What would it take to make Austin 'the next Silicon Valley'?

I'd like to share my viewpoint on the recent Statesman article, What would it take to make Austin 'the next Silicon Valley'?

While I don't think that Austin wants to become Silicon Valley any more than Texas wants to become California, I think that we can learn from Silicon Valley to continue attracting great innovators and entrepreneurs to Austin.

Steve Blank commented that one of the most important aspects of Silicon Valley that differentiates it from the rest of the world is that failure is a badge of experience, not a badge of shame. Austin needs to be a safe environment for entrepreneurs to try out new ideas, to experiment, and to fail.  

Part of that is attitude and culture, but a big part is access to early stage capital and collaborative working spaces where entrepreneurs can meet each other, incubate ideas and inspire each other. We are very fortunate to have spaces such as Conjunctured, Cospace and Tech Ranch and communities like Bootstrap Austin. Still, we would benefit from a larger, central community meeting space and coworking facility. We need the Startup District that John Erik Metcalfe and Ceasar Torres started promoting a few years ago.

Capital Factory is one piece of the puzzle. We provide a small amount of capital and lots of mentorship to 5 select startups each year. More than half of the 15 companies in our portfolio are from outside of Austin and come here to participate in our summer program. Half of those stayed here after the program ended because they find the environment so friendly to entrepreneurs. We need to expand the number of companies so that we can have a bigger impact.

One obvious way reach more entrepreneurs is through the University of Texas. Inspired by the success of Capital Factory and the encouragement of Dr. Bruce Porter in the UT Computer Science department, I'll be joining with John Butler and Bob Metcalfe to teach and undergraduate entrepreneurship class at UT called 1 Semester Startup. I hope that through this class we can identify promising young entrepreneurs at UT, accelerate them down the path of success and keep them here in Austin.

Communities like Angel List are helping Austin by connecting our entrepreneurs with early stage investors from Silicon Valley and around the world. There are more than 100 Austin startups listed and more than 300 investors "watching" the Austin market (most of them NOT from Austin).

First time entrepreneurs need inspiration from successful entrepreneurs. They need role models to look up to and get advice from. Bazaarvoice, HomeAway, Spiceworks and Rackspace are all helping to fill this void. Let's not forget the massive Trilogy Alumni network that are driving many of the top companies in Austin right now. We need more visible leaders in the entrepreneurship community like Andrew Busey, Brett Hurt, Jack McDonald, Kip McClanahan, Bryan Menell, Bob Metcalfe and John Price.

I actually think most of the right things are happening. I've been here for more than 10 years and Austin has only become more attractive to startups and entrepreneurs. We are one of the top cities in the world attracting young smart entrepreneurs, college grads, and young professionals.

We are attracting startups like Gowalla and others that are moving to Austin from elsewhere in Texas and around the country. Austin is a great place to launch a startup because it is a market full of early adopters. I am contacted at least once a month by a startup who is looking for advice about moving here.

What do we need to do? We need to keep Austin attractive to young, smart people and innovative startups. We need to continue growing the early stage venture community and our connections to outside capital. We need to identify our Startup District (East side?) and achieve critical mass. We need to embrace failure. We need to keep being Austin. 

What do you think we should be doing to promote entrepreneurship and startups in Austin? Leave a comment below.

Comments

[wholesale hats]

Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming.

[Dallas venture capital]

Wow this such a great article and the tips are very comprehensive. For sure many entrepreneurs with small and big businesses are going to benefit from this. Keep it up!

[The North Face Outlet]

thanks for your article,like your blog very much,well done

[moncler down]

Great piece, Josh! Though it might sound a little crazy, I would argue that Austin doesn't need to be more Silicon Valley

[Irina Patterson]

Hi Josh,

Since I couldn't find your e-mial, I am posting my request here. We are doing series of interviews on the Role Of Incubators in the Global Economy Recovery. Examples of my interviews are here: http://www.sramanamitra.com/topics/seed-capital-funding-for-a-business/

We would like to include Capital Factory in this series.

We are interested in exploring questions such as incubators' business model, curriculum in use, if any, scalability of the incubator model, size of deal flow, what happens to the companies you accept, as well as what is the fate of those that are not accepted.

The goal is to use this interview series to highlight best practices and brainstorm about constructive ways that the global incubator industry can contribute to the Global Economy Recovery.

If you are interested to be part of this interview series, could you please get back with me?

Thank you,

Irina Patterson
http://sramanamitra.com

[Joshua Baer]

Welcome to Austin Ryan! Make sure to check out the Austin Startups Facebook group, the Austin Startup Digest, and the Tech Happy Hour.

[Joshua Baer]

Great comments Jim!

Let's talk to Bruce Porter about an iOS class!

[Jim Hillhouse]

Josh,

Good post. But there are some blanks in it concerning educational and capital aspects that will ensure Austin does not become another Silicon Valley.

Stanford, U.C. Berkeley and San Jose State form an educational component of the Bay Area's ecosystem that will be require long-term focus and effort to germinate in the Austin area. Those institutions innovate to keep the Bay Area at the leading edge by engaging in outreach to the technical and business community, an effort in which U.T. currently lags. It's not an issue of resources. Compared to U.C. Berkeley, U.T. has 7 times the endowment and 42% more students. Yet comparing the CS Departments of both schools, during the period 5/3-5/6 U.T. C.S. has 2 colloquia events where Berkeley has 25. And it's not just Berkeley. Where Stanford has pushed iOS development since 2009, an effort which has led to several start-up's, U.T. has done nothing, despite interest from its own students. But for ACC's iOS development course, there would be no formal mobile development program in the Central Texas area. I hope in the future U.T. innovates much more aggressively to expand its programs into areas of interest to entrepreneurs.

But even if U.T. were to throttle its efforts in such fields as mobile development, its graduates seeking financing in Austin, even in Texas, for their start-up's would experience a drought in funding, and one that is not improving. Fortunately, Austin start-up's are extolled to "boot-strap"! From pwcmoneytree.com, in Q1 2011 on a regional basis Texas ranked 7th behind SiValley, New England, the New York metro, LA/Orange Co., Midwest and Southeast. In Q1 2000, 2005, 2008 and 2011 Texas raised respectively about 21%, 19%, 12% and just over 10% of SiValley. Clearly, the trend in VC funding for Texas in general, and Austin in particular, is heading in exactly the wrong direction. That's not good news. And why is this happening?

As I once heard at a SIG in the Bay Area, "Talent goes where the money flows." Capitol Factory, Startup District and the many other places in Austin promoting startup's are a good beginning. But we need to recognize the need for U.T. to bring in more Bruce Porters. And somehow, the city needs to attract more funding.

From pwcmoneytree.com data, I've graphed both the SiValley-TX general VC, as well as start-up, funding here:

http://public.iwork.com/document/?a=p38250913&d=SiValley-TX_VC_Funding.numbers
http://public.iwork.com/document/?a=p38250913&d=SiValley-TX_Startup_VC_Funding.numbers

[Ryan Little]

I really appreciated this post. I am a young entrepreneur who moved to Austin less than a week ago from a small city in Pennsylvania. I have a number of startup ideas, one that I am hoping to launch in the near future. I live in East Austin, so that would be great if it became more of a "startup district. Although I'm not a student, I hope that I can find ways to meet like-minded individuals and begin networking with others in this city.

[Mike]

I'm guessing the article you refer to from Steve Blank is when he went back to Ann Arbor, MI and investigated the startup scene at U of M (http://steveblank.com/2011/04/07/one-hand-clapping-–-entrepreneurship-in-ann-arbor-michigan/). Real good insights.

One thing I've seen in Chicago is a real effort to connect all of the tech and startup companies into a community. There seems to be a collective decision not to become like the 'coasts' and keep our Midwest sensibilities. Of course having a company like Groupon has changed everything because investors who wouldn't give Chicago companies the time of day now want to find out what's happening here.

Good article. Perhaps one of the Capital Factory companies can spur things like Groupon did.

Of course if you could find a way to keep the temperature under 100 in the summer it might help too :)

[Mikael]

I think you've raised some excellent points here. Ultimately, capital and success stories are going to draw startups to any town and the silicon valley has certainly proven that. Another great factor is the Startup culture. The valley has painted itself as a meritocracy where eager/hard working entrepreneurs can find success if their ideas are good, but that's not always the case. We chose Austin as the home for our startup, Compare Metrics, because we knew that successful Texan entrepreneurs love to help other Texas startups; this community is an invaluable asset to our business. I'd rather be surrounded by passionate people who want to help than be just another fish in the sea.

[Eric Ingram]

One thing I can say about Austin, it has the most kind bunch of locals I have ever met. Enjoyed our visit at SXSW. Hope to see the startup economy bloom in Austin.

[Sam Eder]

Great piece, Josh! Though it might sound a little crazy, I would argue that Austin doesn't need to be more Silicon Valley, instead we should embrace the solid fundamentals and focus on profitability that is a departure from the SV scene. But, more importantly- we have a chance to make our own entrepreneurial environment. I for one, am grateful of being in Austin during this time period, as opposed to elsewhere.

[Kevin Koym]

Josh,
I think you're right on point that Austin does not want to become Silicon Valley just like Texas is not looking to be California. There are things to learn from the Valley. There are times that I miss the time that I lived there- there is a distinctive difference between hanging out in Palo Alto and Austin.

I think that the key difference is a measure of density. Startup activity is so dense across the Bay Area that many people here in Austin just have no concept of what it is like. At the Tech Ranch Austin, we have the first steps of what I remember it felt like to hang in Palo Alto... but as you point out, a "Startup District" type of physical focus will make a difference. We've got part of that around the Ranch, but agreed... its not to the level that Austin needs.... and once Austin has one nexus of this type of activity, there will be many different areas in town that will support the same activity... Just like Palo Alto does... and San Jose does... and SoMo (South of Market in SFO) does.

I believe, though, the number one thing that we can do now, starting today- that will move the needle faster than anything else- is going to be greater coordination between all of the activities happening. i for one am glad to see so much direct and indirect coordination between Capital Factory and Tech Ranch- e.g. having entrepreneurs taking advantage of both programs. Further- we (the whole community) don't need to add any new events, or start any new groups... we can coordinate what we've already got as our strength areas- and have everyone play to their strengths. I believe that without additional effort, other than this coordination, much greater output is possible here... Giving Austin a stronger base for startup activity, while keeping Austin distinctly Austin (and NOT just an extension of the Valley).

Thanks for the article.