Startups in Austin

Scott Francis
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There have been a series of articles over the last week about Austin and Startups… The two that seemed to really stir up discussion were by Trevor Gilbert of Pando Daily.

In the first, he discussed Austin’s Warped Center of Gravity – as a result of having one dominant VC firm in Austin:

First, the facts. Austin Ventures has nearly $4 billion under management. It has backed some of the most successful companies in Austin, including HomeAway, which is now publicly valued at roughly $2 billion. It has connections with nearly every major player in the ecosystem, giving it amazing deal flow. That is all to say: it’s a pretty successful firm, it’s found a formula for success, and it’s not going away any time soon.

Now, the criticisms. Most of them tend to focus on a somewhat controversial practice called a roll-up. Essentially, Austin Ventures picks a team to run a company (like HomeAway) and gives them capital to buy as many companies as possible to become the dominant player in a market by default. It requires more money than traditional early investments, but it also increases the chances of the company succeeding.

Reading the article, on the whole Trevor isn’t terribly critical of Austin Ventures.  After all, isn’t it better to have one incredibly successful VC firm than none?  It would obviously be better for Austin and entrepreneurs if Austin had more than one successful VC firm, but that’s hardly AV’s fault.

The second article covers more of what it is like to start and build a company in Austin. The article is pretty spot-on as-is.  Texas, and Austin, are pretty business-friendly places.  Austin seems to have the balance between business, music, art, environment, and public works down pretty well.  At the very least, there seems to be a broad consensus about the mix being “good”.  And that leads to Trevor’s second point – that Austin is a nice place to live:

Austin is, simply put, just a nice place to live. This is a largely subjective point of view, but it does gel with what I heard from dozens of people that live in Austin and are a part of the startup community. The city has a vibrant nightlife, live music, tons of quality restaurant, good weather 11 months out of the year (avoid August), outdoorsy and healthy activities, and a general can-do attitude. These factors are often cited when people decide on where to live.

Austin also has a diversity of economy that has helped it weather the economic storms of the last decade.  He also nails the “downsides” though these may or may not affect your startup-

  • smaller city, and ecosystem
  • lacks a local voice/blog/paper – I don’t quite agree with this, but I can understand the perception from the outside. There isn’t one definitive source of information, but actually the ABJ, Statesman, Austin Startup, and a few others sites are quite good.
  • money pool is broken – those of us who live here would say it is just more challenging than it is in Silicon Valley.  But it is a lot less challenging than it is in many other cities.

The real action on this article is in the comment stream.  The vast majority of comments are coming from Austinites sticking up for our city, which is as you’d expect.  You can quibble with the details of Trevor’s post, but he’s largely hit the nail on the head as to what the headwinds and tailwinds are if you’re starting up in Austin.

For us, at BP3, Austin is a perfect place to start and grow a company that requires a lot of human capital – a consulting business.  Your mileage may very!

 

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