Dallas’s Deep Space Ventures Targets Business-Focused Startups
Deep Space Ventures has big plans for the North Texas venture scene.
“We’ll spend $ 20 to $ 30 million; it’ll take us three to five years to do it,” says co-founder Stephen Hays. “And then we’ll go from there.”
“We” is Hays and an unnamed partner, an energy entrepreneur who is providing the funding for Deep Space Ventures. “He’s not that excited about putting capital to work in the oil patch,” Hays says.
The search for better prospects led the men to found Deep Space last December as an early-stage seed fund based in Dallas. Hays is a West Point grad and a former investment banker with stints at SunTrust Robinson Humphrey and Houlihan Lokey.
The firm’s name is a play on Hays’s partner’s experience in the oil and gas industry where the term is used to describe hidden sources of oil. “VC, especially seed investing, is a lot like prospecting for oil. You don’t know for sure what’s in there,” he says. “You think there’s value; you think there’s a higher probability in this location rather than that location.”
So far, Deep Space has placed its bets with a handful of North Texas companies, including connected car startup Vinli ($ 1 million); Panamplify ($ 750,000), which makes software to automate rote chores for advertising and marketing agencies; and PediaQ ($ 500,000), an on-demand urgent care house call service for kids. On average, Hays says investments will be made in about $ 500,000 increments.
Hays says Deep Space is targeting startups that cater to business-to-business problems, a tactic that makes sense considering that the North Texas economy is made up of top corporations.
The region’s innovation community has coalesced around these companies as both potential customers and acquirers for startups targeting their needs. In particular, the Tech Wildcatters accelerator has sought closer ties with businesses so that its startups can benefit more directly with those companies’ domain expertise and connections. (In fact, Deep Space has also invested $ 100,000 in Tech Wildcatters.)
“B-to-b is the smart place to be in Dallas because of the customer base that’s located here,” Hays says.
That niche also makes sense for Hays, he says, because it’s where he can bring his investment banking expertise to bear. “I understand selling a service to a corporation,” he says. “Some of the businesses that we look at are in areas that I covered as a banker. I still have relationships in those industries.”
Hays says part of building up Deep Space has been learning just as much about the founders he invests in as the technologies they are peddling.
“A lot of founders need to focus on their self-awareness,” he says. “What is going on in their market? Who else is trying to solve the problem? Maybe there’s a reason the problem’s not already solved.”
Still, Hays says, these investments make sense in what he feels might turn out to be a shaky economy. “If we find pain points in corporations and solutions to those pains, even if the economy takes a little bit of a downturn, that company’s still going to pay for that service because you’re solving a pain for them,” he says.
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