The managing director of Techstars, a mentorship-driven start-up accelerator backed by more than 75 venture capital firms, explains how Austin, Texas, is re-establishing itself as an alternative destination for venture capital.
Austin is not a stranger to tech start-ups. In the dotcom boom, it was a second hub to Silicon Valley, but when the bubble burst so did Austin’s tech scene.
However, now it’s back and attracting accelerators, incubators, venture capital and an increasing number of new companies.
According to Dallas News, across the state, venture capital firms invested $183.7 million into 31 companies in the second quarter of the year, compared with $181.2 million into 38 companies during the same period in 2012.
Start-up accelerator Techstars expanded into Austin in May, adding to Boulder, New York, Chicago, Boston and Seattle in the US, and London. It runs Techstars Cloud programmes in San Antonio, Texas.
Jason Seats, Techstars’ MD in Austin
“It was a measured and strategic move to set up in Austin,” says Jason Seats, Techstars’ managing director in Austin. “We are very cautious about the noise around cities becoming tech hubs, but about a year ago we noticed we had rapidly approaching 200 portfolio companies’ alumni – and none were from the state of Texas.
“But Texas is a top-five state in terms of venture capital. So Texas has been on our radar for some time but we felt confident moving in after seeing what was happening.”
Seats says Austin is at an inflexion point. “The city spiked too quickly in the dotcom era, so did not have the foundation to weather the bust,” he says. “People and money left. People here didn’t forget that.
“Really, the city has tiptoed through the social-media boom and has just knuckled down and built businesses and models that are tangible and make money. It means there have been a lot of hard-working people here over the last 10 years and they’ve built a solid foundation and infrastructure in tech.”
Austin differs from other emerging tech hubs because of its diversity, says Seats, adding: “When you look at San Francisco, Boston, New York – the types of companies being created are very diverse by sector. They are large enough not to rely on branding themselves into one area. Austin is the same.”
Also, Seats says the stability of the Texan economy is supportive for new business and gives the city a stability that investors like. “There is a resource windfall happening right now in Texas, for better or worse, that means there will be a budget surplus for the foreseeable future,” he says. “It feels stable to be here.”
Seats says there are a number of new venture capital funds coming together and some in Texas are already on their second or third series of funding.