January 2010 Vol. 237 No. 1


Harnessing Entrepreneurial Energy: Houston Technology Center Boosts Texas Innovators

Erin Nelsen, Online Editor

Since the Houston Technology Center (HTC) opened for business ten years ago, it has pushed dozens of companies through its client program, accepting promising startups and “graduating” successful small businesses once they hit $35 million a year in revenue. In 2007, upon assuming the position, HTC President Walter Ulrich cited the HTC’s impact on the Houston-area economy as $225 million a year. The goal under his leadership is a positive impact of $500 million per year.

That number is especially impressive given that the HTC focuses on only four areas of entrepreneurship: life sciences and biotechnology; aerospace and nanotechnology; information technology and, of course, energy. All of their client companies are judged to be in “late incubation” or “commercial acceleration” stages.

Nurturing Community, Disruptive Technology
The program is simple enough. Companies are accepted as clients if the HTC’s evaluators believe they have a “disruptive technology” — that is, an innovation that’s truly game-changing in the industry they’ve chosen — and the company is deemed viable on scalability, investment and coaching grounds. Once in the program, client companies receive the advice and guidance of mentors and industry experts capable of assisting with just about any aspect of business growth. According to Maryanne Barker, development director of HTC’s energy program, “A lot of time is spent on business guidance. Lots of entrepreneurs don’t know where they want to go, they just want to go.”

David Weston is CFO of itRobotics, an HTC client company that designs inspection tools for the coiled tubing plant refinery and pipeline markets. According to Weston, “They’ve helped us dramatically with exposure. They were involved in getting us published in MIT’s technology review for our autonomous robotic inspection tool.” But the HTC also has a long track record of client companies, like itRobotics, that have been awarded grants from Texas’s Emerging Technology Fund. In July 2006, itRobotics received $750,000 to develop its robotic inspection prototype. The tools are now generating revenue in the coiled tubing market. The fund has allocated more than $110 million to “early-stage” companies to date.

Brandy Brazell Obvintsev, CEO of Energy People Connect, a social networking site directed at the energy industry, focused on the benefit of experience from what Barker calls “serial entrepreneurs.” “The community in Houston is extremely nurturing. My whole background was corporate, and they were able to provide a baseline [of what to expect with a startup] and help me move into the entrepreneurial realm.

“They’ll roll up their sleeves and help you.”

Busy Despite The Slump
The HTC has definitely rolled up its sleeves, regardless of the business climate overall. Barker has more than 30 client companies under her charge in the energy department, served by a staff of 14 and a rotating cast of volunteer advisors. Some of the wave of entrepreneurs in energy see the slumping economy as an opportunity.

Kyle Bethel of Smart Pipe explains, “We weren’t established enough to be affected by the downturn in the economy, and in fact, it’s helped us in several instances. Now that the oil and gas business is slowing down, this is the kind of time they look at doing the kind of projects we want to do, which is refurbishment of oil and gas lines.” Smart Pipe makes a reinforced thermoplastic pipe used to rehabilitate older pipelines — according to the company, up to or above their original pressure ratings.

But the process requires shutting down the pipeline in order to rehabilitate it. “It’s very difficult to talk a major company into shutting a pipeline down and repairing it when they’re pumping it through at $80 a barrel. It’s a lot easier to talk to them when it’s down at $50 a barrel,” Bethel said.

The downturn has increased the supply of experts working with the HTC, too. “With the economic downturn, we’ve seen people coming out of the woodwork: laid off, in transition, looking to retire, looking for something in the interim. They’re all senior executives who’ve spent many years in the energy industry,” said Barker. When Barker’s advisory board meets to review companies’ progress, “We have about five hundred years’ combined experience around the table.”

There was no shortage of energy luminaries at the Gulf Coast Innovation Conference and Showcase, held Oct. 21. Texas Gov. Rick Perry was on hand to award grants and the atmosphere was bustling, with representatives from the majors, investors and entrepreneurs mingling.

Perry linked the HTC’s success and its involvement with the Texas Emerging Technology Fund to a friendly environment for business in Texas as a whole. According to Perry, the 2003 legislative session “put Texas on a track to, six years later, being the state that is home to more Fortune 500 companies than any other state, a state that created more jobs in 2008 than the other 49 states combined, and the number one exporting state.” For energy in particular, Perry believes Texas will maintain its dominant role in the industry. “What we’re doing is an all-of-the-above approach [regarding traditional vs. alternative energy]. We’re going to lead the rest of the country in how to find the alternatives, and we’re very supportive of all of those” energy technologies.

Reaching The Big Players
Innovation in energy can be fraught, of course, and the energy experts at the HTC are well aware of the perils for new technology. Lane Sloan of the HTC board of directors puts it bluntly. “Particularly on the upstream side, the energy business is a big business. The industry is risk-averse. But eventually these small companies and their innovations need to marry into the big companies as the technology is proven.”

To help small companies and large, therefore, HTC has developed a sponsorship program. HTC’s President Ulrich said, “There are more than 20 sponsors just for HTC’s energy sector now, including Chevron, Shell, ConocoPhillips, Halliburton, BP and Schlumberger. It lets them hear about the very latest technology, see what opportunities might arise. And it’s also a civic commitment. They can mentor these smaller companies and give them advice.”

John Hanten, venture executive at Chevron Technology Ventures, explained the business sense behind the relationship. “We’re looking for technology to help our core business. We’re here as tech scouts, looking for solutions that match our pain point that we can introduce into our company. If they’re promising, we’ll occasionally make a venture investment.”

For the big players, investing in a startup makes the stake “highly leveraged R&D money.” The corporation usually puts forth 10% or less of the total valuation of the company, but that investment makes sure the emerging technology is explored, tested and brought to market if viable, without bringing all the risk and expense in-house.

With HTC bringing companies to events like the Gulf Coast conference, Hanten said, the process is much easier. “We can scout a lot of companies in a single session, and talk to CEOs,” instead of trying to chase down contacts individually.

Some of the client companies benefit as much from the connections as from investment or advisory help. Network International, an online auction house and marketplace, sells idle equipment on behalf of oil and gas companies. The firm was one of the original HTC clients when the center started in 1999, and it “graduated” in 2004. “HTC helped leverage us into the Houston community and get our name out,” said Director of Marketing Victoria Schlesinger.

Boyd Heath, chairman/CEO, said, “In the beginning, Network International was just a concept; HTC’s early support allowed us the opportunity to establish Network as a real company that makes business and financial sense for our customers.” In the second quarter of 2009, the company surpassed a quarter billion dollars in total energy equipment sales since its inception, and it conducted 37 public auctions last year in addition to private sales.

On the HTC’s busy calendar, there are more events scheduled, more companies moving into the program, and more almost-there clients pushing to graduate. Which innovations will succeed in the long run and which will fizzle out remains uncertain. But with the HTC running the show, Houston, at least, is open for business.

For more information:
Houston Technology Center: www.houstontech.org
itRobotics: www.itrobotics.com
Energy People Connect: www.energypeopleconnect.com
Smart Pipe: www.smart-pipe.com
Chevron Technology Ventures: www.chevron.com/ctv
Network International: www.OneSiteForEquipment.com

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