures, Shoaibi Group, Klaveness Invest AS, Kommunal Landspensjonskasse (KLP), and Stanford University, along with its executives. Ingrain is developing digital reservoir rock property measurement technology, which the firm says helps simulate fluid flow measurement in reservoir rocks, allowing oil and gas companies to better understand the potential of their reserves (courtesy of Texas Tech Pulse);
  • David and Mark of NutshellMail presented at TechCrunch50 last month. They received some great coverage from Forbes and apparently had some great introductions. Here is a writeup from IEEE Spectrum;
  • AlwaysOn announced its coveted GoingGreen 100 Top Private Companies Awards last month and named Houston-based and DFJ Mercury funded GlycosBio a category winner in Clean Manufacturing. GoingGreen is where cutting-edge greentech CEOs meet the movers and shakers from the biggest industries on earth. Green technology innovators are transforming the global energy, water, agriculture, transportation, construction, manufacturing, and resource recovery establishments. This two-and-a-half-day executive event features CEO presentations and high-level debates on the most promising emerging green technologies and new entrepreneurial opportunities. GlycosBio has acquired and developed a number of platform technologies which will attempt to reduce production cost with environmentally friendly technologies as an alternative to petrochemical-based manufacturing;

I’m sure that there were others…tell me what I missed.

Oct3rd2008

On credit, recessions and bailouts…

Published
by
Josh Tabin
on October 3, 2008
in General
. 1 Comment

I personally cannot understand why so many people are taken aback by recent events in the capital markets. From my perspective, this is the only possible outcome from decades of failed oversight and unbridled expansion. Regardless of who or what you blame for our current mess, some new economic realities face entrepreneurs that are important to get your head around before making any rash moves with your startup.

The number one question that I have been asked as of late is what impact will this have on my ability to get access to capital for my startup? The short answer is that it will have an impact but to what degree depends on several factors. Here are some of my thoughts.

If you are seeking less than $1.5 million, which places you squarely in the angel investor space, the impact will likely be great. Angel investors allocate a portion of their investable assets towards stable and risky investments. Historically, stocks and bonds have been the stable investment vehicle of choice but with the amount of volatility in the markets, the typical allocation for an angel investor is on its head these days. But even this depends because not all angels are created equal. The typical angel investor nationally invests around $45,000 a piece; this type of angel will think harder about his startup investments in turbulent financial times.

The other type of angel tends to have enough wealth that they invest more like a venture capital firm (I call this group “superangels”). Superangels tend to be somewhat insulated from economic peaks and valleys and likely are not overly focused on macro conditions from an investment perpective. We’ll talk more about this group in a moment.

Those companies that are further along and looking to raise investment north of $3 million will see some impact but in unlikely places. Venture capital firms (and some “superangels”) tend to get a bit antsy when Wall Street struggles even thought that venture money is already committed and desperately seeking a good home (nice Fast Company article on this: hat tip to Jeff Cornwall). The impact will be felt in the diligence stage where your model may be discounted a bit more than usual to adjust for uncertain economic growth opportunities. In economic contractions like a recession, companies reduce spending which flows through the economy a limits revenue growth potential early on. Many times, you can spin this in your favor if you have a recession resistant (be careful about this…don’t kid yourself about what’s real) business model or if you are in a nascent market that will not likely start taking off for a few years anyway. Investing at the low points is always best (”Buy low, sell high.”)

One thing I advise all of my clients to do is not panic. I always say that good deals get funded and if yours doesn’t, it may not be as good as you think. Capitalism does not go into hibernation in rough times and opportunities abound for those with a strong stomach for the roller coaster.

I am curious, though…what are you seeing the market?

Sep17th2008

Nano-Storage, the Store-Gen Grid and Hurricane Ike

Published
by
hschmidt
on September 17, 2008
in Energy, General and NanoTech
. 1 Comment

Hurricane Ike has given us a massive object lesson on the importance of implementing the late Rick Smalley’s vision of the Store-Gen Grid (SGG; graphic courtesy Wade Adams at Rice’s Smalley Institute) – a highly distributed network of granular electric production and storage.  One of the elements of the SGG concept is a household storage unit for about 100 kW-hrs of dispatch energy. 

 Smalley's Store-Gen Grid Concept Could Keep The Lights on After a Hurricane

Well, we ain’t there yet.  Of all the standard infrastructure services, only two seem to be reliable in a pinch: cell phones and natural gas.  The electric grid is plainly extremely fragile.  This is a major opportunity for nanotechnology.  With a major power outage in the energy capital of the world, this topic ought to get *lot* more traction, and fast.  So get your thinking caps on.  According to the Houston Chronicle, nearly 3 million people lost power due to the storm.  So I reckon there are about 3 million ready customers for the next big thing in distributed power.  I’m one of them!

 

Now, when considering storage technologies, energy density *really* matters!  Among practical materials, nothing is even comes close to gasoline or diesel fuel.  Just before the storm, my wife was wise enough to ignore my objections and bought a neat little Honda 2kW generator.  I got ten gallons of gas on Friday, and used about five gallons over a 36 hour period.  This was just enough to keep the refrigerator going, charge cell phones, and run a lamp, two fans and a small TV set.  This enabled us to essentially camp-out in our house.  Forget about air conditioning, running the washer/dryer or taking a hot shower (the darned water heater has an electric starter).

 

Here are some representative (volumetric) storage energy densities (from Wikipedia):

 

Technology or Material

Energy Density ( MJ / liter )

Capacitor Ultracapacitor

~ 0.050

Lead acid battery             

~ 0.15

Flywheel

~ 0.50

Lithium ion battery     

~ 1.50

Hydrogen Fuel Cell 

~ 1.62

Li Ion w/ nanowires   

~ 2.60

Ethanol                 

~ 24.0

Gasoline                

~ 34.6

 

Let’s look at the Lead-Acid Battery (LAB) as an example, since it’s still the workhorse for storing electric energy.  My five gallons of gas would equate to 4,383 liters of lead-acid batteries (LABs) (3.8*5*34.6/0.15).  My total investment for generation and storage was $1020 ($1000 generator, $20 gas).  How much does 4.3 cubic meters of LABs cost again? - about $20-$50/liter?  And how much does it weigh?  I can (and did) carry (lug) the generator and the five gallons of gas myself at the same time. 

 

Overall, electrical storage energy density is worse than chemical storage a good factor of ten or more.  An order of magnitude (or two) is nothing to sneeze at!  It is plain that without sufficient oil/gasoline/diesel, we are in a world of hurt for the foreseeable future.

 

Each of the technologies listed above employs, or can be improved with, nanotechnology or nanostructured materials.  Let’s do a little math and get a handle on the nano-scale challenge involved here.  If gasoline has an energy density of, say, 35 MJ/l, it equivalently contains about 3.5 x 10-17 Joules per cubic nanometer.  Modeling this as a parallel plate capacitor in vacuum with a 1 nm gap, you get the target energy density with a voltage difference of about 2.8 Volts.  If you use a decent dielectric like TiO2 (k = 40ε0) instead of vacuum, you only need 0.44 V.  About 1 V/nm is a pretty stiff electric field, but not larger than those considered routine for ultra-thin gates in the semiconductor industry.  This all seems pretty doable; making the nanowire connections to the outside world will be the tricky part; it’s probably a job for carbon nanotubes or maybe graphene.  Rick would have liked that. 

 

I hope somebody out there gets to work on this pronto!  Even at $100 / liter, it would be a useful technology.  When you get the cost down to about $10 / liter, you’ll be a bona fide hero, and a very wealthy one at that.

 

Sep6th2008

Ripening Houston

Published
by
hschmidt
on September 6, 2008
in General
. 0 Comments

Yesterday, Josh Tabin gathered the Startup Houston contributors to lunch at El Meson; the company and the food were both spicy and excellent (thanks, Josh!). Collectively, and individually, our goal is to help transform Houston into a dynamo of entrepreneurship.

Of course, the main discussion was about start-ups and the environment where they originate and grow – and what we could do to help. As in any conversation about start-ups here, the disappointing fact came up regarding how venture capital is so concentrated on the East and West Coasts (the Bay Area and Boston) and how Houston (and indeed Texas and the other 48 states) is ignorable fly-over country.

I’ve heard comments like that for a long time. And while is certainly true that the preponderance of venture capital and start-ups are both concentrated in those areas, stopping the conversation there, as often happens, isn’t constructive. It makes me think of frustrated bird-watchers looking for some rare scavenger species with a weird diet (e.g. start-ups that can’t live without vitamin VC).

The musing geek part of me is also reminded of Ostwald Ripening (Figure from Wikipedia). This describes process by which a large ensemble of small particles usually ends up as a small collection of large particles. It’s often an important issue in nanotechnology. You can see a very nice simulation of the process here (warning: big animated gif).

Ostwald Ripening Schematic

Ostwald Ripening Schematic

Here’s the point: is there some social or business process that makes start-ups diffuse to where the VC’s are? Maybe so – I need to ponder that some more. I’m pretty sure that it accounts for the old adage about the rich getting richer. Perhaps it also explains why there is more money in banks than laying on sidewalks, and why trash ends up in landfills (OK, maybe not on those two).

But back to the lunch discussion - of course, we got past the forlorn birdwatcher stage quickly. We all have particular perspectives about important growth factors.

Here’s mine: I think that start-ups come from combining customers with ideas in the presence of an entrepreneur. Now that can be an explosive mixture – fuel, oxidizer and spark. But I’m talking about real customers – live people you meet face to face that have real problems they’ll pay money to resolve. And real ideas – potential solutions that arise from some well informed knowledge about how things work – and how you might be able to make them work better. Of course, you can have a business idea essentially in a vacuum, but if you’re idea serves some faceless ‘market’, you’d better track down a real customer to vet it. And if you have a general idea for a better widget, you’d better find some technical specialist to validate the approach (or learn enough to do it yourself).

The rate limiting step is thus connecting customers with potential solutions. (I know it’s true for me – every time learn about the key problems in an industry, I come away with a year’s worth of ideas). Note that no money of consequence is needed for this. So far, VC’s are irrelevant. I reckon that a big reason Silicon Valley shines for start-ups is because there are a lot of ideas and a lot of customers in a small area. The staff churn out there (yuck!) probably accelerates the process, too. Note that most of the start-ups there involve electronics or software. In my experience, the initial barriers to entry in those fields are generally low and the costs to make or mock up a demo are pretty low, too.

I think that Houston has plenty of customers, and I know that there are lots of well-informed technologists here. So what’s missing? Two things come to mind – Houston is very spread out compared to Boston and the Bay Area, and our major industries, energy and health care, are capital-intensive monoliths. So the flux of entrepreneurial connections is lower, and the barriers to entering the market are fairly high.

The flux issue can be partially addressed by mixer conferences – like the Rice Alliance, BioHouston, Houston Technology Center and Startup Houston events. These are great; we need to grow them and multiply them. And generate some new meetings that are more technology/industry specific. The cost of seeding an idea is a problem if you’re going into energy or biotech, though. My general suggestion is to bootstrap aggressively by using SBIRs and STTRs and connecting with academic laboratories at Rice and the University of Houston. This approach allows you to get to the demo stage while you keep your day job. I’ll write more about that later.

I’d finally observe the obvious – energy is THE hot topic nowadays, and Houston is the world’s energy capital. So we have a big natural advantage and we really should exploit it. I’d note also, that there is an important new trend towards distributed energy - this means small granules of generation and storage at the point of consumption. Thus, some of the monolithic nature of the energy industry is getting deconstructed. This is a MAJOR opportunity for Houston entrepreneurs.

I hope to have a lot more to write about distributed energy in the near future – if you have stories, applications, events, etc. on this, please let me know.

Sep2nd2008

Houston Startup Happy Hour: Need Sponsors

Published
by
Josh Tabin
on September 2, 2008
in General
. 0 Comments

We are lacking sponsors for this month’s happy hour happening this Thursday. Anyone interested please contact me via email at josh<at>startuphouston.

Aug23rd2008

Shameless Plug: Avert Ye Eyes If This Bothers You

Published
by
Josh Tabin
on August 23, 2008
in General
. 2 Comments

So I have wrestled internally about doing this, but times have gotten that I need to make a point of distinguishing my professional life from what I do for the startup community in Houston. I am often asked to meet with members of our community to provide an evaluation of their business, introductions into the community and ideas on capital connections. Given my involvement and influence in the community, I have been happy to oblige almost anyone who requests my time. Unfortunately, I need to alter my unwritten contract with you, the technology startup community, so that we are clear on the rules of engagement. I suspect that this may ruffle a lot of feathers, but this conversational medium that we operate in is about transparency, openness and frank dialog.

Let me start off by stating clearly that I enjoy meeting with each and every one of our readers, as often as I can. The energy I get from hearing about a new startup feeds me and keeps me excited about Houston and all the wondrous changes I see. My background has been in technology startup companies for years and I enjoy the environment tremendously. I originally moved to Houston back in 1995 to start a new life with my then girlfriend, now wife, and was surprised on the diversity that this city offered. After a brief, five year, stint in San Antonio, I came back to Houston amazed at what had changed (I even went downtown at night, something I never would have considered before I left). After a couple of years at another high growth startup, I decided a change was in order and branched out on my own.

When I started evaluating opportunities for myself, I recognized that there was a lack of strategic resources available to small-mid sized companies and even less to startups. Most companies are extremely capable at tactical analysis and decision making, but often are unable to bridge those tactics into strategic thinking. For example, the first client I picked up was looking at several potential acquisitions and assumed the best source of financing was mezzanine capital. After some discussion, I was able to convince them of the value they would give up with mezz and helped them secure debt from a senior lender in town that effectively saved them millions out of there own pockets. It is often that early stage companies use their CPA firms to advise them on financial matters and that is like asking your plumber to fix your pool. I have nothing against CPA’s and in fact, refer them often when issues of accounting and tax arise. However, most accounting is tactical and backward-looking. What I do is think about right now and the future and it is not something everyone is good at. I’m just lucky like that.

Today, I have clients from around the country who call on me for advice on capital allocation, economic analysis, capital sourcing, internal reviews and business plan development…among other things. Those roles range from advisory board member to contract chief financial officer and almost always are fee and equity based.

In Houston, I have been extremely generous with my time as you can often see me at Coffee Groundz or any number of Starbucks “holding court” with any number of startup visionaries. Startup Houston has been a fantastic vehicle for that and I only hope that we have provided enough value to the community to date. My current problem is that those demands for my time have become more than I can logistically handle and not forgoe cash flow which is important to my survival.

I am not sure how to address this because I really don’t want to stop meeting people. However, starting today, I will need to figure out a better balance and frankly, may even propose a fee based engagement to offer my service to companies that are in need of them and can afford to pay me for my time. This pains me to do, but I cannot continue to sacrifice my family’s financial stability to favor yours; being a good husband and father trumps everything that Startup Houston has to offer.

Bottom line is that I want to continue to hear from you and will meet with people as I can. What I suggest is that you contact me via email and let’s evaluate where you are and what your needs are before we sit down. I try to be a reasonable person and want to do the right thing.

I really dislike the idea of doing this post but am at a loss to see another way to communicate the rules of engagement that I need to follow going forward. Feel free to call me out and comment away. I welcome the feedback.

Best regards,

Josh Tabin, President of Mosaic CFO & Startup Houston Nutcase

Aug20th2008

OpenCoffee Tomorrow Morning at Coffee Groundz in Midtown

Published
by
Josh Tabin
on August 20, 2008
in General
. 2 Comments

Houston Open Coffee ClubMarc Nathan and I have been so busy lately that we neglected to send out a notice for tomorrow’s Houston OpenCoffee Club meeting. Well, as they say, better late than never.

Marc and I will be at Coffee Groundz in Midtown tomorrow, August 21, from 8:00-10:00 a.m. and are looking forward to reengaging with everyone to get the monthly morning meetup back up and running again.

For those of you not familiar with the OpenCoffee Club, once a month on the 3rd Thursday of each month, local entrepreneurs, tech enthusiasts and investors come together over some java to talk about Houston, tech investing, trends and whatever else keeps you chatting. It is the first community event we started and is the foundation for everything we’ve done since.

We promise to get the mailing list and notifications back up and running again before next month’s event so send me your contact info if you’d like to be on the distribution.

See y’all tomorrow!

The Houston OpenCoffee Club is a joint event brought to you by Startup Houston and the Houston Technology Center.

Aug16th2008

We’re Getting a Facelift…Now We Need a New Face

Published
by
Josh Tabin
on August 16, 2008
in General
. 0 Comments

So we are deep into the site redesign and I figured a new logo would be warranted as well. Our current logo leaves much to be desired and I thought instead of having one person focus on it, I’d open it up to the entire creative community of Houston.

So if you want to take a stab at redesigning our logo, go ahead and send your submission to me via email (josh<at>startuphouston.com) or upload them as a comment to this post.

The winning designer will get full credit on our site and get free advertising on our site.

Deadline for submissions is August 31st.

Aug15th2008

Why Aren’t There More Prizes in Science?

Published
by
Graham Randall
on August 15, 2008
in BioTech/Life Science and General
. 2 Comments

Graham Randall is a regular contributor to Startup Houston on the topics of biotech, life sciences and entrepreneurship.

Newt Gingrich recently wrote an editorial in the WSJ [subscription required] calling for greater use of prizes to solve the world’s problems. Regardless of what you think about Newt’s politics, it’s difficult to deny that the current grants-based process of funding science isn’t meeting our needs. Grants are too risk-averse and too time-consuming. As a result, the visionary, but risky, experiments that lead to major breakthroughs have difficulty getting funded, and many future scientists are turned off by the prospect of spending a career writing grant applications. The success of the first X-Prize shows that prizes can work and can be much more cost-effective than the grants system.

Gates Dissatisfied With the Conduct of Science

Derek Lowe commented a while back on the dissatisfaction of the Bill & Melinda Gates foundation with the results of their Grand Challenges. These were grants awarded in 2005 to researchers to try to solve the biggest public health problems. Unfortunately, these grants produced no major scientific breakthroughs. So, the Gates Foundation is reissuing the grants, but this time ignoring the so-called “experts” and looking to other fields for ideas.

Derek isn’t surprised that the grants produced no results since the practice of science is so unpredictable. You can’t do science the same way you would build an operating system–set some deadlines, allocate resources, and draw up a Gantt chart.

Still, I’m not certain that the conduct of science wouldn’t benefit from somebody like Bill Gates throwing some money around and imposing some discipline. Science, and in particular academic science, is woefully inefficient. Part of this is because in academia, the worker bees (graduate students) are still learning their craft. But it’s also because, having accepted that science is unpredictable, hardly anyone puts any thought into managing the project. Few scientists even have training in project management. Experiments get done when they get done, and then the scientists move on to the next experiment. Science, today, is too much like a drunk man’s stagger.

What is generally missing is a project manager–someone to drive the schedule and hold the team accountable for meeting deadlines. By deadlines, I’m not suggesting “cure cancer by the end of the semester.” I’m thinking of shorter-term, measurable goals. What can be accomplished this week, this month, and this semester, and how do the results contribute to the ultimate goal? Nobody’s keeping an eye on these little details in an academic lab. Days turn into months which turn into semesters. Graduate students bang their heads against walls pursuing deadends because nobody set a deadline for pulling the plug.

All of this is allowed to go on in academic science because the focus is on the proposals and the subsequent publications, not the actual, real-world-affecting results. Come review time, anybody can say “Look at how productive we were, we published all these articles!” What Gates is realizing is that publications don’t cure diseases.

Prizes would bring the focus back to results–real-world-affecting results.

Gingrich’s Prizes

In Newt’s article, he suggest seven prizes with $2 billion awards for accomplishing the first three and $1 billion for the rest:

1) A low-cost vaccine or preventive intervention for malaria — possibly the single biggest potential improvement in the quality of life in poor tropical countries.

2) A modestly priced, mass-manufacturable hydrogen engine for cars, which would be the biggest single contribution to reducing carbon loading of the atmosphere and reducing subsidies through high oil prices to dictatorships.

3) A cheap method for turning large quantities of seawater into fresh water.

4) A reusable system that could get people into space at 10% of the current cost, thus enabling genuine space tourism and launching an age of exploration.

5) The first privately financed permanent lunar base.

6) A method for reusing nuclear waste to make Yucca Mountain, Nevada unnecessary as a repository.

7) A method of learning math and science that kids like, and that enables us to leapfrog India and China by breaking out of our unionized, bureaucratic curriculum. This would enable us to replace “No Child Left Behind” with a more effective education model that could be called “Every American Gets Ahead.”

This is a good starting point for further discussion, and I’m sure everybody has their own pet cause they believe is worthy of the list. I’d rather see more prizes for addressing disease. I also think Newt’s prizes are too big. There’s no doubt that the person who invents a mass-manufacturable hydrogen engine will make a lot of money just by licensing the technology to automobile manufacturers. So does that challenge also merit a $2 billion award? For $10 million, the X-Prize found a solution to fly us into space, so why should we spend $1 billion to reduce the cost of that trip by 10%?

We should differentiate between the two uses for prizes:

  1. Spur innovation in a potential commercial market. Compel innovators and entrepreneurs to take the next step to commercialize the technology.
  2. Incentivize innovators to develop solutions to problems for which there is no significant ROI. The mainly applies to orphan diseases, like malaria.

and then adjust the size of the prizes accordingly. Curing orphan diseases is going to require big prizes, but prizes designed to spur innovation in a potential commercial market should be just large enough to motivate people to get started–like the $10 million offered for the X-Prize.

So what do you all think? What causes do you think merit prizes? How big should those prizes be? Please leave your ideas in the comments.

Aug10th2008

BarCamp Houston 2008: I Am Still Exhausted

Published
by
Josh Tabin
on August 10, 2008
in BarCamp and General
. 14 Comments

The Schedule

If you did not get a chance to attend the happy hour at Caroline Collective Friday night or BarCamp Houston on Saturday at the Houston Technology Center, you missed out on two fantastic opportunities to socialize, collaborate and gain an education on why Forbes magazine calls Houston a, “bubbling entrepreneurial tech scene.” Here are some things that I walked away with after the event:

  • Never underestimate the value of strong sponsor support. Many of the sponsors for the weekend had a strong showing at the event through their financial support (C-TREC, BlogCatalog and BizTools), their attendance (Ryma, DFJ Mercury and TopSpot Internet Marketing) and their presentations (Spur Interactive’s Business and Social Media Workshop, BeagleBoard.org’s demo and Clearpoint Technology’s session). Our biggest debt of gratitude goes out to Marc Nathan (as well as his wife and family) and the Houston Technology Center for letting us take over both buildings for a day.
  • Bringing lunch in was the best idea I ever had. Last year, we all broke away for lunch and the event fizzled out after that. This year, we brought in Pappas BBQ and I believe it was a huge hit. Thanks to Ed Schipul for taking charge during feeding time to speed up the process. Most everyone was surprised that lunch was catered and it helped us recharge for the afternoon sessions.
  • Houston needs more events like this. Our early survey showed that over half of the early attendees had not been to a BarCamp before and left with a nice buzz. Based on several conversations throughout the day, I have already started coordinating two more BarCamp events for Houston: GreenBarCamp Houston and BioBarCamp Houston. If you are interested in being part of the planning for these events, sign up on the wikis. In addition, REBarCamp Houston is already scheduled.

If you want to read other perspectives of BarCamp Houston III, check out some of these attendees’ posts:

The photos that Michael Cummings took are available on his Flickr page.

BarCamp Houston Crew

Thanks to everyone for making this a great event.