Why You Should Start a Company in… Austin

It used to be, if you were serious about starting a tech company, you went to Silicon Valley. But emerging entrepreneurial hubs around the country are giving startup aspirants options. In this series, we talk to leading figures in those communities about what makes them tick. Here, part five of our series.

Seattle has Microsoft millionaires; Silicon Valley has—well, all kinds of bazillionaires. In Austin, they're called "Dellionaires," after the local computer company that made them rich. But Dell isn't the only big company to come out of Austin. The city can also boast that it is the land of Whole Foods, Tivoli, and SolarWinds—and a launch pad event for hot new tech companies in its annual South by Southwest conference. Twitter captured the buzz at the event in 2007; last year, Foursquare was all the rage.

But when the Web site AustinStartup declares in its tag line, "Ditch the valley, head for the hills," it's talking about more than just a smaller alternative to Silicon Valley. Located in the state capital, Austin's tech community has leverage when it comes to state initiatives that help support startup growth. And it's a good testing ground for government-related tech. It has also helped that Austin has a strong chamber of commerce, which sought to bring tech companies like IBM and to the region in the 1970s and 1980s, seeding the South with a source of tech talent.

Recently, Bryan Menell, publisher of AustinStartup and a director at The Dachis Group, spoke to FastCompany.com about what makes Austin's startup scene unique.

What makes Austin a great place for startups?

I think it's a combination of things. We have a pretty low cost of living in Austin. At the same time, there's a really high quality of life. The amount of home that you can buy here is much better than most places and we have nothing but land. But also there's the outdoors and then the sort of cool elements in the city, like South by Southwest. And so it just has those combinations and there's also a great kind of entrepreneurial ecosystem that we built over the years.

We have a large leading venture capital firm in town with Austin Ventures. Also Austin is a state capital and we have a huge university here with the University of Texas in Austin, which keeps a steady pool of really young smart people coming into the workforce all the time. So it's a real unique mix of state government and young smart kids.

Also, there is a state fund—they call it the Emerging Technology Fund, which is meant to help attract and fund technology companies.

How is it helpful to be located in the state capital?

Well, from a global city perspective, it provides a big base of jobs. The state government's going to be a big employer around Austin. And then there are just places where government meets technology. We just launched what's called the Texas Tribune, which is a brand new experiment and a very transparent bipartisan reporting of state government, so it'll be interesting. I work six blocks from the capital, so it provides interesting opportunities to sort of lobby the government around adopting technology and how to use new technologies for their benefit.

So Austin's great because of the quality of life, low cost of living, state capital, university—are we missing anything?

Just this entrepreneurial ecosystem or some people call it sort of like the entrepreneurial scene here. There are enough different things that we have going on, different tech groups and organizations that make it into a scene and it's less important that any one become big or become important, but the fact that there are just so many provides enough diversity for you to find what you're looking for if you're in the hardware and chip technology or if you're in the social software or enterprise. There's enough of that sort of scene here that people can find the things they're looking for.

Are there particular types of startups that would do better in Austin than others?

Sure, I think Austin is known for enterprise software companies, Trilogy and Tivoli and now Spiceworks and Solar Winds going public, so that's a huge base that people really know [about] Austin. Gaming has been solid, too, for a long time. Companies are bought and sold here, so there's a lot of gaming and multimedia stuff going on.

B to C [business-to-consumer] has been kind of bigger in recent years, companies like Home Away and CreditCards.com, and then we have a few of the kind of social media like CheapTweet, so we're starting to see a variety of different things going on. And then there are emerging clean tech and wireless and biotech areas, so I think those are the ones, as well.

So if you're going to create a new technology that is going to do real time reporting from the head of a drill bit in the Black Sea on oil, Houston is really your spot for that, I think—enterprise software is big, gaming is big, we're having some success in B to C and then, clean tech, wireless, biotech—we're trying to get a teaching hospital here in Austin to let biotech take off, so those are the areas and some of them are very big. There are probably six or seven major areas for Austin.

What's happening in the entrepreneurial system that makes it sustainable?

Austin's tech history is relatively young. I think that the Chamber of Commerce and the city leaders made a really concerted effort to bring technology here in the 1970s and 80s. They wanted to bring jobs to Texas and they wanted to make them tech jobs and clean jobs. It started with IBM and getting IBM to build a big plant here. I believe it was their Selectric-typewriter plant that was here and then it evolved and now, there's an IBM operating system group here and I think the AIX—Unix group I think is here and so there's a huge IBM presence now. But it took a while to attract AMD and other chip companies to come to Austin to build that.

We're past that stage, so I think now it's sustainable because there's enough of an ecosystem to sort of fuel it, but it helps to have a constant influx of smart new graduates coming from the University of Texas who love Austin. And if they're going to school here, they want to stay here. I've even met a lot of people who went to school here, graduated and maybe took a job in Chicago or New York or the Valley or whatever and stayed a couple years and then when it comes the time to sort of get married and raise a family, they go, 'Oh time to go back to Austin to go do that.'

The Chamber of Commerce initiative is interesting. Has that changed in any way?

Now the Chamber of Commerce's thinking is totally different. Before, they wanted to attract companies here, so the jobs will sort of follow. But now, they all want to make the quality of life in Austin great and bring smart people here, and they figure if the people are here, the companies will follow.

So is there a particular profile of an Austin entrepreneur that's unique from others cities' entrepreneurs?

I think they are different. I lived in the Silicon Valley for a few years and I think Valley entrepreneurs are much more progressive and I think they are sort of keeping a score financially. No matter how much money they make or how big the exit was or whatever, they recycle and go try the next thing.

And I don't think Austinites are particularly like that. I think they're a little bit more relaxed, a little bit more of sort of socially aware, too. I know some entrepreneurs who have grown their companies, they have a very intense experience, done well, had an exit and then they sort of disappear from the scene and they go focus on the quality of their life and spend time with their family and friends and maybe they will be an angel investor or be an adviser, but they're just not interested in hopping back into that really crazy 18-hour a day, six-day a week frenzy. I think in the Valley, they live off that. They totally love that stuff. So I think our profile is a little more laid back.

For more from this series:

  • Why you Should Start a Company in...Boulder
  • Why you Should Start a Company in...New York
  • Why you Should Start a Company in...Los Angeles
  • Why you Should Start a Company in...Chicago
  • Why you Should Start a Company in...Boston

Image: http://www.flickr.com/photos/shanepope/ / CC BY 2.0

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  • Mike Zeller

    Oh and we have the world's 13th LEED certified Silver Neighborhood, the Gulch.

  • Mike Zeller

    Austin is a pretty awesome city for businesses and entrepreneurs no doubt. But you can't mention Austin without remembering it's sister city, Nashville. We have an avid and thriving entrepreneurial and creative culture, enriched with academia, social non-profits/entrepreneurial initaitives, and multiple major multinationals have their headquarters here. Nissan has their North American headquarters here, HCA, and many others.
    #1 city for musicians in the country in terms of per capita people involved in the music industry (11% of our population).
    #6 city for artists to live according to USA Today rankings in 2009 (or 2008).
    #1 city to live according to Kiplinger's magazine based on quality of life, low cost of live, local economy and more.
    -Many more accolades for entrepreneurship....looking for them at the moment as I've misplaced my stat sheet.

    Email me for more info if you want as I feel like Nashville's worthy of consideration and would love to contribute any way you'd like. My best email is Nashvillemikez@me.com.

    Love the articles Laura!

  • Armando Filoteo

    Hi! Austin is also a mecca for eBay sellers, especially eBay consignment sellers like us, The Sellery.com. This week we are featured in an article on Auctiva's EDU website at: http://www.auctiva.com/edu/ent...
    We want to become the eBay center for Austin not only for consignment sales but also to teach people how to sell and how to buy. 7 other ebay drop off stores have popped up since 2003 and all went out of business. We are still here and plan to be for as long as the market provides. Austin is a perfect city for eBay sellers looking to expand into bigger operations.


  • Anne Michaels

    That is why I am bringing a new company to Austin late Spring/early Summer 2010.

  • Carol O'Brien

    So glad Laura and Bryan mentioned more than technology startups here in Austin. There's a culture of entrepreneurship here that spills over into all industries. Great article!
    Carol O'Brien
    Founder, Cleanicity

  • Gayle Hight

    Menell's "pretty low cost of living" in Austin is debatable at bes. OK, compared to Palo Alto, yes. And "nothing but land" is just Texas bragging. Austin has urban sprawl, long commutes and heavy traffic congestion- just like many other cities in Texas and around the country. In addition to a steady source of smart young people coming to the workforce, The University of Texas at Austin has an active venture startup mechanism, including Moot Corp (http://bit.ly/dsCTgX) and Austin Technology Incubators (http://www.ati.utexas.edu/). Thanks, Bryan, for sharing some of the great things we all love about Austin that are “Not Just for Start-Ups.”

  • Larry Warnock

    I too moved to Austin from Silicon Valley. This is a great town to start a software company. Phurnace was started in 2006, raised capital from Angels and VCs here in Austin, hired developers and sales reps and were off to the races. Grew quickly and were acquired by BMC Software in January of this year. Now, under BMC, we continue to grow here in Austin and the start-up spirit is still alive and well. No going back to the West coast for me.

    Larry Warnock, CEO, Phurnace Software

  • Gregory Ferenstein

    Great comments, all! Keep the personal stories coming. We'd love to hear more about your experience.


  • Bryan Menell

    Thanks, Laura, for doing this story on Austin! It's floating around the Twitterers in Austin very rapidly this week. As you can tell from my cohorts at Capital Factory, we're excited to help incubate a new round of startup tech companies this year, and a new group of entrepreneurs!

    One thing to note is that Capital Factory is not limited to just Austin companies. The program runs for 10 weeks in Austin, so you must be in Austin for the program. Applications are now being accepted for the 2010 program (http://bit.ly/cpKyps) so come be part of the Austin startup ecosystem!

  • Tina Cannon

    As a newbie to the start-up world I am living proof that (a) Austin is the place to start your business and (b) you need to get into an incubator/mentor type program asap.

    We were lucky enough to be selected for the 2009 class of the Austin based Capital Factory incubator program. Think of it as a "American Idol" for start-ups. The mentors within the program work with each company and really help the founders refine the concepts to be a more successful company, quickly. You will learn more in those 10 weeks than a year plugging away at it all by yourself. Take a look at the mentors you get to brainstorm with daily - http://www.capitalfactory.com

    As part of the first "alumni class", I am approached weekly with folks in Austin wanting to know "Is my idea a good one? Should I do this or that, Where do I get blank..." My answer is always the same, "apply to the Capital Factory at http://bit.ly/cpKyps and they will work with you to make your dreams a reality." You idea can quickly become your company.

    Tina Cannon
    CEO and Co-Founder

  • Sam Decker

    I came to Austin from the Bay Area in '99 for Dell, after working for 3 startups in SF and Silicon Valley. We haven't looked back, and I can tell you everyone I talk to says the same thing. We've built Bazaarvoice here, which is now 250 people in Austin and growing. I can tell you there is great talent and support system in place. With Josh Baer and Bryan Menell, we co-founded Capital Factory to support startups through a summer incubation program (www.capitalfactory.com). And there are about 20 other groups and associations in support of entrepreneurs. While Austin lacks many of the big success stories that make every developer believe they can invent the next Google, I think there's a healthy 'grounding' here and a lifestyle that fits the out-of-school entrepreneur to the seasoned entrepreneur who wants a great place for their family. Here's what Austin looks like: http://budurl.com/a7xm