When oil prices hit rock bottom in 1986, the city of Houston followed suit. By the end of the 80s oil bust, Houston had lost 225,000 jobs and unemployment was at nearly 10%. While commercial projects ground to a halt, thousands of homes were left abandoned and the future looked bleak for the once-booming oil town. The decade was a brutal wake-up call for a city whose livelihood was uncomfortably dependent on the well being of one volatile industry.
The events of the late 80s catalyzed efforts to diversify the city’s economy in preparation for future market downturns. Thirty years later, that investment is paying dividends beyond what anyone could have imagined. In the three decades since the oil glut, the Texas Medical Center has become the largest medical center in the world, creating over 100,000 jobs and billions in annual revenue. Beyond healthcare, another industry has emerged as a potential leader and future flag-bearer for the Houston economy: technology. IT start-ups have been multiplying in the Bayou City for the last several years, creating a small but extremely talented community of entrepreneurs and innovators.
“I think [there was] a need,” says JOHN REALE, CEO and founder of Station Houston, a co-working space and tech incubator downtown. Station launched in 2016 to serve a young ecosystem of tech start-ups in need of mentorship, work spaces and business resources. He explains that the current boom in start-ups is the result of a “digital revolution” in existing industries that created a need for third-party IT solutions. “There are real opportunities to reimagine industries and solve problems,” says Reale, “and corporations are finding new ways to engage start-ups.” While most of the start-ups launched in Houston serve the needs of the energy and healthcare sectors, they are simultaneously creating a new local industry that may outlive its larger peers.
JOE ALAPAT, founder of Liongard, an IT security start-up and Station Houston member, tells me that launching his business in Houston was a no-brainer. Most founders first think of Silicon Valley when deciding where to launch their tech start-up, but for Joe, it made more business sense to be in Houston. “Getting real traction with customers is more important than being cliché,” says Joe. “Houston has a huge number of [corporate] headquarters.” For IT solution companies like Liongard, Houston presents a much greater opportunity to reach customers locally. I asked Joe if this city is missing the financial infrastructure that makes Silicon Valley so enticing to founders. “Houston has a lot of wealth,” he replies, “it’s just an issue of educating them.” While he admits that traditional venture capitalists are harder to find here, the sheer number of millionaires willing to invest presents an important opportunity for local entrepreneurs. In terms of creating a Sand Hill Road-type network of venture capitalists, Joe says the city still has some work to do, “but we’re not that far off.”
Houston has come a long way since 1986. A thriving healthcare industry and a growing community of tech entrepreneurs are shaping the future of the Texas economy. With some experts predicting that fossil fuels may never again see the booms of the 20th century, this diversification could not have come at a better time. The technology infrastructure that is being created in Houston will one day serve emerging markets in sustainable energy, as well as continue to lead the world in healthcare innovation. Though the city still depends largely on the condition of traditional energy markets, Houston is creating an economy that will no doubt remain future proof, no matter what the future holds.