Austin's Start-Up Landscape

What’s the number one city for startups in the United States? Is it Silicon Valley, home to accelerators Y Combinator and 500 Startups and to tech giants Google and Facebook? Or perhaps it’s New York City – where companies like Foursquare, Warby Parker, and Rent the Runway got their start.

According to the most recent annual Kauffman Index report, which ranks “the rate of new entrepreneurs, the number of entrepreneurs who started their companies when unemployed, and the number of startups per capita,” it’s neither New York City nor Silicon Valley. Austin Texas, hometown of True Wealth Venture’s takes the top spot, followed by Miami, then San Jose and NYC ranks at number seven. As of now, the City of Austin’s startup density is greater than that of the Silicon Valley!

There’s no denying that this former little Texas town has recently become a booming hub for entrepreneurial and tech activity; it’s been rumored that 110 people move here every single day. But, what exactly does that mean for both founders and investors? Can the Austin investment landscape afford them enough staying power? Or is just a matter of time before these companies pick up and move west to secure funding?

In November of 2015, the Austin Chamber of Commerce in partnership with the Austin Technology Council released the Inaugural Capital Landscape Analysis to answer these questions. In summary, the results show there is quite a disparity between the number one Kauffman ranking and how Austin ranks in terms of funding sources and average deal sizes.

Austin has approximately 600 fewer funding sources than both Silicon Valley and New York (144 compared to 785 and 739, respectively) and an average deal size half that of other major metropolitan areas’ ($5.4M versus $10M+). The investment network here is growing, but is still grossly developing when compared to those coastal cities.

However, Austin is well poised to catch up quickly. City leadership is actively championing the development of later stage funding sources, and the city’s culture lends itself to supporting that. “Keep Austin Weird,” serves as the longtime unofficial city slogan, and it represents our, albeit sometimes offbeat, but always forward-thinking mentality. Austin is a melting pot where musicians, artists, professors, engineers, entrepreneurs and moguls live in harmony. We have a nationally ranked university of over 50,000 students (with a new state of the art medical school set to open this year), Whole Foods, Dell and SXSW. This unique combination in a city of this size creates not only a breeding ground for innovation, but also a haven for cross-functional and cross-industry collaboration. During a panel, “New Funds Seek to Provide More Money for Austin Entrepreneurs”, LiveOak Ventures general partner Krishna Srinivasan discusses the growth of the Austin landscape and said,

“One way to make the entire ecosystem thrive and grow is through cooperation, collaboration and syndication.”

And collaboration is a key piece in making Austin a hub for entrepreneurs, and is an unspoken rule. That is, if you’re part of the entrepreneurship community giving back and paying it forward is expected, which makes it a very accessible and friendly place to meet people. True Wealth Ventures partner Kerry Rupp is quoted from a recent SXSW panel entitled “Female entrepreneurs offer advice to women in Austin startups at SXSW”:

“In Austin the leadership in the entrepreneur community has fully embraced the idea of raising all the ships,” she said. “We’re all figuring out how to make the ecosystem of Austin successful and not ‘how can I get mine?”

If we look at the position of women specifically within this landscape, we see a thriving network for collaboration and a good support structure for female founders. Women@Austin is an exemplary case of this collaborative environment. Women@Austin brings together the city’s best and brightest female leaders and entrepreneurs to work toward a mission of making Austin the number one supportive city, and most accessible in the nation for women entrepreneurs. And in fact, we’re well on our way to achieving this goal. Austin now ranks number six among U.S. cities for women-led businesses seeking equity funding.

We must point out that a big part of what makes Austin such a thriving hub is the fact that it’s in the middle of Texas. Texas ranks number 2 among U.S. states for fastest growth in the number of women-owned businesses — a number that grew by 98 percent between 1997 and 2014. And as a whole, if Texas was it’s own country (an idea many Texans dream of) it would have the 12th largest GDP in the world, with 54 Fortune 500 companies headquartered in Texas, coming in second behind New York for highest number of HQs.

So while we see the numbers of entrepreneurs in Austin growing rapidly, the rate of funding sources still doesn’t match the rate of entrepreneurs seeking funding. True Wealth Ventures is excited to contribute to the much-needed growth of the funding sources in Austin, and utilizing the huge potential the Texas market has for both wealth and business talent! As Austin Mayor Steve Adler put it,

“Austin’s ecosystem has never been more hospitable for new venture capital and additional capital sources.”

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“Inaugural Capital Landscape Analysis for Austin Reveals Investment Gaps & Opportunities,” BusinessWire.com

“Facts and Figures,” Utexas.Edu

Dell Medical School Info DellMedSchool.Utexas.Edu

“Austin Demographic Data,” AustinTexas.Gov

Lorek, Laura “New Funds Seek to Provide More Money for Austin” Entrepreneurs,” Silicon Hills

Denney, Amy, “Female entrepreneurs offer advice to women in Austin startups at SXSW,” Community Impact Newspaper

“Welcome to Women at Austin,” WomenatAustin.com

“The 2014 State of Women-Owned Business Report” American Express OPEN

“If Texas Were a Nation 2014,” Gov.Texas.gov