U of H’s Quoz Capital Will Channel Foreign Investment into Startups
The University of Houston will announce today a deal with private investors to create a venture fund to boost its technologies and create a dedicated entrepreneurial center near campus.
“This agreement is not just about the technologies, it’s about the whole ecosystem,” says Roth Bose, the university’s vice chancellor/vice president for research and technology. “The university is going to benefit; the city is going to benefit.”
The agreement creates the Texas Collegiate Regional Center, or TCRC, which will act as a holding company that will manage a venture fund that will invest at least $3 million in technologies developed by Houston faculty as well as build a new Center for University Entrepreneurship. The TCRC is being formed under the EB5 visa program, which grants residency to foreign individuals who invest a minimum of $500,000 in job-creating projects in the United States.
The university’s partners in the deal are three Houston-based investors and entrepreneurs: Huan Le with medtech company Medifr; James Tao, co-founder of a local angel group, Houston Health Ventures; and David Franklin, executive vice president at Consumer Media Network.
“The university has some really amazing technology, and we want to be able to go through those and really give them a good shot at winning,” Le says.
Franklin says TCRC is still completing the paperwork with the US Citizenship and Immigration Services but expects approval to come through in the first quarter of 2015. The federal program, approved by the US Congress in 1990, requires that immigrant investor-funded projects create 10 full-time jobs within a two-year-period. A recent Brookings Institute study found that the number of such regional centers topped 400 at the end of last year, up from 16 in 2007.
In recent years, it has been particularly popular with Chinese citizens seeking entry into the United States. Brookings found that, in 2012, 76 percent of these visas went to Chinese investors.
At a lunch today, Renu Khator, chancellor of the University of Houston system and president of the maincampus, will lead a delegation in signing a memorandum of understanding with TCRC partners. Tao says he is traveling to Hong Kong right after the signing ceremony to visit with potential investors. In particular, investors are interested in companies with innovations in nanotechnolgy and material sciences.
The venture fund, which will be called Quoz Capital, will attract investments from foreign citizens as well as investors already residing in the United States. The plan, Franklin says, is to start out with a $3 million fund but eventually grow that to $10 million. The university will be able to co-invest in each deal, up to a limit of 20 percent of the deal size. Standard licensing and royalties apply to each project, Bose says.
TCRC is also permitted to invest in outside technologies, and university faculty are not obliged to commercialize their technologies solely through TCRC. An investment board, with appointees from both TCRC and the university, will choose which technologies will be funded. Mark Clarke, the university’s associate vice president for technology transfer, says initial investments will be made in increments to $250,000 to $1 million.
In addition to the venture fund, TCRC is investing $15 million in building a new Center for University Research at the university’s Energy Research Park, a 75-acre campus of research labs, classrooms, and office space near the school’s main campus. The university will lease the land for $1 a year in a 38-year contract, Bose says.
A new facility—which will be open to both university and outside companies—is needed, administrators say, because the Energy Research Park is nearly full.
The combination of a venture fund and a real estate deal makes sense, especially for foreign investors, who may want the security involved in a property transaction versus the higher risks in startup funding, Le says.
Bose says the project will also benefit the neighborhood around the university’s campus, the Third Ward of Houston, which historically has been economically disadvantaged. “We’re bringing new capital here,” he says.