Nicole Walker and Tim Marx discuss Baird Capital’s investing strategy, what they are looking for and how they are doing more for Houston startups.
Gina: Hi, I’m Gina Luna and this is HXTV, championing Houston’s innovators and entrepreneurs, brought to you by PKF Texas, the CPAs and advisors serving Houston’s innovators for over 15 years. My guests today are Tim Marx and Nicole Walker, with Baird Capital. Welcome.
Tim: Morning, Gina.
Nicole: Thank you.
Gina: Let’s just start. I’d love to have each of you tell our audience a little bit about yourself and your background. Nicole, why don’t you start?
Nicole: Sure. I’m one of the partners with Baird Capital. Within our team we have both buyout funds as well as venture. Our team focuses on venture investing and I’ve been with them for five years. I actually started my career as an engineer who used to design medical devices, and along the way I eventually got the bug to not only start new businesses, but to help others start new businesses and ended up doing venture investing so I could continue to do that.
Gina: Great. Tim?
Tim: I’m Tim Marx. I was born and raised in the Northeast but now I consider myself an adopted Houstonian. I joined Baird in 2017 as a venture partner. Prior to that, I had spent 16 years with the Boston Consulting Group, in both Mexico as well as the Houston offices.
Gina: Thank you. So, let’s talk a little bit more about Baird Capital. You touched on it but that’s a name I think a lot of people recognize but don’t necessarily know all the things that Baird does. Give us a bit more background on Baird and we’ll talk about what that means to Houston and to entrepreneurs here.
Nicole: Sure. Why don’t I start with the broader Baird picture? Baird Capital is actually the direct investment arm of Robert W. Baird, which is an investment bank based in the Midwest. We’ll be celebrating our 100-year anniversary this summer. Within Baird, we have multiple divisions. We have asset management, private wealth management, investment banking, and Baird Capital is a unit that we belong to. Within Baird, we focus on both technology investing as well as healthcare investing within the Capital group, and have done so for over 20 years at this point. And really, from the healthcare perspective, where Tim and I focus, that passion has always been driven by trying to develop new technology and bring new alternatives to the standard of care within medicine. Our funds, which look to invest in entrepreneurs fairly early on in the development cycle of companies—we consider ourselves or like to be the first institutional investors into these opportunities, and so, with having partners on the ground like Tim, we’re able to learn about ecosystems and start to develop relationships with entrepreneurs very early on. Once they start to build their companies and are at a point that they either have a product, if it’s a medical device or if they have a service or tool that they’re using within the hospital systems, that it’s reached a point that it requires the kind of capital that we like to bring to the table.
Gina: Well, as you all know, one of our priorities at HX has been to bring more early stage capital investors to Houston, and so we are thrilled that Baird Capital has an office in Houston and Tim is the partner here. I’d like to think that this is a very target rich environment for you.
Gina: So, talk about the office that you’ve opened in Houston and what you’re seeing and why you’re excited about it.
Tim: Sure. I think one of the reasons we’re most excited is that Houston really represents a major wide space when it comes to investing. There’s not that many VC firms here. Typically, it had been flyover land for a lot of firms. Really, it just kind of puts into play, at least personally, one of the things I was looking to do with my career when we moved here three and a half years ago was get involved in something that was smaller, more dynamic, with a lot more innovative companies, but to be able to do that when you’re also helping to build the ecosystem. You move to the coast, there’s a lot of activity out there, but you’re looking for a seat at somebody else’s table. Here, the great thing about Houston is we’re all coming together. We’re actually building the table, right? And so I think that is the vision that Baird had. When we started talking last year, our ideas really aligned that we would open the office and really just start to be here for the companies. At the end of the day it’s about the entrepreneurs, it’s about the companies that they’re building, and we’re here to play our part, whatever that part is. We recognize that capital is one part of the equation, but the mentorship, the services around it, all the other parts of the ecosystem that, frankly, is a bit lacking here in Houston, we’re really excited about being able to get together with all the other people around the table and really build the environment.
Gina: I think that’s exactly right. We are building the table and having great partners like you has just accelerated that momentum. You’ve been in a position to be here over the course of the last year and see just the momentum that’s been generated. I’d love to get your perspective on what you see in the market and what you see as the potential in the market.
Nicole: Absolutely. Each year, we try and take a look out into our markets as a firm to understand where some of the compelling and really interesting areas to be in. Houston struck us as one that was really ripe for growth and expansion, as you saw it from innovation, as well as an opportunity to come into a market and really help it grow, be a part of that on the ground floor. That’s something that’s always been really important to us as Baird. Since we aren’t coastally based, we are based in the Midwest, our venture team is based in Chicago, it’s always been really important to us to look at those key markets that aren’t ocean bound. Houston, to us, made a lot of sense. It had a strong history of innovation in multiple sectors. You have the energy corridor, you have the aerospace corridor, as well as healthcare, selfishly. It just came together for us that this was a market that we needed to spend more time in if we could find the right person to be our eyes and ears on the ground.
Gina: And thank goodness you did.
Nicole: We were able to find Tim and convince him to join the team. We spent time talking about a shared vision. To start with, it was really important for us to just really come into the ecosystem and try and understand where we could play a part and who we should start to get to know and better understand what the vision was within the community here and where people wanted to be over the next five years, and then start to work together to build out that plan and what it might look like.
Gina: So, how is your pipeline?
Tim: It’s going pretty good. We’re talking to a lot of companies. We’re actively looking at a few. I think, at the end of the day, we hope to be able to make a big splash soon, but even if we don’t, I do think the idea, and right from the start, was to build for the future. Even If it takes a couple months, if it takes a year, really start planting that first stone and then the second stone to really build up. If you look back over the course of the last year, so much has happened. You’ve always had the TMC and the TMCx and the Accelerator. I was participating in it as a mentor several years ago. But what Bill and Erik and the team were able to do with that, and where it is now, and where it’s headed is great. But you also look at the rest. Houston Exponential, 13-14 months ago, didn’t really exist.
Gina: That’s exactly right.
Tim: You look at the great stuff that JR and then Gaby is doing with Station and the plans then to go with Rice Alliance, Rice University; you look at what Lawson and his team at The Cannon are doing and you see all of this great stuff, but it’s all brand new. I was up in Chicago a couple of days ago telling the team, and what I put was an Established sticker on all these things that we were talking about: Station Houston; the Rice buildup; Station Houston was established just a couple years ago; The Cannon was established two years ago; HX, 2018 vintage. And so you look at all these things, it’s brand new, but there’s a lot of Texas sized plans and good financial backing and we have no doubt—we talk about the pipeline now looking good, but it will just continue to look better.
Gina: As an investor, what is Baird Capital looking for? What is your sweet spot?
Nicole: From a healthcare perspective, and actually broader Baird Capital, within venture investments we look for opportunities to work with great entrepreneurial teams. That’s probably our number one ask. And then, our opportunities have to be in really large markets, and we look for things that make a difference. So, within healthcare, things that either improve the overall efficiency of care and/or optimize the cost structure within care. At the end of the day, what we hope for our solutions, and in working with our teams, is that we can fundamentally change the way that healthcare is delivered and improve life quality for individuals.
Gina: An initial investor, because I love it, you said you love to be the first institutional investor. So, what would be a typical investment size that you would consider?
Nicole: Our initial check size is—it ranges, but usually between 5-8 million is where we like to be in terms of initial investment. So, that give you an idea how large the raise might need to be.
Gina: I think it helps people figure out when they should come to you.
Nicole: But that doesn’t mean that we don’t like to have conversations early, even if an investor is looking at doing a seed round. That might be a little small for us, but again, it’s the long process of getting to know each other and really understanding what they’re trying to do. We like to build those relationships a lot sooner than when they’re out raising that first institutional round.
Tim: And Gina, if I may add, we talk a lot about the healthcare side of the portfolio where Nicole and I work quite heavily, but we also have a tech side of the portfolio too. Healthcare made the bigger splash in Houston because we signed a partnership with TMC and there was a lot of announcements around that. It was kind of a really emotional connection with Bill and his team. On our tech side, we also focus on B2B or B2B2C companies and they’re all around business solutions. We have the human capital side, whether it’s hiring platforms, background checks, things around knowledge management and the like. We do payments and logistics, and then enterprise software, as well. Really, Baird is not just a healthcare venture capital firm, but also has the tech side as well.
Gina: Well, this is great to visit with you. We always wrap up with the same question, and you alluded to it earlier, but what is it about Houston that you most love and gets you excited as it relates to the entrepreneurial ecosystem here?
Nicole: I think that the one thing that has always impressed me is the determination within the community to get things done. Seeing the development just over the last 12 months, for me, knowing where we were last year and kind of what was in consideration, now things are fully established on so many levels, reinforces that perception I’ve always had.
Gina: Good. I agree.
Tim: For me, it’s just the opportunity to help build and not just reap what others have sown, but kind of build that up. You see a lot of the enthusiasm, you see a lot of people coming together and everyone realizes that we are nowhere close to where we need to be, so I’m not naïve enough to think we will maybe never get there. Right now, everyone is just elbow to elbow working together and realizing we have to grow the size of the pie before anyone can really be worried about how big of a piece they get.
Gina: That’s so true. I always say about Houston right now in terms of the development of our innovation ecosystem, more is more.
Tim: Right, exactly.
Gina: Well, it’s great to visit with you and we’re so happy that you’re in Houston.
Tim & Nicole: Thank you.
Gina: I’m Gina Luna, wrapping up my interview with Nicole Walker and Tim Marx from Baird Capital, and this is HXTV.
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