Business Management

View from Austin: A thriving tech startup scene

Austin is the 13th largest city in the United States with an estimated 150 people moving in every day. And very rapidly, it has risen to the role of US tech capital, a possible second after Silicon Valley with an estimated third of the city's jobs being tech-related.  Not surprisingly, big name organizations such as Apple, Facebook and Google have opened offices while Samsung recently made a $4 billion investment in a local factory.

Like most serious tech city contenders, Austin has a big student population and boats a lot of young entrepreneurial talent. It is also known for its quality of life and property affordability.

Julie Huls, President and CEO of the Austin Technology Council (ATC), who is tasked with promoting the city to a wider tech community tells IDG Connect: “The startup scene in Austin is thriving for a few reasons. The first is that Texas is a very business-friendly state, offering $19 billion a year in company incentives. Additionally, the cost of living is lower than in other tech cities like New York and San Francisco, and there is no state income tax, which is appealing for startups to get off the ground.”

He believes another reason startups choose Austin is because of the bountiful seed and angel capital. Austin has one of the most active Angel Networks in the country, and there are also a number of incubators and accelerators. “Tech directly accounts for 110,000 jobs in the city of Austin and contributes $21 billion to Austin's GDP,” says Huls.

Funding is always a bone of contention though, and like most regions that aren’t Silicon Valley, it is hard to avoid comparisons. “Lots of communities aspire to be Silicon Valley, but only some communities can reach that level,” says Eugene Sepulveda, the CEO of the Entrepreneurs Foundation of Central Texas.

“The tech companies that first-time entrepreneurs launch in Austin are practically pre-revenue companies,” he continues. “The main challenge for first-time entrepreneurs in Austin would be that it's hard for them to connect to angel investors. It's not for a lack of want. Austin entrepreneurs have the drive, the passion and the ideas, but they need help in execution. Entrepreneurs need to be able to demonstrate a return to the deal that's proportional to the risk.”

First-time entrepreneurs looking to secure seed capital, in the range of $250,000 to $1 Million, is considered to be the hardest round of funding to raise. However, Sepulveda claims this isn't as big of a problem in the Austin market. “The varying marketing costs have been drastically reduced because of the extensive use of incubators and accelerators. Incubators can provide a much more significant launch.”

“We are a very deliberate tech region,” Sepulveda adds. “You could call this a story of the chicken and the egg. Did the Austin tech scene explode first, or did the city itself explode first? You could make a valid argument for either one.”

Whichever way it worked, Andy Aguiluz, a program manager for Techstars in Austin believes that the wise business decisions made by former and current Austin tech startups are gradually paying off. “For the last 10 years, Austin has been creating tech jobs at both startups and large companies that used to be startups like HomeAway, Bazaarvoice and RetailMeNot. It's in the last three to five years that Austin has gained increased media attention constantly ranking as a top tech city.”

Aguiluz feels that the main challenge the Austin tech startup scene faces is the lack of emphasis placed on searching for homegrown Austin talent. “Local fundraising is improving but founders are still spending a lot of time traveling outside of Austin while trying to talk to customers, build products and find talent. They can take advantage of local resources like Techstars, Capital Factory, WeWork, Open Coffee, WomenAtAustin, the list goes on.”

Jason Bornhorst, who studied at University of Michigan launched a company there, then moved to Austin to Co-Found Filament Labs is very positive about the area: “Austin tech is strong as ever, with huge growth seen over the last few years driven by the folks at Capital Factory and Techstars. Positives include a tight-knit community and lifestyle. Austin is still short on early-stage investment capital, but this is rapidly improving.”

The success of Austin certainly looks to continue. As Bornhorst concludes: “I think Austin will continue to be a top location for technology companies, and will also be a strong digital health hub in the mid-continent.”


« Meet the companies changing your data centre


Research: Most companies baffled by Big Data »
Steven Vitte

Steven Vitte has written for his local South-Central Ohio newspaper the Chillicothe Gazette and has contributed his writing to various blogs. Vitte currently runs a blog called the Gaming Journalist Gazette and writes articles that discuss topics related to the Video Game Industry.

  • Mail


Do you think your smartphone is making you a workaholic?