While venture capital investing has slowed somewhat in 2016, interest in Texas startups remains strong, based on an event held Thursday in Austin.
In its second year, the Texas Venture Summit drew twice as many attendees than its inaugural year, according to Hall Martin, founder and director of the Texas Growth Capital Forum series.
Last year, 27 companies and 42 venture capital firms met in 125 one-on-one sessions at the summit. Seven of those companies went on to raise a combined $84 million from that event, Martin said. This year, preliminary numbers indicate that 56 companies and 82 investors met up in 215 half-hour sessions.
“Investors are becoming increasingly more specific about what they want to invest in,” Martin said. “They’re going out nationwide to find good deals – and that’s evidenced by how many VCs from the West and East Coast attending the summit this year.”
Indeed, more than half of the investors at this year’s summit were from out of state. The event featured only companies with revenue of $1 million or more. It’s meant to bridge the gap between the large number of early-stage investors in Austin and Texas as a whole, and the lack of later-stage investors.
“There’s been no Series B fund in Texas since Austin Ventures shut down,” Martin said. “So this gives companies and local investors a way to build relationships with later-stage investors for their deals.”
One of the issues the state faces is that population-wise, Texas represents 10 percent of the country but VC-wise, only 2.5 percent, he added.
“So there’s plenty of room left here for good quality deals,” Martin said.
Austin-based Edgecase CEO Susanne Bowen leads one of those startups hoping to raise money as a result of the summit. Her company, which creates and manages product data for retail and e-commerce marketers, has raised about $15.5 million in previous rounds. The goal this time is to raise another $5 million that would go toward accelerating the company’s sales and marketing investments, and growing the company in general, Bowen said.
“This event allows you to quickly connect and assess the fit, and then carry those conversations more deeply later (on) if appropriate,” she said. “We’re delighted it is bringing more growth capital interest to Austin.”
Greg Colella, an investor with Susquehanna Growth Equity, and Kalen Smith of SSM Partners, both traveled from out of state – from Philadelphia and Memphis, respectively – to attend the summit.
It was Colella’s second time, and Smith’s first.
“Austin has become widely known as the technology hub in Texas,” said Colella. “We can see that second-time entrepreneurs love this city and move their businesses here because they know it’s a great environment.” He’s also impressed with the local early-stage venture capital presence, which he termed “strong.”
Smith’s firm already has two Austin companies in its portfolio and is open to adding more. “Entrepreneurs are more mature here,” he said. “I think Austin is unique in that by the time we come in, there’s already a lot of efficiency.”
Both agree the event not only introduces them to potential portfolio companies but provides an opportunity to meet with other VCs.
“I want people in the market to know we’re serious about investing here,” Colella said. “So if we do come across a company outside this event, there will be local reference points.”
To Aziz Gilani, an investor with Mercury Fund based in Houston, the summit gives startups an economical and highly efficient way to meet with a number of venture capitalists.
“There’s a combination of strategic investors and growth equity funds here,” he said. “A startup would have to invest dollars and a lot more time to otherwise travel to one or both of the coasts to have the meetings they can have here in one day … They can have that initial get-to-know-you, which is huge for a local startup.”
Gilani, who spends a lot of time in Austin, said he is proud of the way Texas funds are not territorial. “Instead, we understand that for companies to grow to their full potential, we need a partner with outside funds to give us the capital we need,” he said.
For Krishna Srinivasan, a co-founder of Austin-based LiveOak Venture Partners and a chair of the summit, believes such events “can only bring goodness.” The event’s growth shows the real robustness in local activity, he said.
“We’re able to expose our companies to a broad collection of investors and get more people to appreciate the quality of companies here,” he added. “And it gives us a chance to connect with companies we’ve never seen before. Hopefully, more investors will spend more time here.”