Venture

Tech’s Major Migration to Austin, TX

When I attended graduate school at The University of Texas in the early 2000s, Austin’s reputation was for “weirdness” (in a good way) and amazing live music. Its downtown was lively, but the skyline was far from impressive.

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Fast forward to today and my, how things have changed. Construction projects and high-rises abound. And while the skyline can’t compete with the likes of New York City (few can), for those of us who live in Austin, it’s not only a beautiful visual landmark welcoming people to downtown, but a clear symbol of the tremendous growth the city has experienced over the past few years.

A large part of what’s behind these changes can be found in the city’s evolution into a tech hub. Over time, it has become a real alternative to the Bay Area for companies, big and small, looking to grow.

Nearly every day another company announces it has either relocated its headquarters to Austin or plans on opening a secondary office in the capital city. It’s been such a frequent occurrence I thought it would be fun, interesting, and hopefully helpful to quantify this apparent trend.

In 2018, the Austin Chamber of Commerce recorded 46 relocations to the Austin area (keep in mind this does not include companies opening second offices here or those like Apple, Amazon and Google who have announced major expansions over the past few months). Those 46 relocations translated into 9,424 new jobs in the city last year. That compares to 51 relocations in 2017 leading to 3,050 jobs.

Over time, I’ve heard many executives and VCs tell me that moving to Austin made sense because of the region’s lower cost of doing business, more affordable real estate (especially relative to the Bay Area), and growing pool of tech talent.

In the first few months of 2019 alone, there’s been a flurry of startup moves to the city in addition to bigger, more established companies. One of the biggest moves was that of Zoho. The Microsoft Office cloud competitor committed to the region in a big way by leaving the East Bay and establishing its headquarters in South Austin with the purchase of 375 acres of land, a move that is expected to create at least 440 jobs. Zoho Chief Evangelist Raju Vegesna told me that company execs noticed the Bay Area had simply “gotten pretty crazy” over the past four to five years.

“The quality of life, traffic, cost of living, and housing prices has just been going crazy,” he told Crunchbase News. “We decided it was time to get out and make Austin our home and expand here.”

Last week, London AI startup Imandra said it would be moving its headquarters to Austin after raising a $5 million seed round co-led by LiveOak Venture Partners. Also earlier this month, e-cigarette unicorn Juul Labs announced it was setting up shop in Austin with plans to hire at least 48 to start locally, according to the Austin Business Journal. The Austin office will serve the Americas and be populated with the San Francisco-based company’s commercial teams. Juul cited the city’s central location as a factor in the move.

It was time to get out and make Austin our home

On April 10, online residential brokerage REX (who I wrote about in January when it raised a $45 million Series C) announced it had moved its headquarters from Los Angeles to Austin. It had 28 employees here at the time. It plans to double that by year’s end. In a press release, Rex CEO and co-founder Jack Ryan called Texas “a place of outsized ambition and out-of-the-box thinking.” He moved to the city last year.

March proved particularly busy for the region. The largest month in terms of jobs as a result of San Francisco-based construction tech unicorn Katerra (which has raised $1.2 billion over time) and its plans to build a 600,000-square-foot manufacturing facility in San Marcos (which is considered part of the Austin metro area). The company plans to create 542 full-time advanced manufacturing jobs to the city in one year’s time.

In March, construction tech unicorn Procore said it had decided to expand its engineering presence to Austin. Previously, that department had been localized in the company’s Carpinteria, Calif. headquarters, according to communications director Doug Madey. Procore first opened an office in Austin in 2015 with five employees. Today, it employs over 280 people and continues to hire. Forty-six percent of its new hires will be for technical roles, Madey said.

“As we expand our engineering teams and consider locations for growth, Austin became a natural fit given the success we’ve seen there already, especially when you consider the city’s growing tech presence and talent pool,” said Steve Mair, vice president of talent acquisition at Procore. “We’re planning for Austin to see the highest employee growth rate in 2019 across all our locations.”

Also in March, London-based online advertising analytics firm Adthena announced it was going to triple its headcount in Austin this year after raising a $14 million Series A. The company opened its U.S. headquarters in Austin last year.

In February, Directive, an Irvine, Calif.-based B2B and enterprise search marketing agency, announced the opening of its second headquarters in Austin. Also in February, Eta Compute Inc., a California company that provides machine learning to mobile and edge devices, announced the opening of a new “tech center” in Austin.

Earlier in January, San Francisco-based Juniper Square, a profitable real estate investment management software maker, said it planned to significantly boost its headcount in Austin after raising a $25 million Series B.

Cellphone case manufacturer and Europe-based Tech21 also moved its U.S. headquarters to Austin last summer. Specifically, it consolidated its U.S. business from the Bay Area and Austin “to just be fully focused on Austin.” I spoke with CEO Colin Woodward about that decision and he said the company (which has annual sales of more than $200 million) had originally opened an office in San Jose to be close to Apple retailers in Cupertino.

“What we discovered is a couple of important things,” he said. “People based in Cupertino weren’t visiting Apple more regularly than people in London. Also, the time difference made it challenging to conduct business. And finally, it was a very expensive place to recruit great people from both an individual salary perspective and tax perspective as well.”

Austin was appealing because of its “very young feel,” innovation, and growth, Woodward said.

“When we do have opportunities to recruit, we’re finding it to be a great process,” he added. “There’s talent already here or talent in other parts of the U.S. excited about moving to the city.”

Just last week, Compass market analyst Patrick Carlisle sent out a report that found that “Bay Area population growth has been slowing markedly in the past two years measured after the extremely high rates of growth for the six previous years.” Meanwhile, more people are flocking to Austin. The city led the nation in population growth again in 2018 for the eighth consecutive year.

I could go on and on, but I think you get the point. Austin is growing. A lot. And I have to say – as someone who has lived in both the Bay Area and Austin – it’s a really exhilarating time to be here. In some ways, it’s even more exciting than the Bay Area, where growth is a given. Here, everyone gets pumped about every major deal, new fund relocation announcement, and general win for the city. That is refreshing and contagious.

Update: The original headline of this article called tech’s move to Austin a “great migration.” However, upon being reminded of that phrase’s historical context we amended the title.

Top Image Credit: Li-Anne Dias.