first fund was started in 2008, and like Houston’s, was around $45 million in size. “Michigan had been in a one-state recession for the better part of a decade,” says Chris Rizik, Renaissance’s CEO and fund manager. “We were exporting people and technology to other places.”
Today, Renaissance is on its third fund and has made investments in about 30 venture firms, including 5AM Ventures, Techstars Ventures, and Houston’s Mercury Fund. Rizik says the first Renaissance Fund has attracted nearly $1 billion in capital.
“What the fund of funds does is it creates that group of players that will say yes,” says Rizik, who is on HX Venture’s investment board. “It’s a terrible thing for angel investors, who create this great startup community, but then there is no follow-up money. Companies either go out of business or they move.”
Recognizing a need to fill a similar gap in Houston, in the last year, local civic and business leaders have studied ways to boost the city’s anemic startup ecosystem. Among the primary recommendations, according to a report put together by Accenture earlier this year: figure out a way to provide more funds to young Houston startups.
While Houston is the fourth largest city in the country and home to a number of global corporations—not to mention being the energy capital of the world—the amount of venture capital its startups have raised pales in comparison to other smaller Texas cities. Houston companies raised $154.58 million this year as of Sept. 30, according to PitchBook/National Venture Capital Association. (Austin companies raised $976.26 million in that same period, while Boston startups posted $6.2 billion.) A recent Kauffman Foundation report ranked Houston 19th in the rate of startup growth, a drop of five places from the previous year.
“Houston’s investment community was secondary or tertiary at best against other ecosystems,” says Blair Garrou, founder of Mercury Fund in Houston and a senior strategy advisor to HX Venture Fund. But he says the timing is now right for HX Venture Fund to reach its potential. With groups like TMCx, the Texas Medical Center’s health IT and medical device accelerator, and Station Houston working to enable the formation of a larger number of viable startups, a fund of funds can have a real impact.
“If you attract 20 venture capital funds to Houston, you need to have quality startups for investments,” he says. “If we did this prior to Station or TMCx, you couldn’t have said that about the Houston economy.”
