It was great news when the unemployment rate dropped to 8.5% last month.  But there were still enough zigs and zags in the data to make it unclear whether the trend would continue, and how real that number was.

Then the numbers came out Friday morning, as reported by the Austin-American Statesman and other outlets:

In the most impressive surge for the job market since the middle of last decade, the United States added 243,000 jobs in January, far more than economists expected. The unemployment rate dropped to 8.3 percent, the lowest in three years.

Hiring accelerated across the economy and up and down the pay scale. The high-salary professional services industry added 70,000 jobs, the most in 10 months. Manufacturing added 50,000, the most in a year.

Not only did the jobs report come back nicely, but an extra 200,000 jobs were added via revisions to the 2011 statistics.  The economy may not be screaming back, but it is slowly but surely improving.   Most surprising was that the hiring was really across the board, across a wide range of industries (including manufacturing and construction).  Let’s hope the economy continues to mend.

There aren’t quite as many independent BPM software vendors to report on these days, but I still try to keep track of their financial performance because it still seems that the overall trend is up and to the right – apparently the market still hasn’t gotten too crowded for more than one vendor to be successful. And of course I’m always looking for confirmation (or exceptions) to that trend.

Appian reported “record growth in 2011″ the other day with some key statistics:

• 90 new-name customers
• 219% YoY license order increase for Appian BPM Software
• Appian Cloud represented 37% of their total license orders in 2011
• Highlighted new customers include several government agencies.

The press release goes on to describe Appian’s mobile BPM offering and several industry awards they won over the course of 2011.  Appian’s press release and blog certainly support the thesis that BPM still has room to grow.

But what I find interesting is the wordsmithing of what seem like otherwise healthy numbers:

• “90 new-name customers”  – how is a customer defined, then? As a department, subsidiary, purchasing group, or corporate entity?  (the use of new-name rather than just “new customers” makes one wonder what the caveat is).
• 219% year-over-year license growth sounds fantastic. But then they added another word – they didn’t actually say license dollars, they said “license order increase”.  An increase in orders could happen if you lowered the price to free, which isn’t nearly as interesting as a 219% year-over-year revenue increase in license dollars.
• I’m surprised the 37% cloud customers is as low as it is.

My beef isn’t that the numbers are good – they’re great numbers, but part of the value of a number is the context.  If Appian grew license revenue 219% why didn’t they just say so?  So if they didn’t just say so, then why did they feel the need to trump up the numbers by obscuring which metric they’re really reporting? It just isn’t necessary.

This isn’t a problem unique to small private companies though.  Just the other day Google reported some misleading vanity metrics about Google+.  The effect of using these misleading figures though was to undermine their credibility rather than enhance it.

This odd cherry picking of metrics isn’t new however, 6 months ago Appian reported “Sales orders for the Appian BPM Suite grew 158%” – again, orders, not revenue.

Of course, as a private firm, they don’t have to report anything, but if your business is growing it is hard to resist crowing about it at least a little! But I would encourage private companies reporting metrics to use plain words in what ever language you need to get through to your audience.  Finessing the terminology only undermines credibility.

A series of articles to kick off the new year show that Austin is a bright spot still…

• Just today, OtherInbox announced it is selling to ReturnPath for an undisclosed amount.  Based on the smiles from the OtherInbox team, this was a good sale, at a good time, for the team.  Looks like a great fit with the parent company. It marks another success for Joshua Baer, who (along with a few others) has really re-energized the startup scene in Austin.  Interestingly, part of the value ReturnPath perceived in the deal was getting a good footprint in Austin, TX:

“The decision to acquire OtherInbox was based on its technology and its broad customer base, but separately we’ve been talking about where we might expand operations, and Austin was on that list,” Forman said. “The cost of living, the tech scene and the talent pool were very attractive to us. The opportunity to get that as part of the bargain with OtherInbox is awesome.”

• Socialware just landed an investment from the CrunchFund.  I’ve known Chad Bockius since ’99 and I’m impressed at how he’s been able to get visibility for the company with investors outside of Austin (note that Austin Ventures is also an investor in the company, however).
• The Austin office rental market is tightening up.  This trend has been going on for some time.  Locally, in our office building, this is noticed as I have to drive one extra floor up in the parking garage to get parking these days.  There just isn’t any vacancy.  Prices are moving more gradually but they are starting to move.  I saw a lot of growing firms in Austin reach for bigger space in 2011, with designs on growing headcount, and a belief in the stability of their businesses.
• There are IPOs on tap for Austin as well.  Bazaarvoice is the most likely candidate with a strong growth track record and a strong product offering.  Chuy’s, a Tex-Mex restaurant chain based in Austin is also planning to go public to fuel expansion (if a location comes your way, two recommendations:  DO order the “macho burrito”, and DO order the tres leches for dessert – but find a friend to share it with).  3 other companies are up to bat this year, having already filed for an IPO.
• All of this really has me looking forward to the Angelou Economic Forecast.  I took a look back at my notes from last year, and it looks like he pretty well nailed the economic forecast for Austin and Texas.  Not only does AngelouEconomics provide some of the best economic development consulting, it is also a local Austin startup-made-good story itself.  Quite a local success story.

Here’s to 2012!

Lots of good economic news in the city of Austin lately.

• Formula 1 is back on track.  There’s some debate, locally, about the value this has for Austin’s economy, but it is clearly a net-positive for the next 10 years.  Perhaps not coincidentally, a couple of new hotels are scheduled to be built downtown over the next couple of years.
• The Samsung plant in Austin is producing the A5 chip for Apple.  This was a massive investment from Samsung in local infrastructure ($3.6B).  Those of us following the news in Austin a few years ago probably recall what a close decision this was for Samsung.  It was the biggest investment in chip manufacturing capacity since the heydey of silicon in Austin.  These days, Austin is more of a hotbed of design than manufacturing.    As I understand it, Austin is Samsung’s second largest infrastructure investment – and the largest outside of South Korea.  People often forget how much is manufactured in the US in general – but this kind of high-tech component is particularly unusual to be manufactured onshore.
• Austin is attracting more early stage investments than other parts of Texas. $280M in Austin alone last quarter.  Fifty Austin companies received funding.  This reminds me of the 90′s in Austin.  There have always been complaints about it being much harder to raise money in Austin than in the Valley, and perhaps it is.  But it clearly is easier in Austin than it is in many other parts of the country.
• It looks like the “best performing cities” are moving to Texas…
• The unemployment rate nationally recently dropped to 8.6%.  But in Texas?  8.1% (down .3%).  A half-point better than the country as a whole. Austin, however, is a full point lower still, at 7.1% – 1.5 points lower than the national average.

So it appears to be a good time to be bullish on Austin.  But if you’re just now noticing, you’re late to the party.  All through the downturn, it seemed clear to those of us who live here that Austin was building up, slow and steady, a diverse and growing economy.  I’m looking forward to going to the Angelou Economic Summit in January – there are typically some key insights into how the local economy has been performing, and this year should be particularly interesting.

Momentum for Austin startups continues – with news that Austin startup Spredfast has raised a $12Million round of funding.  Rod Favaron, our Lombardi CEO, is running the company:

The company, which launched its service last year, received the funding from InterWest Partners of Menlo Park, Calif., and Austin Ventures. It has raised a total of $16 million.

Spredfast’s software lets clients manage campaigns and conversations on social media sites, including Facebook, Twitter, LinkedIn, YouTube and blogging platforms. Rather than going to each social site, Spredfast lets users publish and monitor social activity from one central platform.

[...]

“This is a big step for us, and we’re ready for the next stage of growth,” said CEO Rod Favaron, who joined the company in February. Favaron was previously CEO of Lombardi Software Inc., which was acquired in 2010 by IBM Corp. for an undisclosed price.

It is both a vote of confidence in Spredfast, and in Austin.  In 2010 it was common to read about the dearth of funding in Austin, but almost ever since then, we’ve been seeing more news about funding in Austin than I can remember since the ’90s.

In a followup to the previous post about recruiting talent to Austin, I think news like the above fundraising does more to recruit industry veterans to Austin than the recruiting trip they recently embarked on.  The coverage on MarketWatch wasn’t flattering:

In fact, I have to report that the Austin group’s recruiting night in San Francisco was something between a bust and a learning experience for the group.

It sounds like the two main events were, basically, a tough learning experience.  But hopefully the CEOs took advantage of the trip to prearrange a bunch of meetings with likely recruits rather than just depending on the group events.  Still, the target and the optics are all wrong.  Instead of getting a story about what a great place Austin is to work, and that people are coming here to work at our high tech companies, we got an article essentially about indifference in the Bay Area and how hard it is to find talent in Austin (which isn’t quite as dire as the article makes it out).

Imagine if these same CEOs had gone on a tour of Universities in California (or other states) to recruit talent?  To put the idea out there for college students to think about Austin as a destination.  University is the right place to strike.  The experienced industry veterans don’t need to go to a job fair to find companies in Austin – they’ll leverage their connections to find a job.  Its the college kids who need some help discovering Austin and Austin companies as a place to land.

The rest of the article focuses on “solutions”… and here’s one perhaps the 30 tech CEOs could get behind – an Austin-funded scholarship at several universities – giving us some press out there on the coasts.

Update:  This article on Austin startups finding funding via Angel List is probably relevant as well.  It just speaks to how the world of fundraising is changing, and there are fewer barriers than ever for Austin entrepreneurs:

Even for Austin startups that aren’t actively raising money, AngelList is becoming a way to get on the radar of potential investors, partners and customers.

Bill Boebel, an Austin entrepreneur and angel who has invested in 15 companies, calls it the “LinkedIn for startups.”

“It’s a startup’s resume,” he said. “Just like when you’re recruiting an employee and want to learn a little more about that person, it’s a great way to find out more about a company.”

And further, Ravikant says:

“Entrepreneurs inside Silicon Valley already have access to investors here, but it can be harder for a promising startup in Austin to break in,” he said.

“We have helped Austin startups get exposure to Silicon Valley and New York investors, and we also give those investors the lay of the land in Austin.”

Has there been a better time to invest in people and talent?

Hard not to revisit this subject when there is so much material out there right now.  Vivek Wadhwa in the Washington Post:

American companies must be provided with the incentives to invest in their workers as they used to. As recently as the 1970s, America’s most respected companies would make significant investments in workforce training. IBM, for example, took non-technical workers and taught them technical skills. They then trained these technicians to be computer programmers, sales reps, or product managers. New recruits received a year or more of training before they were expected to become productive.

I don’t know any company doing this anymore.

Today, nearly all American companies, including IBM, expect new hires to be productive on day one. These employees are given a day or two of “orientation” at best. Companies routinely fire people whose skills are obsolete and hire replacements with the right skills to maximize quarterly revenue and profits. Employers often fear that if they spend too much on skill development, employees will become more marketable and leave.

I’m afraid we are guilty as charged.  At a small company, I can understand this problem more than at a larger company.  At a small company one might not have the resources to invest in training in the early days.  And yet, it is precisely at these small companies that many people investments are made.  Are being made. Right now.  If you’re one of those small companies making excuses about investing – stop.  Stop making excuses.  Just start figuring out how to invest.

There’s been a bit of a blast of news about the Austin Technology Council (ATC) taking a delegation of Austin CEOs to Silicon Valley to recruit technical talent to Austin:

“These events are about Austin making a pretty loud statement in the Bay Area,” said Julie Huls, president, Austin Technology Council.  “Texas is a New Economy State, and we have a killer combination to support it: high-paying tech jobs, fast-growing companies, a low cost of living, and a relaxed way of life.  Over 100 of our area CEOs were together in May at an ATC CEO Summit and one key call to action was to bring more tech talent to Austin.  We are proud to deliver on that idea in a couple weeks in San Francisco and Sunnyvale.”

Some of the best companies in Austin are represented in this trip – and some great CEOs for sure.  These are people that Austin has a lot to be thankful for.  I may not be sure that sending the CEOs en masse is the best way to recruit tech talent to Austin, but I certainly don’t blame Austin CEOs for recruiting in other markets.  From my time at Trilogy and Lombardi, and now BP3, I know a thing or two about recruiting talent to a firm.  I think this event in the Bay Area is more about news cycle than actual recruiting.  Hoping to plant the seeds for the future.  Clearly there is a need for more skilled people in Austin:

Austin currently has several dozen technology companies hiring 40 or more new programmers each.

Integrating new talent into Austin is clearly good for the local economy and ecosystem.  I was part of one of these waves of immigration to Austin back in the mid-90′s – and the imports are now the CEOs and hiring managers at literally dozens of local companies.  But the long term solution to this problem should be a mix of approaches – recruiting and retaining talent from universities, industry, and various locations inside and outside of Austin. Too many of the startups in Austin have stopped college recruiting and really developing their own talent – which is easy to understand when a company has a horizon to exit of less than four years. But it isn’t just college recruiting – it is also hiring people with experience who have the potential to do more – and then challenging them to do it!  Don’t just hire Ruby on Rails experts and developers – hire people that you believe can become Ruby on Rails experts.

The strategy we take at BP3 isn’t to import talent – but to hire our talent where they live – so long as they’re willing to travel to customer sites.  If they live in California, that’s where we hire them and where they base out of.  If we hire them in Minneapolis, that’s where they’re based out of.  It is actually part of our goal to have geographic diversity, and it means that we can hire people that other companies can’t touch as easily. But it has a bigger benefit for our clients-  as we add staff, we’re more likely to be able to serve our customers with local staff rather than a team that has to travel to be there in person.  High touch, high value, we like to call it.

Vivek Wadhwa’s article in the Washington Post was a brilliant assessment of the “talent shortage” in the USA – first by calling out the objectives of the President’s Council on Jobs and Competitiveness:

The council is holding a series of meetings to find ways to fix a perceived national problem: an engineering shortage. Otellini and the council claim that such a shortage seriously threatens America’s ability to create jobs, and that the U.S. risks losing its innovation edge to China and India, which are producing a million engineers per year — 12 times as many as the United States.

But next, by explaining what is wrong with this logic:

The graduation statistics most commonly touted then were: China graduates 600,000 per year, India, 350,000, and the U.S., 70,000. We found that, in 2004, when comparing apples with apples, the U.S. had graduated more engineers (roughly 140,000) than India had (roughly 120,000).

Wow.  Wadhwa’s analyis just does not agree with conventional wisdom.  Wadhwa predicts that great numbers of engineers in India and China will face unemployment or jobs in fields unrelated to engineering.  This is where he cuts to the heart of it:

Then there is the question of whether there is a shortage of engineers in the United States. Salaries are the best indicator of shortages. In most engineering professions, salaries have not increased more than inflation over the past two decades. But in some specialized fields of software engineering in Silicon Valley and in professions such as petroleum engineering, there have been huge spikes.

So, there are shortages in a few critical areas, but overall there is not a shortage of engineering talent.  Again, this matches with the data that I’ve been seeing.  It also better reflects the proliferation of engineering-derivative majors in US universities.

If I were these local Austin CEOs, however, I’d also be shopping in other parts of the country outside of Silicon Valley and Austin, and I might also focus more time on universities – graduates are more likely to relocate and take a chance on a place like Austin.  But that requires a long-term strategy toward staffing that not all companies have.

I’m hoping that companies in Austin, and in general, will start taking the time to invest more in the people they’ve got, and hiring more people with potential, rather than just looking to find someone who has done it all before.

I have to applaud this article from the Business Insider, because it puts into words so well, something that I’ve been trying to articulate since 2008 (their emphasis):

Now here’s the interesting thing about Groupon: Despite its massive unprofitability, it’s a jobs-creating behemoth. According to its last updated S-1 filing, it’s got 9,625 employees, up from 37 in June 30, 2009.

So awesome, especially since that explosion basically coincides with the bottom of the recession.

But it’s not making money. So why is it adding so many jobs? Simple, because demand for its services and offers has been ridiculous.

Demand = jobs.

Right.  It isn’t actually profit that creates jobs.  At BP3, we don’t hire more people because we are more profitable and want to spend those dollars on hiring.  We hire more people because there is additional under-served demand for our services.  The article goes on:

If you offered Groupon a tax break, it wouldn’t make a difference because it’s not profitable. But even if it were, and you cut its corporate taxes, allowing more money to filter to the bottom line, unless that somehow translated into more demand for its products, it wouldn’t need to hire more people.

Again, correct.  Higher taxes aren’t “good for business”, but lower corporate taxes don’t lead to hiring (and jobs) either.  But hey, maybe this Groupon thing is just an exception.  Maybe other businesses with demand are refusing to hire because of their high tax burden? But I haven’t heard of such.  SalesForce seems to be doing fine, if you listen to Benioff:

We’re adding more than 1,000 new positions this year. Plus acquisitions. We’re aggressively growing the company….I’m not an economist, I don’t look like an economist. But as I said on our last earnings call, I don’t think there’s going to be a double dip because I talk to customers and they’re all growing, maybe not at 10% or 20% or 30%, but they’re all growing. I feel good about jobs, I feel good about the economy….

There’s demand for BPM as well – and so my colleagues in BPM aren’t seeing the recession or the possibility of one either.  Our customers are investing in their businesses (and most of them appear to be hiring in IT).  The jobs are just going where the demand of customers is strongest.

In a recent Austin Technology Council (ATC) CEO Summit, talent shortage were a hot topic.  Which sounds crazy when the unemployment rate is north of 8% in Austin, and in Texas.  AustinStartup’s George Dearing did a good job addressing a few of the key issues.  It’s a really good read.

• 77% of respondents agree that there will be a shortage of technically skilled talent in the future.
• 71% of respondents agree that there is a shortage of technically skilled talent at the present time in Austin.
• More than half of respondents believe that talent issues have limited their organization’s productivity and efficiency.

Future Talent Shortage:  I think the overall concern for the future is valid – but overstated.  Technology and productivity advancements often have surprisingly dislocating affects on employment.  In the 1990′s, VLSI and CAD tools got to the point where 4 Electrical Engineers could do the work that had required 100 engineers just a couple years previously.  I watched my fellow class of ’94 graduates in EE go into software companies instead of working for Intel and the like – there just weren’t the number of new jobs in electrical engineering and chip design that there had been in previous years.  In Austin I’ve followed the chip business with some interest – and I would venture to say that the number of chip designers employed here probably declined into the early 2000′s… until the market changed.  Now there are a lot of different chip applications – mobile devices and analog applications have created opportunities for a lot more applications – and for more engineers.  And, with the tools at our disposal today, it may make economic sense to tweak chip designs for much smaller volumes than in 1995.

What’s my point?  Technology employment is volatile.  That results in under-representation in STEM (Science Technology Engineering Math) majors, and it results in people with little STEM education joining STEM-related fields in boom times… and it results in people with STEM backgrounds exiting these fields when the boom eventually turns to bust.

When I was entering college I heard and read the same concerns about there not being enough engineers.  Somehow we made it to 2011 anyway. All I know is, STEM majors are going to be good choices for college students for many years to come.

Shortage of Talent in Austin Right Now:  I don’t see it.  I was just talking with someone today at a local software company who commented how hard it was to find the right people in Austin.  I expressed sympathy – after all, BPM is a bit of a niche business,  so I can relate in that not everyone is an expert in BPM software.  But his complaint was that people don’t spend enough time retraining themselves to be prepared for the technology shifts – learning a new platform or language.  He has a point – if you’re in high tech and you’re not willing to invest in your own skills you’re making a mistake.  But it seemed clear his expectation was that his company shouldn’t have to make an investment in someone ramping up.

But, on the other hand.  This reminds me a bit of companies who hire interns but don’t expect to teach the intern anything.   If you’re hiring high tech workers, you have to be willing to mix it up.  Sure, hire a few people with expertise in the relevant technologies.  But don’t be afraid to hire people with varying degrees of learning curve required to be proficient in the job.  We hired an intern this summer who didn’t know how to do what we wanted him to do this summer.  And he figured it out.  And I dare say he probably has a bit more confidence that the next time someone asks him to just figure something out, he will.

Talent Issues Limiting Growth.  All I can say here is – developing talent and growing costs money.  For many years, many companies have gotten by with minimum investment in people.  I don’t mean training classes.  I mean investing in real opportunities for people to learn by doing as well as training.  And then investing enough in retaining talent so that the investment in education and self-improvement pays off.

I have to quote a telling paragraph from the original post:

Brooking’s analysis opens up several discussion points. With diversity and the educational pieces presumably in place, what then are the  obstacles to acquiring the right talent? Are companies just terrible at recruiting? Are all the good engineers are in Silicon Valley or overseas? Perhaps even more provocative, are companies really investing in people and training their employees to become more highly-skilled instead of sourcing things out to get the razor-thin margins necessary to sustain their models? Whatever the case, the NYT surfaced data from the National Employment Law Project [below] showing low-end jobs are actually the ones making a comeback, again leading me to question how aggressive some companies are really approaching the recruiting process.

Great work.  By next summer, I’ll report on some of our own talent investments at BP3.  Maybe it is just the lack of VC funding that allows us to look further out for our investments than just the next year.  We have time to invest and grow with the team we hire.

More signs of momentum in Austin:  I’m a fan of Evernote, and in particular I think they’ve been smart about their application development strategy.  But today recently came news that Evernote is opening a development lab in Austin, which is great news for Austin, and hopefully for Evernote as well.

Credit to Austin Startup for bringing it to my attention first – there’s also an article on the Austin-American Statesman.  I also learned something new from the Austin Startup post:

Note that both Rich and Evernote’s CEO Phil Libin are no strangers to Austin; during the early 2000′s they spent their time at Vignette.

I didn’t realize they were previously at Vignette.  Nice Austin connection.  They’re getting started the right way – hosting a happy hour downtown and getting their job postings up.

Coming next week, several startup-oriented events, culminating in Capital Factory’s Demo Day ’11, and the ATX Startup Crawl afterward.

According to Diana Olick of CNBC, PMI Mortgage Insurance recently signed on to the “Responsible Homeowner Reward” program – a program that reward homeowners for paying their mortgages every month, on time, for the next 5 years.

It sounds like a pretty innovative way to encourage homeowners who are underwater to stay in their house and keep paying their mortgage (something they likely want to do anyway).  These underwater mortgages are particularly concerning, because a homeowner might conclude that it makes more financial sense to hand over the collateral (the house) to the Bank and default on the mortgage.

But Diana Olick comes down hard on this idea:

But current borrowers are current—plain and simple. Why do they need a bonus for fulfilling their financial obligations?? Credit card companies charge you a heaping fee the minute you’re a minute overdue, but now mortgage lenders and even mortgage insurers are so afraid of their customers, or have so little faith in them, that they’re paying them to pay up? They are literally willing to pay insurance on previously signed legal contracts?

Maybe Diana isn’t aware, but credit card companies pay a “bonus” for paying them off on time as well.  The bonus is in the form of frequent flier miles, award points, savings contributions, or cash back.

It is interesting that so many people find it immoral to renegotiate a contract, if that contract involves a single individual or family, and a house.  But businesses renegotiate contracts all the time!  They renegotiate debt servicing arrangements, payment terms, maturity of the debt obligations, etc.  And sometimes it makes sense to proactively offer to renegotiate terms with your customers, rather than to wait for them to make a drastic move.

An intelligent incentive to keep current on mortgage payments sounds sensible to me – I’d like to see more creative (and relatively inexpensive) ideas like this, not less.

I have to admit I was a bit puzzled by the distance between the ADP report and the official jobs report. Not to mention, I was a bit puzzled by the net-18,000 job gain, while around me I’m seeing more hiring than laying off going on.  Yes, we’re in Texas, but tech workers all over the country are finding work.

But of course government employment was a big drag on the monthly number, as the number of state, local, and federal workers declines in the face of less stimulus spending and budget shortfalls in most of the states.  So, it turns out if you *don’t* add seasonal adjustments to the monthly jobs report, the US actually added 376,000 jobs, according to Joe Weisenthal at Business Insider.

So, to explain:  we added 376,000 jobs in June.  But, the federal government applies a smoothing function to make month-to-month comparisons easier over time, that reduced the reported numer to 18,000.  But, we can compare June 2011 to June 2010 to get a sense for whether things are better or worse in 2011, in actual job number terms:

June 2010:  +107,000 (not seasonally adjusted)

June 2011:  +376,000 (not seasonally adjusted)

Seasonally adjusted or not, jobs in June 2011 were better than June 2010.  Having said that, this doesn’t mean that jobs won’t take a turn for the worse later in the year, or that we’re out of the woods.  Government budgets continue to shrink. Minnesota has shut their government down temporarily, and some firms are struggling a bit as of late. (The article does take pains to point out that in this case, it looks like a Cisco-specific issue rather than the economic headwinds)  It takes a lot of hiring to make up for a 10,000 person layoff.

No one said it was going to be easy to dig our way out of the recession, but I still think we’re making progress, based on what we see at BP3 with our customers, partners, and colleagues.

After a long drought, could there really be 7 Austin IPOs this year?  (which doesn’t even include companies that IPOed with significant Austin operations, like Demand Media)

The company is the seventh in Austin to file an IPO this year. Freescale Semiconductor Inc. moved forward with its sale in May, raising a less than hoped for $783 million. Also last month, WhiteGlove House Call Health Inc. registered to complete a $31.6 million IPO, but that deal has yet to close. Austin-based VOC Energy Trust raised about $217.7 million, before expenses, with its initial public offering on May 10. Also, San Marcos-based Thermon officially went public on May 5 with expectations to raise about $120 million.

Earlier this year, HomeAway Inc. registered to complete a $230 million IPO and Newgistics Inc. filed for a $86.3 million offering.

Can’t remember ever seeing so many maturing companies in Austin (including OtherInbox, which just hit a million users, Bazaarvoice, Vast, and others).  Oh, and HomeAway appears to be pricing at $24 or so…

The good news, unemployment has dropped to a recent low, of 6.5%:

Though the report showed a modest pace of job growth, there has been a string of recent announcements by companies planning to add jobs in Central Texas this year.

They range from startups adding five or 10 jobs to Altera Corp. , a California chip design firm that plans to open an Austin design center this year and grow to several hundred workers in the next few years.

There really have been a lot of “hiring” announcements lately.  I never know exactly how seriously to take those announcements though (after all, what really matters is how many people companies *actually* hire).

The bad news?

The region’s improving job picture is threatened, however, by proposed budget cuts at a number of school districts and state agencies. Government employment in the Austin area accounts for 173,500 jobs, more than any other sector, according to Workforce Commission figures.

The looming state budget cuts are expected to be severe, and are expected to have a significant impact on employment (including that of teachers).

Meanwhile, at a recent CEO summit in Austin, hosted by the Austin Technology Council (ATC), there were complaints of a talent shortage:

“That only gets you so far,” Favaron said. “We need to import top people, not hire them away from each other. In the past, we’ve had companies like Tivoli and Trilogy that brought in hundreds and hundreds of highly talented people. Nobody’s doing that right now. Instead, we’re recycling people.”

(Note: Rod Favaron was previously CEO of Lombardi, he is now CEO of Spredfast).

There’s some truth to that statement – we’ve had a lot of new talent injected into Austin via the college graduate ranks (thanks UT!), but we haven’t seen a company come along that is a net-importer of talent in the way that Trilogy, Tivoli, and Dell were in the 90′s.  Or perhaps the new up-and-comers (Home Away, Bazaarvoice, Solarwinds, etc.) are just going about talent-importing more quietly?  Too soon to tell.

I think the message to Austin-based CEOs is clear: be prepared to pay a little more to get and keep the people you want on your team.

From the NYTimes:

Two years ago, ad executive, Nancy Giordano, moved to Austin from Los Angeles, and within 12 months she had organized and started TEDx Austin with Jen Spencer. The idea-sharing conference had a waiting list its first year, leaving me wondering how an outsider could come into another city and pull together such an amazing gathering of thinkers and leaders. Ms. Giordano had grown up in Atlanta, and her career took her to New York City for seven years, Chicago for three and Los Angeles for 13, where she worked for Chiat Day, the ad agency, before starting her own consulting firm, Play Big, Inc.

I asked her what about the Austin culture made this doable. “There is this circle and a current that runs between the community’s business pillars that helps people do their thing,” she said. “There’s a real desire here to help people manifest whatever success they want to create. I think that’s because people are really happy. There is no sense of, ‘you win, I lose.’ Here it’s, ‘you win, I win.’”

The whole piece is pretty glowing, with an appreciation of Austin that only a fellow transplant to Austin can understand.

And speaking personally, I can’t help but feel like Austin’s vibe is reaching VC circles, as two of my friends who work in VC firms have come to visit Austin recently to touch base with companies in their portfolio.  Austin continues to hit on all cylinders.

We’ve written previously about the fact that the Austin economy and startup community seems to be humming along, as well as about the economy in general, which appears to be particularly startup friendly at the moment.  Or at least, it looks like startups are back to hiring in a big way.

More evidence of a change in the Austin fund-raising environment.  A couple of weeks ago Spiceworks raised $25 million- a tidy sum for an Austin startup.   Congratulations to our friends and colleagues at Spiceworks, which represents another example of Austin’s odd nexus of social, and enterprise software – a theme first made apparent to me by a speech Mike Maples, Jr. gave at Capital Factory a couple years ago.  He characterized the situation in Austin and laid out the data points – all of which I was aware of but hadn’t picked up on the emerging theme.

Spiceworks is “the largest and fastest-growing social business network for IT”.

Meanwhile, TabbedOut just raised another $3.7 million.  At first glance a consumer play, but it is as much about helping the enterprise (bars and other venues in this case) get paid.  Think more “OpenTable” than “Yelp”.  Actually, GigaOm has a better summary of TabbedOut than I could hope to provide, updated May 9th (Thanks to Stacey Higginbotham for the link).

The money raised is a good indicator that Austin venture capital funding is getting back up off the mat.

We’ve commented before on the economy, and hiring, and jobs.  As a small business, these are topics very near and dear to our hearts.  I’ve been waiting for the optimism that we feel, and that I see in Austin, TX, to start showing up in statistics.  Finally, it seems it might be.  ADP’s latest report showed and increase of 217,000 jobs in February (the largest increase since November 2006!). Small companies accounted for all but 13,000 of this increase.

We did our part – hiring 2 more seasoned BPM veterans in February.  We still see more opportunity out the front window than we do in the rear view mirror.  BPM in general is still growing.  The software platforms we know best have a lot of market momentum.  We’re bullish on 2011, and on the long-term prospects of business process management and our consulting practice.

To put it in perspective, at some point this year, we’ll have a team 3x the size that we started with in 2010.  And we’re seeing other small businesses – often in service industries0 – picking up  hiring activity as well.  And the market for software developers in Austin has markedly improved.  Hopefully this is the beginning of a long, steady recovery.

Think we’re the exception to the rule?  Check out the results of the Austin Technology Incubator’s survey of technology companies in Austin.  81% are increasing staff.  34% of all respondents are increasing staff by more than 10%.  Only 5% of respondents are decreasing staff.  Key findings:

• 33% launched their company in the last five years. The median year founded was 2001.
• Approximately half (55%) were headquartered in Austin.
• 4 out of 5 were privately owned.
• 37% earned more than $10M.
• Software companies represented approximately a quarter of the respondents.
• 21% employed more than 100 people. 45% employed between 1 and 10 people in the Austin area.
• In 2010, 53% increased their headcount, 32% didn’t make any changes and 15% decreased their headcount

With spring already here, and SXSW starting tomorrow (unofficial events starting tonight), optimism is the word for the day in Austin.

Angelos Angelou is a legend in Austin.  He’s been giving the Angelou Economic Forecast for 25 years now, and it has become a real institution in Austin.  I believe over 700 people attended his forecast – occupying one of the large Ballrooms in the Austin Convention Center, and essentially filling it.  The core of the event remains two focused economic talks, one by Mr. Angelou himself, and the other by a prominent guest economist.  But around that core is an excellent opportunity to network with fellow Austin business owners, business leaders, and political leaders.  The demographics appear to lean toward law firms and financial institutions, but I was hardly the only consultant in attendance.  I sat next to the assistant City Manager from Waco (the city management of several local cities were represented at the event), a couple of bankers, two lawyers, and a microsoft solutions partner.  Representatives of several politicians were also in attendance, along with our emcee, Kirk Watson.  At the forum, you sit at round tables over breakfast – encouraging a little discussiong before the talks get started.  As we introduced ourselves, I explained how Lance and I started BP3 back in 2007, and a bit about our trajectory to this point.  Only a few minutes into the first talk, Mr. Angelou made a comment about unemployment being under-reported because many people drop out of the job market and become “consultants”.

Mr. Angelou led off with a discussion of the Austin economy – how his previous forecast fared against reality (pretty well – directionally correct, and he correctly captured the “perception” of the growth), and his forecast was going forward.  First the overall context of the US:

• losing 650,000 jobs in 2010 (compared to losing north of 800,000 jobs in just January of 2009),
• an increase in GDP of 3.6%,
• an influx of 4.3 million people into the US,
• 6 quarters of consecutive growth
• household net worth is up
• consumer debt declining
• direct foreign investment is up
• US exports are up quite a bit

And yet, the gray lining:

• Likely, 200+ banks will fail this year
• Commercial loans are coming due for refinancing in large numbers.  Unclear how many of these will successfully emerge.
• Lower rents and lower occupancies – good for businesses generally, bad for the landlords and the banks.
• Significant cuts are coming in State, City, and County budgets as they confront mounting deficits amidst declining revenues

So how is Texas doing?

• Added 26,000 jobs in 2010.
• 8.2% unemployment
• Added 363,000 people.
• VC funding up nearly 30%
• Gross state product was down
• Retail sales down
• State deficit for the next two years: in the neighborhood of $20B.

Austin, in particular, is looking good compared to other tech hubs.  But, ironically, that is largely because of Austin’s non-tech work (government, for example).  Austin is forecast to have:

• 2.8% annualized growth rate
• 5.8% unemployment by end of 2012
• Might cross 1.9million residents in the metro area by 2012.  25 years ago: 500k.  We’ve come a long way.
• Estimated 125,000 new residents over the next 2 years.

The trends are basically all “up” over the next three years, but there is room for improvement.  Tech has been underperforming based on the statistics, and the median wage has been stagnant as more jobs enter the market but the new jobs are largely service sector, lower wage, jobs.

However, being an observer of Austin myself, I see some silver lining that may not show up in the numbers yet:

• Known as a “great place to start up“, the employment of startups is largely hidden from the statistics until the companies become established enough.
• VC investment doubled from 2009 to 2010 – $344MM in 2010.  That’s great news.  But Austin is home to one of the most active boot-strapping and lean-startup ecosystems.  These companies won’t show up as VC investments – but many of them are growing, or at least sustaining.

After Mr. Angelou finished, Greg Ip gave a talk about the financial crisis – how we got there and how we’re getting out of the mess.  His first argument was that a decade or two of great moderation typically leads investors and business leaders (and political leaders) to take on great risk.  This risk is primarily measured by the amount of leverage businesses are engaging.  One of the charts he showed was breathtaking in terms of how fast leverage grew relative to the modest economic growth.

Current account balance was highly symmetric with respect to the rest of the world.  As our balance went increasingly negative, the rest of world went increasingly positive.  There’s been a big correction back, but it is still a wide gap.

A key point in Ip’s analysis is that deleveraging recoveries take longer to take hold and get the economy back to the size it was when the crisis started.  People are still increasing savings, banks are continuing to sit on their capital.  The value of collateral (and therefore the ability to borrow or lend) has declined.  Ip discussed Quantitative Easing (aka “printing money”) – and why this makes sense to do.  Because at the moment, it doesn’t raise much risk of inflation – after all, Banks aren’t lending enough to create the multiplier effect you would normally worry about, and wages aren’t increasing, which prevents a wage-price spiral from taking hold.

Of course, as the US arrives at a more realistic view of what we can afford (both within government and personally), who will buy all our stuff?  Well, Mr. Ip proposes that Quantitative Easing has the effect of putting downward pressure on the dollar, as does our historically low prime rate.  The Rest of World is growing quickly.  China, India, and Brazil are all expected to grow north of 4% annually over the next 3 years.  When exchange rate changes and trends stick, over a long period of time, they start to really affect trade, because it affects the investments of corporations.

For the first time in a long time, the emerging markets now consume more than the US.

Of course, this blog only scratches the surface of the two talks.  I appreciated the opportunity to step outside the BPM bubble to hear how other people perceive the economy.  Sounds like things are looking up.

Steve Blank writes about the “enterpreneurial singularity“, a result of a combination of factors that make it easier than ever to start up a new company – combined with a set of factors that reduce the opportunity cost of doing so (the implied risk is less than it has been in a long time).

The Entrepreneurial Singularity
The barriers to entrepreneurship are not just being removed. In each case they’re being replaced by innovations that are speeding up each step, some by a factor of ten. For example, Internet commerce startups the time needed to get the first product to market has been cut by a factor of ten, the dollars needed to get the first product to market cut by a factor of ten, the number of sources of initial capital for entrepreneurs has increased by a factor of ten, etc.

And while innovation is moving at Internet speed, this won’t be limited to just internet commerce startups. It will spread to the enterprise and ultimately every other business segment.

When It’s Darkest Men See the Stars
The economic downturn in the United States has had an unexpected consequence for startups – it has created more of them. Young and old, innovators who are unemployed or underemployed now face less risk in starting a company.  They have a lot less to lose and a lot more to gain.

This is partly why I’ve remained (perhaps overly) optimistic throughout the recession.  I just believe the seeds are being planted for a sound recovery, and perhaps a more diverse future economic base.  Companies that survive the recession will emerge with new skills, customers, products, and survival skills that will help immensely as the economy grows.

Vivek Wadhwa writes that there is no simple answer to the question of whether there is a shortage or a glut of engineers:

So there are many issues here. But the national debates about competitiveness, immigration, and education, typically focus on the issue of supply and demand of engineers and scientists. They paint this issue in black or white when it is shades of gray.

And he makes a few additional points supporting the notion that educational institutions don’t always teach the specific skills companies want, and that our corporations aren’t investing in teaching the skills they want to their employees either.  The combination of these two effects leaves many companies feeling as if there is a shortage in general, when it may really be specific areas of shortage instead.

Of course, a shortage of people with the right skills has been a real problem in the BPM space – so this is nothing new to us.  And we think the primary answer is to invest in the people you hire to keep them up-to-date with the skills you need, while augmenting with help from outside your organization (leverage).

However, there was one point where perhaps the cause-and-effect were mis-stated:

The world’s best and brightest aren’t beating a path to the U.S. any more. In previous years, H-1B visas for foreign nationals were in such high demand that they had to be awarded by lottery. This year, the annual quota of 65,000 hasn’t even been used yet. Instead, these workers are staying home and entrepreneurship is booming in countries like India and China.

I don’t believe the lower number of H-1B visas has anything to do with the demand from foreign nationals to live and work in the United States.  The issue is that you can’t get an H-1B visa without a corporate sponsor.  Many companies have pulled back on hiring H-1B’s – partly because of the economy or their own circumstances, partly because of moderating labor costs for US nationals, partly because of public (and internal) backlash against abuses of the visas (mostly other than H1B), and partly because many of the multi-nationals have offices in various countries around the world – and may prefer to hire these same people for lower wages in their home countries.  I think the Startup Visa movement was one great way to help keep talented H-1B visa holders in the United States, and I think it illustrates that the problem is one of process, rather than demand imbalance.