Monday, September 24, 2012

Growing Houston's startup scene

There have been both online and group meetup discussions lately about cultivating a more vibrant entrepreneurial startup scene in Houston, possibly even a startup district (more here, esp. the full comment conversations here and here and here).  There is a thriving scene, as evidenced by the recent rise of so many coworking spaces (coworking defined and HBR on the rise of them), but the general feeling seems to be that the Houston scene is too fragmented, decentralized, and lacking in technical talent availability (they're here, but the energy companies suck them up with big salaries and benefits).

Getting more concentration and critical mass seem like a good strategy.  Dispersed = invisible, no critical mass. Concentrated = high-visibility, virtuous cycles of growth. If a decent chunk of the entrepreneurial activity in the city were concentrated in a single building/district, it would get a lot more notice and many good things would happen: media coverage (including from outside the city), connections, activity, investors,  and overall growth.

The hot thing in Silicon Valley is shared houses with techies doing startups - hacker hostels - sort of a live-in incubator/co-working space. In Chicago, they recently opened a huge startup incubator called 1871 (for the renewal after the 1871 Chicago fire; NYT story).  Here's some description:
It's over 50,000 square feet, in the bustling Merchandise Mart, and can accommodate up to 300 companies, both with long-standing desk arrangements and short-term desk arrangements. The space has been laid out ingeniously. There's a large open area built on a grid with desks, meant to mimic the design of the city of Chicago, and a winding wall through the area that symbolizes the river. It's a beautiful thing to walk into, even while it is under construction. 
The thing that makes this space special, however, is just how much it can accommodate. There are multiple meeting spaces, meant to be both conference areas and classrooms. Entrepreneurs around the Chicago area will rotate within a regular schedule of speakers, on everything from sales to marketing to tech to PR...
There's a kitchen area, phone and rest areas, bathrooms that are frankly much nicer than they need to be, a coffee shop that will welcome weary travelers in the front as they stagger in each morning, and even a tiny equivalent of Sand Hill Road, in the form of a long hallway with offices down each side that investors from the area can conduct meetings in. Startups get access to phone systems, WIFI, copier services and so on, for no extra hidden fees. Which means that not only can entrepreneurs build companies within this space, they can grow, push their teams to grow and even seal funding without ever leaving the space (much less the building).
This is exactly what Houston needs.  One of the ideas I floated around the event that got some strong positive reception was the idea of a large off-campus student dorm aimed at UH and Rice business, entrepreneurship, and technical/engineering students, combined with a large coworking/incubator/accelerator space open to the entire Houston startup community. The mixing could be very beneficial for both sides. The target building would be converting the old abandoned Holiday Inn/Days Inn tower downtown (Google Maps aerial view), which has 31 stories and 600 rooms. It also has 32,000 sq.ft. of former meeting room space that could become coworking/incubator/accelerator space. There are a lot of advantages to this approach:
  • It builds critical mass for a startup district near the Houston Technology Center as well as the walkable Bagby/Gray/Midtown district full of restaurants, bars, apartments, and young professionals.
  • It has plenty of parking with a six level parking garage.
  • It's just a block from the light rail line serving Rice and the med center, and soon connecting to UH.  It's also next to Metro headquarters' bus transit center/hub.  Rice already gives students unlimited Metro transit passes.
  • Old, small, low-ceiling hotel rooms are much more easily converted to dorms than apartments, condos, or a hotel up to modern-day standards.  Dorms don't need kitchens.  Shared kitchens could be added to each floor or just a single large one at the base.
  • Rice forces ~1,000 undergrads to live off campus every year due to lack of space, generally in their junior year, which is perfect for exploring entrepreneurship since they have skills but aren't yet doing senior year corporate interviews.
  • Rice has ~2,000 grad students living off campus.
  • UH has tens of thousands of undergrads and grads living off campus.
  • If UH and Rice agree to send it students, that creates a predictable revenue stream to incent a developer and secure a redevelopment loan.  It also can subsidize the startup space to make it very cheap or even free, which will help it achieve a critical mass of activity.
  • I think students would love the social dorm environment with other students as opposed to the usual cheap, sterile apartment.  It could also offer key dorm amenities like a cafeteria, which is also likely to be popular with the startup employees.
  • For students who do not want to work for energy companies, it may help keep their talent in Houston rather than moving elsewhere after graduation.
  • It's in bankruptcy + foreclosure right now because their original plan of a low-end budget hotel doesn't really make much sense downtown.  So the availability is there.
It could be a truly incredible entrepreneurial environment, and put Houston on the map nationally as an innovator in encouraging entrepreneurship.  In my seven years of blogging, this is one of my favorite Houston strategies so far, and I hope to connect to the right people that can make it happen.

Thoughts welcome in the comments.

Update: UH and Rice get top rankings for entrepreneurship programs.
Update 2: NYT on how the Merchandise Mart building is anchoring a tech startup district in Chicago.

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Monday, September 17, 2012

3x our freeway capacity, everyone to TX, Interesting Times, and more

Some smaller items this week:
And some HDA links...
Finally, the short, 24-min Rice documentary on Dr. Stephen Klineberg, the Houston Area Survey, and Houston is now available on YouTube ("Interesting Times").  Very well done, highly recommended.  And evidently this is a secret, unlisted link to it.  Can't find it with search.  I've heard Rice would like to keep control of the video, so watch it soon before they take it private...

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Sunday, September 09, 2012

Houston's last opportunity for another university campus?

Recently the Chronicle ran an article exploring options for developing KBR's 136 acres of land in the east end.  Peter Brown even put in his two cents.  It's a pretty amazing piece of land in the core, right on Buffalo Bayou with a downtown skyline view.

The Greater East End District even says it's part of a larger set of 400 underutilized and vacant acres, which you can see some of in this picture:

It also sparked quite a discussion over at HAIF.

Everybody seems to want this land to end up like CityCentre or the Sugar Land or Woodlands town centers, but the retail components of those places absolutely require the vast numbers of upper middle class residents in the many miles of neighborhoods around them to support them (the residents on-site are nowhere near enough support).  Given that this site does not have those income levels surrounding it, I'm not sure what's feasible.  It seems like there are a few options:
  • Go for very high density so the on-site residents can support the retail.  There will definitely be a chicken-and-egg problem for quite a while as it is built out.  It seems unrealistic.  If people are going to live in that kind of density, I think they'd prefer to be inside the Walled Garden.
  • Focus mainly on residential space, and the residents will drive elsewhere for most retail.  Possible, but not very interesting for such a prime parcel of land.
  • Try to do something more tailored to the area demographics, like maybe a town center version of Gulfgate? (which I believe has been quite successful)  The problem is that the key to Gulfgate is being at the intersection of two major freeways, which is not exactly the case here.  Gulfgate is also mainly built around big box stores, which are hard to do in a town center format.
But I think there is a much bigger and more viable opportunity here.  Houston is weak relative to its peer metros in higher education.  We're below the national average, and even behind Atlanta and Miami.


This parcel of land could be the last opportunity for Houston to add a major college campus to the city.  We should consider something similar to what NYC just did with Roosevelt Island, where after a long evaluation process they awarded it to Cornell for a technology campus.  That is likely to eventually be a huge economic development boon for New York.  Of course the City of Houston doesn't own the land, but it could be a facilitator (along with the GHP) to open discussions with the landowner and various universities to explore interest.

There are a lot of potential options:
  • A branch campus of UH, like my proposed Houston Institute of Technology, an elite Berkeley-level campus to go along with the Tier 1 main campus and the open-access UHD campus.  Or the University of Minnesota is an example of a university with multiple campuses in the same metro area (Minneapolis-St. Paul).
  • A branch of Texas A&M.  I like this option a lot.  We're close enough to the main campus it would be easy for faculty and students to travel back and forth, and it opens up a large pool of students for them that would prefer to save money by living at home in Houston instead of College Station.
  • A branch of Texas Tech, like the way Atlanta has Georgia Tech.
  • A branch of UT, since they have them in every Texas Triangle city except us (not counting UT Health in the TMC or UTMB Galveston), including two in the DFW metro.
  • A branch of one of the more elite private or foreign universities.  This is a stretch, but worth exploring.
  • We have traditionally African-American universities like TSU and Prairie View A&M, but I can't think of anything similar on the Hispanic side.  Would that make sense?  It would certainly fit the demographics of east Houston.
  • In a similar vein, maybe a University of the Americas, with a Latin American focus, including both partnerships and exchange programs with schools in those countries.
  • A new private university from scratch, endowed by one or more of our local billionaires.  A long shot, and of course Rice and UH would much prefer that money went to them.
  • Something like what they've done with the Compaq campus, where multiple colleges share the site.  This might even work for branches of foreign universities looking to bring their programs to the U.S.
UH probably wouldn't be thrilled, but a little competition is good (see: SWA going international at Hobby vs. United at IAH), and it would attract more students from across the state and region to Houston, as well as provide new a new higher ed option for locals, which would have to be good for the city.  I think it would ultimately be a net positive for UH as we become more of an academic hub with more opportunities for collaboration.  Don't you think Harvard and MIT strengthen each other in Boston? (not to mention all the other schools up there)  And do you think the Texas Medical Center would be anything close to what it is today if it was a single monopoly institution instead of 50?  We need a synergistic cluster building attitude, not a "not in my backyard" one.

I'm looking forward to your feedback in the comments.  And if you know any of the right people that might initiate or facilitate something like this (or even just start the conversation at the right levels), please pass it along.  Thanks.

Update: The Chronicle of Higher Education picks up on the idea.

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Sunday, September 02, 2012

Traffic reduction tech, Houston's city type, Metro pros and cons, and more

Sorry to keep doing this, but there are just so many backlogged small misc items to get through...
"Basically, I don’t see the upside to voting against this referendum. I see the case for it, but not the case against it. I wish the referendum would have been better, but that fight is over. This is what we have to work with, and it’s good enough for me."
"Metro's high water mark for transit ridership was in 1999-2002 when its fixed-route service had slightly fewer than 100 million boardings annually. This was just prior to the opening of the light rail line on Main Street, so all of these boardings were on buses. 
However, since 2000, Metro's fixed-route ridership has declined in all but three years. In 2011, total boardings were just under 77 million, a decline of more than 21 percent in eleven years. Of the 77 million boardings in 2011, roughly 11 million were on the Main Street light rail. Therefore, bus ridership has declined in the last 11 years by about 32 percent
This decline in ridership has occurred at the same that Metro estimates that the population of its service area has grown from 4.2 million to 5.1 million, a 23 percent increase. If Metro had just been able to keep pace with population grown, its ridership would now stand at something over 120 million boardings annually. 
The decline in ridership certainly cannot be attributed to Metro being short on funds during the last decade. Its total annual revenues have increased 43 percent, from $397 million to $568 million. Much of the increase has come from the sales taxes area residents pay into Metro, which increased 49 percent since 2000, rising from $359 million to $537 million. 
Even if you net out the general mobility payments to the member cities and the county, its share of the sales tax collections have risen from $233 million to $348 million, also a 49 percent increase. During the same time, inflation in the Houston region only rose by 31 percent.
What is most startling, however, is the increase in the amount of sales tax subsidy per fixed-route boarding. In 2000, after subtracting the general mobility payments, local taxpayers only contributed $2.31 per boarding. By 2011 that amount had increased to $5.25 per boarding, a 128 percent increase. 
Metro attributes its ridership decline to the recent economic recession and the 2008 fare increase. However, nationwide transit ridership has grown by about 10 percent over the last decade. Certainly other urban areas have been hit harder than Houston by the recession and virtually all have substantially increased their fares since 2000. 
Metro's failure as a transit agency has not been for the lack of funds nor because of the recession. It is because Metro has neither a clear mission nor a cohesive strategy to increase ridership. Increasingly, it has been trifurcated into a light rail construction company, a bus company and special needs taxi service. 
Of these three, the bus service, which is the most flexible mode, has the greatest capacity to increase ridership and still carries more than 80 percent of Metro's riders. But it has been constantly shortchanged, primarily to pay for the at-grade rail system. As a result, the decline in Metro's bus ridership is three times the national rate. We have sacrificed the most effective transit system to pay for one that Metro's own environmental studies show will make traffic congestion worse, only marginally increase overall ridership and do nothing to reduce emissions."

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