附近上门

In what is turning out to be a roller coaster of a year for Texas, the state鈥檚 third quarter performance marks its lowest both in terms of number of deals reported and dollars raised in at least five years, according to 附近上门 data.

(Note that numbers will likely go up as more deals are reported, but are likely not significant enough to make the above statement untrue.)

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Venture capitalists put $268.2 million into Texas startups across 38 known deals in the third quarter of 2017. In perspective, that is less than what was invested in all of Austin alone during the second quarter. VC funding in the Lone Star state was down a whopping 56 percent compared to the $609.7 million raised in the second quarter, and 21 percent lower versus last year鈥檚 third quarter.

Deal volume is also particularly low for Q3 2017. Between 2012 and 2016 (inclusive), the third quarter saw an average of count of 121.8 deals.

, vice president of client strategy of Austin-based technology and venture capital practice group, believes the dip is due to a variety of factors.

鈥淭he biggest and most likely is that there aren’t enough companies that can accept larger Series A or Series B deals right now,鈥� noted Nathan, who is also publisher of the .

Another contributing factor is that a number of Texas-based venture capital firms are in the fundraising mode of their lifecycle. Austin-based , for example, is in the process of a $110 million raise.

鈥淭his activity takes time and attention away from new investments,鈥� Nathan added. On top of that, 鈥渙lder deals are getting follow-on funding from past investors, which also takes capital away from new deals.鈥�

Life Finds A Way

On the positive side, newer funds such as are making $4 to $5 million investments at a steady clip, according to Nathan.

, managing partner of Dallas-based , believes it鈥檚 tough to look at funding on a quarterly basis.

鈥淭he deals that really drive the bulk of the total dollars invested in a quarter are usually larger deals, and those come in chunks,鈥� he said.

However, Hays conceded, the quarter 鈥渇elt slow, in terms of deal flow and closings in Dallas.鈥�

In an interview earlier this year, CEO told 附近上门 News she does feel Austin lacks some 鈥渢hink big global perspective.鈥� While Austin may be a great place for startups, Brunner would like to see the city鈥檚 small-to-midsize companies think bigger.

Austin Reigns Supreme

In the second quarter, the Texas capital showed impressive results with startups collectively raising $423.7 million over 45 deals. But for the three months ended Sept. 30, 2017, Austin companies raised just $143.4 million across 22 deals. The dollar amount was not much lower than the $144.6 million raised in the 2017 first quarter; however, deal volume was significantly less than the 41 rounds reported in that time period.

One Austin deal in particular stood out because of its size 鈥� the above-mentioned $40 million raised by auto insurance comparison marketplace in a Series B round led by out of Palo Alto.

The Zebra has raised a total of $63 million since it was founded in 2012 by then 25-year-old high school dropout (a Forbes 30 Under 30 winner). Other investors include Dallas investor , Palo Alto-based and Austin-based .

As part of the latest funding round, Accel and The Zebra tapped , former president of travel metasearch engine KAYAK as its new CEO.

The investment was a bright light in an otherwise bleak quarter.

Still, LiveOak Venture Partners founding general partner remains bullish on the Austin startup scene. He said he finds it hard to make trend conclusions based on quarterly aggregate data.

鈥淚t might be one large financing, or a financing that slipped into an adjacent quarter especially a later stage one that skews the numbers,鈥� he told 附近上门 News. 鈥淚 would not attach much significance to it. 聽The activity is fantastic which perhaps might be reflected in the number of earlier stage deals.鈥�

In fact, Srinivasan said 2017 has been one of his firm鈥檚 most active years with five new investments so far. LiveOak describes itself as an 鈥渆arly-stage, lead investor鈥� that will 鈥渙pportunistically lead late-stage financings.鈥�

鈥淚f you look at the five companies we invested in this year, they are all repeat entrepreneurs who have been there and done that who are doing something new and interesting,鈥� he added. 鈥淲e鈥檙e seeing a lot of strong repeat entrepreneurs coming back into the market to start new companies.鈥�

Also, in all five deals, LiveOak had a co-investor that came from outside of Texas. Those investors hailed from New York, California, and Toronto, specifically.

鈥淥verall, we saw great activity in the quarter,鈥� Srinivasan. 鈥淚t was one of our busiest summers ever in terms of both new and follow-on activity.鈥�

Dallas

During the third quarter, eight Dallas startups raised $52.6 million compared to 21 startups raising $142.6 million in the previous quarter. The dollar amount, at least, was higher than the $46.6 million reported in the first quarter, although there was less than half the number of deals.

The city did see a couple of large deals close in the quarter, and they made up most of the city鈥檚 total venture investment. The deals included a $30 million round 聽by Carrolton-based r 鈥� an energy project investment company 鈥� and a $20 million raise by financial services startup out of Dallas.

While Deep Space Ventures鈥� Hays acknowledged that things felt 鈥渟low鈥� in Dallas in the third quarter, he is optimistic about early-stage funding in Texas as a whole.

鈥淚 feel like there is a lot of momentum at the early stage across the state with the expansion of (Austin-based incubator) into Houston, Dallas and San Antonio,鈥� he said. 鈥淭he ecosystem is really coming together across cities within the state, which is creating opportunity and value for investors and founders alike.鈥�

Houston

Hurricane Harvey devastated Texas鈥檚 largest city in August. The storm forced many residents out of their homes and many companies out of their office space.

Ironically, Houston is the only city out of the state鈥檚 major cities for fundraising that saw an increase in the amount of venture capital raised in the third quarter. That was largely due to the above-mentioned $50 million raise by HighRadius. Overall, funding climbed to $67.2 million for the quarter compared to $42.1 million raised in the second quarter.

, co-founder of ., was one of those whose home flooded and family displaced as a result of Hurricane Harvey. Still, the startup managed to close on $500,000 in seed funding during the quarter with plans to raise another $500,000 this fall.

Velamuri, who also works full-time as a physician, and founded Luminare in September 2014 with the goal of preventing people from dying of sepsis. The company鈥檚 software platform optimizes nursing workflow, accelerates access to care and streamlines medical communication, he said.

鈥淔undraising has been time-consuming, elaborate and a learning process. Easy is not a term that applies to fundraising,鈥� Velamuri said.

Harvey, Velamuri, his wife, and three kids are currently sleeping in a friend鈥檚 guest room.

鈥淚 thought my life was busy and complicated before the flood,鈥� he told 附近上门 News. 鈥淣ow every day requires a more detailed plan. Sometimes stuff gets done in the middle of the night.鈥�

From the VC side, oil and gas continues to be a hot sector 鈥� despite the lower oil prices globally.

, managing partner at Houston-based , noted that his firm invests strictly in companies providing digital solutions to the oil and gas industry.

鈥淭he third quarter was the hottest time yet that we saw in the digital oilfield space, and we expect the fourth quarter to be even more active,鈥� he said. His firm closed two financings during the quarter. Ironically, neither deal involved a Houston startup. One investment was in a Canadian firm and the other in an Austin-based startup.

Harvey impacted the entire oil & gas space, Arendt noted, and put the industry back by two to three weeks.

鈥淰enture-backed companies were not immune,鈥� he said. 鈥淏ut it has already recovered and is back in full swing.鈥�

The third quarter was by far and away one of the worst for the Texas venture scene in recent times. Despite optimism on the part of local venture capitalists, the state appears to be struggling to gain the momentum it needs to emerge as a shining star in the startup world.