HX Venture Fund, which aims to grow Houston’s venture capital ecosystem, is raising money for its second fund-of-funds.
HX Venture Fund is raising $75 million from institutional limited partners for HX Venture Fund II, managing partners Sandy Guitar and Guillermo Borda told the Houston Business Journal. The fund-of-funds will have a series of rolling closes, but HX Venture Fund expects to roll in a majority of its investors over the year, Borda said.
HX Venture Fund’s second fund-of-funds has received seven subscription agreements so far, including from three of its original limited partners: Kingwood-based Insperity Inc. (NYSE: NSP), Houston-based Camden Property Trust (NYSE: CPT) and Houston-based Quanta Services Inc. (NYSE: PWR). Two of the anchor investors, Insperity and Camden, have come onto HX Venture Fund II at three times the size of their contributions to the original fund, Borda said.
The original HX Venture Fund ended up with 18 corporate and institutional limited partners. HX Venture Fund II plans to expand that base of investors.
“We are in very serious dialogue with a great number of them at the moment, including some more on the institutional side, meaning endowments or public pension funds,” Borda said.
HX Venture Fund uses a fund-of-funds model to invest institutional capital into venture capital groups outside of Houston that, in turn, consider investments into and partnerships with Houston-area startup companies. The first HX Venture Fund launched in late 2018 with $25 million, but the fund-of-funds has since grown to $42 million, Borda said. HX Venture Fund has made 11 investments into VC funds to date.
“We thought maybe 50-some funds would want to engage with us and we’d select a small portion of the 50,” Guitar said. “The truth is well over 250 so far have approached us wanting to engage in real dialogue.”
In 2020, Washington, D.C.-based Updata Partners, which received an HX Venture Fund investment, led Houston-based Liongard Inc.’s $17 million Series B funding round. HX Venture Fund has also made investments into Greycroft Venture Partners, Material Impact, Revolution Ventures, VenBio Global Strategic Fund, .406 Ventures, Baird Capital, LiveOak Venture Partners, Next Coast Ventures and OpenView Venture Partners. Baird Capital, the VC arm of Milwaukee, Wisconsin-based wealth management firm Robert W. Baird & Co., also has opened an office in the Texas Medical Center Innovation Institute.
Other HX Venture Fund limited partners include California-based Chevron Corp. (NYSE: CVX), Netherlands-based Royal Dutch Shell PLC (NYSE: RDS-A, RDS-B), Houston-based Pros Holdings Inc. (NYSE: PRO), San Antonio-based H-E-B Grocery Co., LyondellBasell Industries NV (NYSE: LYB), Rice University and Exponential Leaders, a group of five individual investors in the Houston community, Borda said.
Meanwhile, HX Venture Fund has other efforts planned to bring together local startups, venture capital funds, and corporate and institutional partners. In early February, HX Venture Fund, alongside Houston Angel Network, the Rice Alliance and for Technology and Entrepreneurship and Houston Exponential, an innovation-focused nonprofit not affiliated with the fund-of-funds, will host a two-day conference and pitch competition dubbed Venture Houston. More than 90 entrepreneurs have submitted applications for the pitch competition, which will disburse more than $1.7 million in investment prizes, Guitar said. Startup registration runs through Jan. 15.