IT Services, Healthcare Attract Most Venture Investment in Texas

Venture capital investments into Texas startups and other high-tech companies totaled $255.6 million in 39 deals for the second quarter this year. The amount invested marked a 16 percent increase from the same period last year, while the number of deals was essentially flat.

The state data is from the latest MoneyTree report on venture capital activity nationwide. The MoneyTree Report is prepared by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters.

It was the 12th consecutive quarter that venture firms put at least $200 million into companies based in Texas. For the first half of the year, about $852.5 million in venture capital has been deployed in the state. Should this pattern continue for the rest of the year, 2016 totals could supersede the state’s total last year of $1.18 billion. (For the national picture, please see my colleague Bruce Bigelow’s story here.)

The IT services sector received the most funds in Texas last quarter, with $72.9 million invested. Healthcare services ($59 million) and software ($37.5 million) took second and third place, respectively. Much of the activity in each sector came from a single deal: in healthcare services it was an early-stage investment in Fort Worth-based US HealthVest that represented that category’s entire $59 million; a $34 million investment in Austin’s Lumos Pharma was the lone deal in the biotechnology category. The biggest chunk of the IT services investments went to Spredfast, an Austin maker of social media marketing software, which received $50.1 million.

Among the Texas metro regions, Austin continued to receive the lion’s share of funding, with more than twice the number of investments than the next area. In the second quarter, Austin received $151.8 million in venture money in a total of 24 deals, with the Dallas area in second place with 10 deals worth $72.6 million. In the first quarter this year, the Houston area racked up $345.4 million in investment, largely through a $300 million infusion into Sunnova Energy in March. Typically, Houston ranks third among the state’s metro regions for venture capital.

Author: Angela Shah

Angela Shah was formerly the editor of Xconomy Texas. She has written about startups along a wide entrepreneurial spectrum, from Silicon Valley transplants to Austin transforming a once-sleepy university town in the '90s tech boom to 20-something women defying cultural norms as they seek to build vital IT infrastructure in a war-torn Afghanistan. As a foreign correspondent based in Dubai, her work appeared in The New York Times, TIME, Newsweek/Daily Beast and Forbes Asia. Before moving overseas, Shah was a staff writer and columnist with The Dallas Morning News and the Austin American-Statesman. She has a Bachelor's of Journalism from the University of Texas at Austin, and she is a 2007 Knight-Wallace Fellow at the University of Michigan. With the launch of Xconomy Texas, she's returned to her hometown of Houston.