Houston, Texas, USA downtown city skyline.

My Energy Investment Thesis #6: Houston

by kirkcoburn
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Throughout the past several weeks, I’ve talked about the who, what, when, and why behind changes (and you can catch up at the beginning). Now, let’s move on and talk about the ‘where’ — Houston.

Why Houston? This is where I live and work. It’s my narrative. When I moved back here in 2010, there was no doubt that Houston was the energy capital of the world. There was so much happening…what changed?

Thesis #6: Energy Investing in Houston

Then:

In 2010, Houston was in the driver’s seat of capturing energy innovation. Here’s why:

  • Texas was the largest producer of wind energy in the United States.
  • Texas led in the deployment of smart meters, a critical IoT device that enables the distributed grid
  • Houston had the largest port in the US for foreign goods, critical for access to the central United States
  • Houston was home to energy trading, including oil, gas, and electricity
  • The city of Houston was the largest purchaser of green energy in the United States
  • Houston was the oil and gas capital of the world

On top of that, Houston had the #1 business plan competition in the world, drawing all types of startups to Houston due to the Rice Alliance. The HTC (Houston Technology Center), while not optimal for startups, had deep relationships with the energy industry’s largest customers.

SURGE was launching. The Houston Angel Network was active and supportive of the digital era for energy. In short, Houston was the place to be for anyone looking for a place in the energy industry — and the network of assistance (customers, investors,  scientists, engineers, other experts) available in the area made it possible for many entrepreneurs to accomplish more than they might initially have dreamed possible.

Now:

Since 2010, a lot of things changed the Houston market. Consider:

  • The market went through an oil crash.
  • Harvey, the storm the devastated this city and continues today, came reallocating many people’s priorities.
  • Innovation in the power industry came to a halt, with New York and other markets taking up the baton.
  • The oil and gas industry fell into the trap of other Petrostates.

Worst of all, as new energies became a society demand rather than a luxury and the world’s largest investors and customers embraced the category, the allocation of capital globally for new energies hasn’t made it to Houston.

Where is the capital going instead?

Silicon Valley, Boston, London, mainland Europe, China, Singapore, and a variety of other markets. Rather than being centralized in one convenient city, new energy investment is spread across the globe. We’ll take a look at this in more detail in future posts. However, the important thing to know is that the key players in Houston know about this disparity — and they’re doing something about it.

There’s tough news for Houston-based funds, however: it may be more difficult for them to raise clean energy capital. This is in spite of the fact that the city remains the best place in the world for clean energy development due to the know-how, talent, and cost of living. Just ask Sunnova!

The changes in Houston aren’t the end of the story. Stay tuned for another installment soon since this is a rolling topic and one that interests me deeply. And let me know how you think venture capital is faring in Houston.

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