Rice Village is Houston’s Hidden Startup Neighborhood

Don’t worry, Rice Village isn’t like that bar without a sign. It’s not exclusive, and it’s not hiding from you. The neighborhood remains the same old destination for boutique shopping and great bars that Houston has enjoyed since the 1930s. But remaining the same isn’t one of Houston’s strengths. Up above the dress shops and taverns, tucked away in the canopy of second floor executive offices, there are startups working on what comes next.

When my company moved into the area last year, it felt like we stumbled across a secret startup world that was hiding in plain sight. Now that we’ve gotten to know a dozen companies in the neighborhood, it’s clear that Rice Village has all the ingredients to attract high growth startups. This blog is my first attempt to explain why.

We met up with Yuji, the New York Bureau Chief for Yomiuri Shimbun, on a chilly winter morning in Rice Village. Yuji was in town chasing a story about the shifting demographics of Texas, and how that changes our politics, too. I invited a few entrepreneur transplants to join us for lunch, hoping they would give him an honest earful about our growing startup community compared to the coasts. We met on a streetcorner in Rice Village and picked a restaurant on a whim.

Right inside the door, there were two startups holding separate lunch meetings. Our group fanned out for handshakes and backpats and smiles. Over the last year, these encounters seem to happen frequently. There are a lot of entrepreneurs in the neighborhood.

“I moved back to Houston to start my business,” Bryan Hassin told Yuji as we reconvened around our table. “It has a low cost of living, lots of friendly people, tons of talent, and it still has that up-and-coming cultural feel.  It’s a great place to uncover opportunity.”

Out-of-towners are usually surprised by Houston’s activity. We’re known as a sprawling yawn of a southern metropolis, with strip centers lighting the way to an edge city in every direction.

Bryan is the CEO of Smart Office Energy Solutions and an Entrepreneur-in-Residence at Rice University. Along with Amitav Misra, he brought the Cleanweb organization to Houston, and was an organizer of the Cleanweb Hackathon in September. Bryan is part of a growing group of civic-minded entrepreneurs who are leading Houston’s startup community into 2013.

Still, out-of-towners are usually surprised by Houston’s activity. We’re known as a sprawling yawn of a southern metropolis, with strip centers lighting the way to an edge city in every direction. But we’re also a city of continued economic and cultural growth.

Houston keeps attracting out-of-town professionals who want a short commute, a vibrant urban core, and affordable housing. So our city is contracting to the tune of infill. This is great for real estate developers who, in the absence of restrictions, will tear down a single 1930s bungalow and and build eight townhomes on the same lot. It’s very sad for history. On the bright side, it’s not long before those townhomes are filled with doctors, engineers, and other skilled professionals who came to Houston for their jobs. (don’t worry: we try to save the magnificent trees)

There’s evidence of our current boom just about everywhere. Count the cranes and construction workers. I’ve been here for three years. Change is a way of life. We are forever turning this city into our vision of home.

But Rice Village is a little different. It’s Houston’s very own college town, surrounded by beautiful neighborhoods that resist change. They fight what they can see, like infill and nightlife. And their battle slows down development, preserving parts of Rice Village as a charming relic of Houston’s past.  But nothing is permanent in this town, and the neighbors are about to lose.

Other cities have iconic symbols of their startup community. Some of these symbols are established over years of innovation, like Sand Hill Road in Silicon Valley. Some are assembled quickly by engaging all of the stakeholders in the entrepreneurial stack, like 1871 in Chicago or Geekdom in San Antonio. And some, like Tony Hsieh’s series of projects in Las Vegas, are brute force attacks that have the potential to transform the city.

Over the last nine months, as Houston’s greater startup community starts to coalesce, there have been rumblings about our startup symbol.  Many want to transform existing institutions into startup community hubs, and others want to build new facilities.  And while I think we’re still in the early stages of community building, I think we will accelerate quickly.  Houston has plenty of entrepreneurs — certainly more than enough to support a grand vision.  But our city is decentralized and fragmented. We don’t really know our own potential, and it’s hard to imagine what things will look like as we get more organized.

That’s why Rice Village is a good start. It’s an existing community where any entrepreneur can show up and set up. No individual business has singular importance. And by weaving in office space around an established retail core, Rice Village feels like the center of a small, boutique universe.

“Where else would I be?” asks Sameer Soleja, CEO of Molecule Software. Sameer’s company graduated from the first class of Surge Accelerator last June. Shortly afterwards, he raised a seed round and set up at 2444 Times Blvd. “We didn’t want to be in a building that reminded us of our old jobs,” he said. “It’s just not the right environment for a startup. I want to open my door and step into the street.”

In the executive office spaces dotting Rice Village, a software startup could fit a team of four in an office that costs, on average, about $700 a month.  (Don’t take my word for it — ask the guys at TheSquareFoot, a startup that took flight in the second floor coworking space at New Living).  There are plenty of one year lease options (instead of the typical three years), so as the startup outgrows the office, they can move into one of several Class B office buildings around the corner.

But for every established startup, there are many more aspiring entrepreneurs. These people don’t need a typical office. Many of them are tied to their laptop, and they’re looking for a productive and stimulating place to work.

They find a home at Platform Houston, a 5,000 square foot coworking facility at the corner of Times and Morningside. Platform opened its doors in October, and it fills the need for a low-cost, public workspaces that are a little classier than a coffeeshop.

Matt Olds, one of the four co-founders, came to Houston from New York where he spent a decade opening restaurants in up-and-coming neighborhoods. In addition to renovating and opening Platform Houston, his group will be opening a wine and cheese shop across the street.

“Houston has so much potential,” Olds said. “But lots of people here only see what’s directly in front of their face. We’re creating a place where they can come together.”

After a soft launch in the fall, Platform Houston has already hosted several lectures, social events, happy hours, and even a hackathon. Eventually, Olds and his partners hope to create a vehicle for investing in local startups, like an accelerator program or an angel fund. But community comes first. “We’re learning more about the startups here in town, and it’s exciting,” Olds said. “We’re still getting a lay of the land, but Houston’s potential is undeniable.”

In fact, the winning team of the most recent Houston Startup Weekend has been camping out at Platform for the last few weeks, making the most of those free memberships. “This is a great neighborhood,” said James Wroblewski, co-founder of PermitMe. His company aims to simplify the city permitting process for new businesses. “I get to meet all sorts of people who come in the door, and it’s refreshing to know that there are lots of startups facing some of the same challenges that we are,” he said.

While Platform nurtures new technology startups, Rice Village boutique PH Design Shop nurtures aspiring product designers. Students in the University of Houston Industrial Design program are showcasing their work this holiday season, and part of the process is leaning the ins and outs of commercialization. And as that program branches out with a focus on entrepreneurship, we’ll start to see new, complimentary talents in our startup community.

There are a few key ingredients to Rice Village’s rise:

1. Existing density. There are people on the street. The walkable retail cluster extends for blocks in every direction.
2. Variety of small, affordable office space. There are lots of executive office spaces sitting right above the action. Their small size, friendly lease terms, and affordable rents make them perfect for a small team. For startups that aren’t ready for a dedicated office, there is a public coworking space.
3. Places to socialize. There are plenty of lunch and happy hour destinations within a 5 minute walk. These destinations turn the neighborhood into a playground where chance encounters are frequent.
4. The party already started. Startups have arrived. Entrepreneurs like to be near one another.

Eventually, if Rice Village continues to be a hospitable place for entrepreneurs, it might resemble some of the dense startup clusters in other cities like N3RD Street in Philadelphia.

But it doesn’t have to be limited to Rice Village. Our city has thousands of entrepreneurs, and lots of hospitable neighborhoods. There are smaller startup communities throughout the city in neighborhoods like like White Oak, EaDo, Midtown, and Montrose. They cater to different kinds of entrepreneurs.  But that’s another article entirely.

So as the “icon” discussion continues to unfold, I think we should take a cue from Houston’s entrepreneurs.  They just do.  The organic rise of startups in Rice Village — and across the city — proves that no institution can control the startup community.  Our community cannot be master-planned.  Under the right conditions, we self-assemble.  All we really need is encouragement.

Learning About Craft Beer (One Pint at a Time)

There were a dozen of us, elbow to elbow around the dining room table. It was August, it was hot, and we were about to drink a few test batches of a soon-to-open craft brewery in Houston.  Around me was a diverse group of young accountants, lawyers, graduate students, doctors — all brought together by their passion for craft beer.

Outside on the balcony, a few guys readied the growler. Back in the kitchen, our host Rassul Zarinfar poured tastes of a homebrew that he got as a job application from an aspiring brewmaster. It was 4 o’clock in the afternoon and I hadn’t eaten anything all day.

“Get ready for our first flight,” Rassul said as he entered the dining room with two handfuls of glassware. “We’re going to try several variations on Dodd’s Gingerbread Stout recipe. If we can get it right, this will be our Christmas beer and Dodd will be our Santa.”

Dodd poked his head inside from the balcony and gave everyone the thumbs up.

Rassul smiled and continued. “Before we get started, though, I want to answer two questions for you. Yes, it’s 11% ABV, and yes, you will get drunk.”

In the spring of 2011, Rassul founded Buffalo Bayou Brewing Company, a local craft brewery that is “fiercely and uniquely Houston.” (Full disclosure: I have a small equity stake in the business).  At the time of our tasting, Rassul had just signed a lease, and he was beginning the cumbersome process of permits and construction. Despite the red tape, he was optimistic about launching in the fall. So he wanted to perfect his recipes right away.  That’s why we were taking down flight after flight of thick ass stouts that no normal person would drink in the Houston heat. But these people were not normal people. They were beer nerds.

The last few years have been good to craft beer. The market has been growing in Houston and across the country. Several local breweries are diversifying and distributing their beer in kegs, cans, and bottles. St. Arnold’s annual Divine Reserve causes stampedes at Specs, selling out within minutes while latecomers scour Twitter for clues about a single or six pack. Even the service industry is growing: a husband-and-wife team up in the Heights launched BottleMark out of a garage, providing homebrewers with custom printed bottlecaps that will turn every beer into a brand. 

If we were on the Oregon Trail, I would have died of dysentery long ago.

These trends validated Rassul’s instincts, but in the end, everyone around that table knew that he had to brew great beer. So we critiqued the variations. As the alcohol grabbed ahold of my liver like a cowboy at a rodeo, my companions stopped being doctors and lawyers and accountants. They became pioneers. They journeyed through new territory, using words like “mouthfeel” and “effervescent” to chart their course. I used words like “this tastes like vodka.” If we were on the Oregon Trail, I would have died of dysentery long ago.

Over the course of an hour, we tried ten varieties of Buffalo Bayou Brewing Company’s Gingerbread Stout. By Christmas, it was a universal hit. It tastes nothing like vodka.

When I met Rassul back in January 2011, I didn’t really understand the nuances of craft beer. To make matters worse, I liked pretty much everything I tried. I was just happy to have a beer with friends, whether it was glass of Dogfish 90 Minute IPA or a can of Miller Lite.

This would not stand. I had to learn more.

Some folks get their education from the chalkboard at the Gingerman over long, lazy happy hours. My schooling happened once a month on Sunday mornings. While my friends and colleagues slept off their hangovers, I made my way to Jerald’s house in Meyerland.

From the street, Jerald and his wife Shelli live in a nondescript, 1950s ranch house across from the bayou. But after passing through the front door, their home becomes a sweeping landscape of windows and light, barking dogs, football games, and laughter. Lots of laughter. Without wasting a minute, we grab plates and feast on bagels, lox, fresh fruit, and latkas — eyeing one another sheepishly while waiting for the dance to begin.

It always went something like this:

“Is ten-thirty too early?”

“That’s a half an hour from now.”

“I don’t think ten-thirty is too early.”

“I think it’s too late.”

“Is now too early?”

“Are we full?”

“Does it matter?”

Then our fearless host grows tired of the deliberation, so he gets up from the table and unloads the refrigerator. Carefully, in the measured way of an architect and a rock climber, Jerald lines up a dozen craft beers on the granite countertop.

We take pictures before battle. We load Untappd on our phones. Then we drink.

In an old warehouse just north of downtown Houston, Saint Arnold Brewing Company looms large as the oldest and most established craft brewery in town.  Despite this reputation, St. Arnold’s still has the atmosphere of a startup and the attitude of an underdog.

St. Arnold’s CEO Brock Wagner met me at the door. We weaved through an open workspace of ping pong tables, dart boards, and a lot of dudes wassuping and high-fiving. But when we arrived at his office, it looked more fitting for a Fortune 500 technology CEO, with leather furniture, soaring windows, and loft-like environment. He seemed uncomfortable with the extravagance. 

“When we started out, there weren’t a ton of craft beer drinkers out there,” St. Arnold’s CEO Brock Wagner said.  ”Around 2000, the average age of craft beer drinkers started to drop. Now people come celebrate at the brewery on their 21st birthday. This generation grew up with craft beer, and they expect lots of options.”

“It’s funny,” he said. “When we bought this building, I got to create my own office. I wanted to do it right. But it looked a lot smaller on paper than it turned out to be,” he said as we sat down. “It’s still a little intimidating, and I work here every day.”

Born in 1994, St. Arnold’s has grown considerably over the last 18 years.  As the industry grew, St. Arnold’s grew, too.  Brock has decades of experience cultivating a rabid fanbase of beer fans from all walks of life. He is also deeply committed to the integrity of the craft beer community. As a result of his success and his generosity, the upstart breweries see him as a wise man, and they speak of him with reverence.

“When we started out, there weren’t a ton of craft beer drinkers out there,” Wagner said.  ”Around 2000, the average age of craft beer drinkers started to drop. Now people come celebrate at the brewery on their 21st birthday. This generation grew up with craft beer, and they expect lots of options. We do our best to keep up.”

St. Arnold’s produced over 23,000 barrels from January to June of 2012, representing 37% growth over that same period in 2011.  In fact, “the first six months of 2012 exceeded the amount Saint Arnold produced in all of 2008.”  Compared to Buffalo Bayou Brewing Company, St. Arnold’s is a monster. But compared to the Golaiths of AB/Inbev or MillerCoors, even St. Arnold’s is a David. The craft breweries know their they need to work together to peel away business from big beer rather than compete with one another.

“As a craft brewery, it’s our job to connect with people and give them what they want,” Wagner said.  ”Then they go ask for craft beer at the bar, and we all benefit.”

Big beer sees this trend, and they are trying to raise the stakes. Many craft breweries produce beer that is named after something local — a landmark, a historical figure, or even just an area code.  Last year, AB/Inbev quietly filed provisional trademarks for area codes, and this year they’re trying for airport codes, too.  Big beer companies have purchased successful breweries in big cities like Goose Island in Chicago, or set up craft beer divisions like MillerCoors did with Tenth and Blake Beer Co. These are industry consolidation moves disguised by marketing.

But that doesn’t deter craft brewers. There is still room to compete.

“I don’t think craft beer is a trend,” Wagner said. “Because it’s about more than beer. It’s about local breweries connecting with customers, and beer drinkers connecting with each other. It’s about building a community.”

This explosive growth in craft beer is happening in spite of Texas state regulations. Open the Taps, a consumer advocacy group, works at a grassroots level to educate craft beer drinkers about the law, and to put pressure on legislators for change.

“There are two things that the Texas legislature can do to make the industry more entrepreneur friendly,” said Leslie Sprague, PR Director for Open the Taps. “First, they can allow breweries to sell their beer on site. Right now, you buy a ticket for a brewery tour, and you get to try the beer. But you can’t order an individual beer like you could at a bar, or buy a growler to take home. Those are high margin products. Much higher than a ticket for a tour.”

She paused to let that fact sink in.  ”But it’s just the opposite for brewpubs. That’s the second thing. They can make it easier for brewpubs to distribute their beer, because right now, they can only sell on site. You can’t take home a six pack or a growler.  As consumers, we want more choice, and we get there by making it easier to get beer into the hands of a customer.”

In an election season that is about jobs, jobs, jobs, our politicians talk about small businesses and entrepreneurs as the gasoline powering our economic engine. Compared to technology or professional services, beer is a low margin business. It’s essential to find ways to increase the value of each customer. So craft breweries often look at their tours as an essential revenue stream. And yet, despite the well-reasoned logic laid out by Open the Taps, the law remains the same.

Every year around Labor Day, over 100 craft breweries converge in Galveston for the Brewmaster’s Festival. I drove down with a couple of friends, and we burst into the exhibition hall like 10 year olds at a baseball card show. Each brewery had a kiosk, and they poured their flagships, their seasonals, and their one-offs for us. The place was crowded, but there very few lines. Walk right up, get a taste, wander around, and socialize.

Except for Buffalo Bayou Brewing Company. Now approaching their one-year anniversary (with an impressive rookie season), Rassul and his crew set up shop towards the back of the hall, where they needed a little extra space to accomodate a constant line of 20+ people. It was, by far, the longest line in the room. We thought it was very unusual. Why would these people stand in line when they could walk up to another kiosk and drink excellent craft beer?

So I asked them.

I spent about 20 minutes asking two basic questions: Had they ever tried this beer before? Had they ever heard of the company before today?

“I got in line because there’s a long line,” one woman said. “But I don’t really care who they are.  As long as it’s good, I’ll be happy.”

New Models for Grooming Startups

Incubators are everywhere. Private investors, inspired by the early success of YCombinator, have taken the incubator (and now the accelerator) model to nearly every city in the US. It’s easy to see why. As an investment vehicle, it’s a hedge against the high risk of startup failure by providing a community of entrepreneurs, mentors, and investors who have a stake in the startup’s success. And through this community, the program creates a shared sense of responsibility and openness, where incremental failures come early, and learning comes quickly.

Big companies are very familiar with incubating ideas. They’ve set up innovation groups, corporate development teams, and even investment funds. But the incubator model presents new opportunities to work directly with entrepreneurs in the field. As a result, big companies have taken the incubator model, sharpened the focus, and developed specialized programs that engage startups working in specific areas of interest. Companies like Dell and Microsoft want an active role in the development of their product ecosystems, and they see startups as an important part of their innovation plan — without the pressure to acquire and integrate these startups right away (if at all).

So there are a lot of new programs designed to groom startups for growth. In exchange for a small equity stake and clear acquisition terms, a startup may receive funding, financing, infrastructure, office space, mentors, staff, and (in one case) access to unique APIs and intellectual property. So if you’re a startup working on an idea that a big company finds relevant, take a look at some of these new programs:

• Rackspace Startup Program. Created about a year ago to provide technology startups with infrastructure, marketing, and mentoring. Rackspace provides lots of free services to startups that depend on a scalable hosting environment (think big data or media delivery). The Rackspace team works alongside the startup, helping them design and launch a customized hosting environment. They do not take an equity stake.
• Dell Innovators Credit Fund. Last month, Dell pledged $100 million in financing for startups over the next ten years. They also provide infrastructure (computers, servers, monitors, etc.) and access to the resources of their entrepreneur-in-residence program (which was recently used as a model for legislation to create an EIR program for the federal government).
• Microsoft Bing Fund. Microsoft is no stranger to the startup world, with its mature BizSpark program, the Kinect accelerator (launched in February), and the Azure accelerator (inaugural class starting in September). Last week, they announced the Bing Fund, an angel investment program for web and mobile startups who can benefit from Microsoft’s technology and Bing’s unique APIs. They provide a bunch of resources, including funding through a convertible note, access to people at Microsoft and partner companies, help with development from people on the Bing team, and coworking space in Seattle.

There are also new (but slightly less accessible) programs like AT&T’s interdisciplinary innovation foundry and IDEO’s startup-in-residence. And there seems to be an announcement of something new every week.

Big companies realize that entrepreneurs are a catalyst for innovation. As a result, these programs become a hedge against the risk of being left behind.