Mercury Fund chief brings expertise to federal government’s innovation council

Houston native Aziz Gilani thinks his hometown is worth investing in.

Gilani, 42, is managing director of Mercury Fund, a Houston venture capital firm that has invested $300 million in more than 100 startups. He was recently appointed to the National Advisory Council on Innovation and Entrepreneurship, a 32-member group tasked with crafting strategies to keep America ahead in the development and commercialization of emerging technologies. Mercury, founded in 2005, invests primarily in early-stage startups in the middle of the country, as opposed to the west and east coasts, where venture capital is concentrated.

Gilani joined the company, which has its offices in the Upper Kirby area, in 2008 after serving as an intern. He recently spoke with the Houston Chronicle about Mercury’s mission to invest in America’s Midtown locations, often dismissed by coastal venture capitalists as “air country,” and Houston’s potential in as a technological city. The interview has been edited for length and clarity.

Q: How do you identify and determine which companies are worth investing in?

A: We’ve been doing this for a while, so we have many, many co-investors. In many cases, they will send us startups that they think fit our criteria for things we like to invest in. We still have many relationships with many seed accelerators and coworking spaces that send us referrals. We look at a lot of stuff that comes from Capital Factory (a coworking space) in Austin. We also have an email address which is on our website. We also get dozens of submissions all the time from there.

Q: What part of the country are these companies from?

A: People contact us from all over, but we are definitely focused on the central United States. So that certainly includes Houston. It doesn’t make much sense for us to invest in a Silicon Valley-based startup, where there are hundreds of Silicon Valley-based venture capital funds doing it locally. But we love investing in places like Cincinnati, Ann Arbor, Michigan, Austin, and mid-country places for sure.

Q: What interested you in the middle of America?

A: Mercury’s original thesis has always been that we believe good ideas come from everywhere. There’s a unique insight you get from being co-located with the industries that drive America – whether it’s Houston with energy, whether it’s Cincinnati with (consumer products). There are concentrations of industries and customers all over the United States. It only makes sense that startups that cater to these industries are also located in these locations. We go where the opportunities are and opportunities related to specific industry items are spread across the country.

Q: How involved are you in business?

A: When we invest in a company, I usually join the company’s board of directors and attend board meetings. I’m going there to meet the CEO and talk to the management team about what they’re trying to do. I try to keep in touch with the employees. Since the pandemic we’ve been doing a lot more things on Zoom (but) I just feel like the tough decisions are easier to make when you’re interacting in person and you can get the full gamut of people’s reactions in time real. I think Zoom is very good for passing on information, but for decision-making, I think meeting in person works much better.

Q: You were recently appointed to a Federal Innovation Council (National Advisory Council on Innovation and Entrepreneurship). How did it happen?

A: I was very active politically for a while. I served on Mayor Sylvester Turner’s technical task force for a few years, where we made a number of recommendations for the City of Houston to improve its position with respect to tech startups. This was put together by council member Amanda Edwards, and it was a lot of fun.

I also sit on a number of other boards outside of the companies in which I invest. I have been an advisor to South by Southwest for many years. I also work with several non-profit associations. I’m working with the Department of Commerce as we take a hard look at how to improve innovation and entrepreneurship in the United States. I’m really excited because there are so many ways to keep the United States at the forefront of innovation. There are plenty of strategies that have worked over the past few years that we can double down on.

Q: What are some of these strategies?

A: I don’t hide that I think innovation is something that doesn’t just happen in New York and Silicon Valley. It is very important for us to think about how to encourage startups and entrepreneurship in non-traditional hubs.

So how do you reduce the barriers for these types of innovators to start businesses? How do we give them access to more talent to keep these businesses going? It could be through how we direct research funding, or the ways we help ensure they have more markets available to sell their products.

Q: What do you hope to accomplish on the National Advisory Council on Innovation and Entrepreneurship?

A: For me, the real focus is how do you evenly distribute innovation across the country? I just feel like innovation and entrepreneurship is something that happens naturally when you give people the opportunity to do it. Since customers, industries, and talents are spread across the country, one would expect entrepreneurship to be spread evenly. I want to make sure that we create as many opportunities as possible for people to be able to do this in a more distributed way.

Q: Can you tell me more about what you did in the city’s Tech Task Force?

A: That was in 2016. So that’s when we published the report that spawned the creation of Houston Exponential (a nonprofit that supports startups in the area). We recommended the creation of a startup district and now the Ion is the center of this district. We ended up doing a lot.

Q: How has the venture capital landscape developed in Houston over the years?

A: We have a lot of co-investors here in town, and that’s not something I could say when we started. There weren’t many investors when Mercury started. I joined Mercury in 2008. I used to joke that to meet another investor I had to jump on a plane. This is definitely no longer the case. But that said, Houston could always use more. This is part of the reason we recommended the creation and demise of the HX Venture Fund Task Force, which was designed to appeal to more investors in Houston. In many ways it was a success. We have a lot more co-investors running around Houston who are now investing in a lot of really great companies.

Q: What are the success stories of Houston-based companies that Mercury has worked with?

A: Talking to a venture capitalist about successful startups is like talking to a parent about their children. In the security world, we had a holding company called Alert Logic that we originally invested in as of 2006. It grew to over 1,000 employees here in Houston. They are based at the Galleria. We ended up pulling out of the deal a few years ago, but the business has grown from nothing to something very, very fast.

Something more promising is TOPL, which came out of Rice University. They focus on using Blockchain technologies to look specifically at supply chains to make sure things are what people say they are in the supply chain, especially when it comes to environmental awareness certifications.

I’m on the board of Graylog, which is based in Houston, a cybersecurity company that looks at very large amounts of data and makes it digestible so that security professionals can understand whether or not a company has been hacked. . These are three Houston-based companies we’re really proud of.

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