Jon: Hi, I’m Jon Nordby and this is HXTV, championing Houston’s innovators and entrepreneurs. Brought to you by PKF Texas, the CPAs and advisors to Houston’s innovators for over 15 years. My guest today, Samantha Lewis, Director of the GOOSE Society. Samantha, welcome to the show.
Samantha: Hi, Jon. Thank you. How are you?
Jon: Excellent, thanks for joining us today.
Samantha: I’m excited to be here.
Jon: So, tell us all about the GOOSE Society.
Samantha: The Goose Society is an investment group based here in Houston. The GOOSE Society stands for Grand Order Of Successful Entrepreneurs. It is made up of all very highly successful people. They either started or ran highly successful organizations; from Rod Canion, with Compaq Computers; to Jack Gill, Silicon Valley venture capitalist; to now, one of our newest members, Jeff Smisek, who is former CEO of Continental Airlines and then United Airlines. We’ve invested $47 million in early stage venture capital companies. We have $10.5 million of that was deployed last year, $9 million the year before, so activity has really ramped up the past few years. We take very active roles in the companies we do invest in. We do have a board seat on 80% of our portfolio companies, we like to lead deals, and our average first check in is $1.2 million.
Jon: And so you used the term investment group. What does that mean?
Samantha: It’s really interesting where I think we fit into the ecosystem, especially here in Houston. Like I said, since our first check in is $1.2 million, we lead the deals, we take board seats, and we usually reserve a lot of capital for follow-on as well. What does that sound like? That sounds a bit more like a VC fund, but all of our investors still get to say yes or no to each deal. Now, the more and more dollars that we’re investing, the more we’re starting to look a bit more like a fund because we take an active portfolio management role. It takes certain thresholds for you to become a GOOSE portfolio company, whether that be dollars invested or members invested, and so once you hit that you become a GOOSE company and we actively manage it. We think about everything as a portfolio model.
Jon: Interesting, ok.
Samantha: Yeah, but all the investors still get to say yes or no to each deal.
Jon: So, that’s super interesting. It’s almost like you have the structure of an angel group but with the follow through and performance of a venture fund and the ability to write a check like a venture fund. Typically, in most angel groups, there has to be a certain number of people that sort of come into the deal. Tell us how that works. Is it typically voted on, is there a certain number of members that have to approve the deal, or how does that work?
Samantha: For it to actually be considered a GOOSE portfolio company, yes, a certain amount of members have to come on board, but that doesn’t mean other members, even if only two are interested, that’s fine, they’ll still invest in it, but we just don’t follow it like a portfolio company. So then, it doesn’t actually fall under the GOOSE model anymore. Investors can do what they want with their money. We have six investment meetings a year. During those six investment meetings – they’re all day long – the go from like 8am to 2-3pm in the afternoon. We do hour-long pitches with these startups. We really dig in, we start asking diligence questions, we follow up with a lot more diligence after that, and then investors get to say yes or no.
Jon: So, that’s a really long pitch, right? That’s pretty unique for most angel groups or most structures like that, right? So you really go deep in those settings.
Samantha: Yes, and for the most part, in order to get in front of GOOSE, usually one of the investors already has done a lot of diligence and committed to investing. So, you already have somebody that’s backing the horse, and then you just bring them—that investor brings them in front of the rest of the members, and then the members ask all their questions, and then we follow up with very specific diligence items after that, and then we will usually close the loop with a conference call or another investment meeting to where we do the final commitments.
Jon: Through that process, like you mentioned, members can obviously choose to make an investment if they want to or not. What’s the threshold for them to actually become a GOOSE company? How many members need to invest?
Samantha: That’s kind of ever changing as we grow. We’re really having to figure out what that specific target is. In the past, it was at least three members come on board. And so, for the most part, if you get on the GOOSE investment meeting agenda, which is very tough to do, but once you get there, 50% of the time you’re going to get investment from GOOSE, which means at least three or more members. The average, as far as how many GOOSE members are coming in on each deal, I don’t know that exact number because it is ever changing as some of our members are starting to retire and we’re getting new members on board, but I would say it’s between seven to ten. Seven to ten members come in on pretty much each deal, which is why we are able to get such large checks, like our average $1.2 million.
Jon: That’s seven to ten out of a 24 –
Samantha: Out of 25.
Jon: Out of a 25-member group. That’s a substantial number. That’s awesome.
Jon: So, assuming all seven come in, or you mentioned, the average of seven come in, do they all come in on equal terms? Term sheets and things like that?
Samantha: Yes, definitely the same terms. That’s another way that whoever is leading the deal, which is usually the investor that brought it—sometimes that’s different but we don’t need to get into that here—but yes, whoever is leading the deal, they usually lead the negotiations for the term sheet. Those negotiations are on behalf of all the GOOSE investors. So, whenever we say we lead a deal, that means GOOSE is leading a deal but the seven members still get to say yes or no. Or the 25 get to say yes or no, and the seven that say yes, just follow that lead.
Jon: So, the seven come in all on the same terms, are they coming in with the same investment dollars, the same amount?
Samantha: No. Not always. Our average amount that each member puts into a new deal is around $140K. That is kind of the average, but the spread is much larger.
Jon: Of the grand order of the Society, how many of those folks are Houston—are they all Houston folks?
Samantha: They all have a connection to Houston. Not all of them live here, but most of them live here and we do have pretty deep ties to Houston. For example, Jack, our founder, he’s not from Houston, he’s from Lufkin, Texas, and then spent all of his career in Silicon Valley but wanted to get back to Texas, so yeah. He came back and moved to Houston, chose Houston as a spot and is now very involved with Rice, trying to get really involved in the ecosystem, and then that’s kind of how GOOSE was started.
Jon: Speaking of Rice, you guys do a lot with the Rice Business Plan Competition, right?
Samantha: Yes, and it’s coming up.
Jon: It is coming up. Tell me about that. How did that start, or what’s the history there, the connection with the Rice Business Plan Competition?
Samantha: Yeah, so I have a personal connection, too, which is fun. When I was a business school student at Rice, I was a volunteer the first year, the second year I competed in it, and now I’m an investor. So, it’s really fun, I’ve kind of gotten to do the full circle.
Jon: The whole lifecycle, yeah.
Samantha: Anyways, I like that because I love Rice. But GOOSE. GOOSE in 2005, a few people got together and decided let’s give a grand prize at the Rice Business Plan Competition. It was $100,000, and they offered as a convertible note to the winner. That’s all GOOSE did until about 2012-2013, and then we started investing more and more as more companies were coming on board and appetites started to grow and our portfolio began to grow outside of RBPC companies. Now, 33% of our portfolio comes from Rice Business Plan Competition. We have, out of five exits, four of them have been from RBPC. We’ve invested over $20 million in Rice Business Plan Competition companies, not necessarily just the winners, in companies. The value of the current investments that’s still open far exceeds that, and the amount returned to us already exceeds that. So there’s some really good metrics there for RBPC.
Jon: It sounds like a really good source of deal flow for you guys. So, 33% comes from there. Where does the other 66% come from?
Samantha: That is always evolving. A lot of it is coming from TMC; TMCx and JLABs, right now. So, almost 60% of our portfolio is healthcare. A lot of med device, digital health, and some biotech, but we’re not doing as much of those deals anymore. That has pretty much come from our connections with TMC.
Jon: How does a young company find you or how do they apply to you, or how do they—how does that work? You’re sort of in this middle space of not really an angel network, a little bit more advanced.
Samantha: Right. It’s a process, definitely. And it’s a work in process. We’re always getting together to try to think of ways to make this the best for the entrepreneurs and the best for us with the amount of resources we have to look at deals. Right now, most of it comes from referrals. We have a really good relationship with the Houston Angel Network. We have a really good relationship with quite a few other entities in town, and so we rely on them and some of the diligence that they do beforehand to push some deals up to us, whenever they’re large enough or a better fit for us. There’s a lot of sharing going on between our groups and we’re trying to continue to push that. So, a lot of us have gotten together investors in the community and thought, what can we do to help share these deals? If they’re not a fit for GOOSE, I can pass over to one of the other groups or vice versa.
Jon: I love it. Website, how do people find you?
Jon: All right, Samantha, thank you so much for coming on the show.
Samantha: Thank you. Sure.
Jon: And that wraps up my discussion with Samantha Lewis, Director of the GOOSE Society of Texas, and this is Jon Nordby with HXTV.
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