Lower Costs, Laid-Back Lifestyle Continue To Draw Tech Companies To Austin, Texas

When I attended graduate school at The University of Texas in the early 2000s, Austin’s slogan was “Keep Austin Weird” (in a good way) and it was known for a vibrant live music scene. Its downtown was colorful, but the skyline was far from impressive.

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Fast-forward to today and it’s startling how much has 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 immense 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. In recent years, it has become a formidable alternative to the Bay Area and New York City for companies, big and small, looking to grow.

More than ever, I am hearing about a company that has either relocated its headquarters to Austin, is expanding its presence here, or has plans to open a secondary office in the capital city. Last year, we took an in-depth look at this migration and it seemed only logical to do it again in 2020.

In 2019, the Austin Chamber of Commerce recorded 58 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 in recent years). Those 58 relocations translated into 4,648 new jobs in 2019.

The rate of company relocations to the city just keeps going up. In 2019, 26 percent more companies relocated to Austin, compared to 46 relocations the year prior. (It’s worth noting that this only includes known relocations, and the chamber expects there others that were not publicly announced.)

Concurrently, Austin experienced record venture funding in 2019, with local startups raising $1.84 billion for the year, up 19.5 percent compared to the $1.54 billion raised in 2018, and an impressive 87 percent compared to $983 million in 2017, according to Crunchbase data.

For the first quarter of 2020, 38 Austin startups raised $434.4 million compared to 71 companies hauling in $577.5 million in Q1 2019, according to Crunchbase. The larger average round sizes for known investments points to an increasingly maturing venture scene, with the caveat that seed stage funding rounds commonly get added to our database weeks or months after they close, so we’ll likely see the Q1 2020 round counts rise.

Economic factor

In the first few months of 2020 alone, we’ve seen a number of startups as well as other bigger, more established companies move to the city.

In April, San Francisco-based Airtable opened a customer engagement center in Austin with plans to hire 100 people over an 18-month period. The startup has raised more than $170 million in capital to date, according to Crunchbase data, and achieved unicorn status in 2018.

At the time, Airtable said it had tapped Brian Hagen to serve as the office’s general manager. Hagen had also helped other companies such as Nextdoor and Twitter expand out of the Bay Area, according to a report by Austin Inno. Most recently, he was leading the sales team for Austin-based Dosh.

“I’ve been long drawn to Austin as a place to learn and grow, and I’m thrilled to be growing Airtable’s presence in this vibrant city,” Hagen said in a statement. “Suffice to say, Austin is the perfect place for Airtable to be investing in because it truly is one of the most tech-forward, innovative, and creative cities in the U.S., and it has so much to offer in terms of talent and culture.”

In January, QuestionPro relocated its global headquarters to Austin from San Francisco, saying that it was drawn to the city’s high quality of outdoor activities, affordable living and desirable housing costs, and the fact that it “attracts top talent from all over the world.”

“Austin is the perfect tech-friendly city for QuestionPro to place our roots and to drive our business to the next level,” said QuestionPro Founder Vivek Bhaskaran in a statement. “It offers a mix of vibrant startups, incubators, and classic technology corporations that we’re excited to be a part of.”

At the time, Bhaskaran also told the San Francisco Business Times that he had previously moved the company’s headquarters to the Bay Area but “economically, could not make it work.”

Expansions

Companies are not only relocating to Austin. They are also expanding.

In March, publicly traded San Francisco-based Cloudflare hired its first chief information officer. That individual, Juan Rodriguez, is based in Austin, not the Bay Area.

The company told me at the time that his appointment marked “the first significant management hire since [it] IPOd in September last year.”

Cloudflare first opened an office in Austin in 2016, and it is now one of its “fastest growing locations,” according to the company. As evidence of that, in March 2019, Cloudflare had 75 Austin-based employees. As of today, that number has more than tripled to 261, and the company is still hiring for another 100 positions, including roles in research and development, sales, engineering, marketing, product, legal, human resources and finance.

In December, Canadian app developer Bold Commerce announced it was expanding its operations in Austin, and ramping up hiring in the city. That’s when the company hired its first chief revenue officer, Mike Sanchez, who is now based in the Texas capital.

Bold Commerce has over 90,000 customers and almost 2,000 technology and agency partners, and describes itself as the “leading app developer on Shopify.” The startup raised $16.5 million in Series A funding from Whitecap Venture Partners and Round13 Capital in January 2019.

At the time of the expansion, Bold Commerce CEO and co-founder Yvan Boisjoi described Austin as “the ideal location for a fast-growing company like ours.”

“The Austin tech market has grown by 25% over the past five years and is now also home to many tech giants, including Google, Facebook, Oracle, and Apple,” he said in a statement. “We are ready to embrace all that Austin has to offer as we fuel our growth and continue to attract great talent.”

COVID effect

With the COVID-19 pandemic forcing companies and employees everywhere to re-evaluate their real estate decisions, it would not be a surprise if that trend continues this year.

In fact, multiple observers say Austin will stay top of mind either way.

“Austin’s quality of place, diverse business base, resourcefulness and creativity have provided resiliency even in uncertain times,” said Charisse Bodisch, senior vice president of economic development for the Austin Chamber of Commerce.

Christy Cardenas, managing partner of Austin-based Ecliptic Capital, believes that the coronavirus crisis has triggered a “digital everything” approach that will add fuel to the fire that is Austin’s growing tech scene.

“The cost of living, the comfort of conditions, and the ‘easy living’ attitude is enough of an attraction,” she told Crunchbase News. “When times get tough, like it or not, costs have to be cut—and real estate is no longer essential to business operation. This changes everything.”

I also talked with the leader of One America Works, entrepreneur Patrick McKenna, who believes Austin is a prime example of a technology center that other cities “aspire to create and where businesses and talent aspire to relocate.”

And McKenna doesn’t just talk the talk. He moved to Austin from San Francisco last June.

“Austin has recreated itself as a tech destination over the past years,” he told me in a phone conversation we had to schedule in lieu of an in-person meeting originally planned for when the COVID-19 pandemic was escalating.

The company is an organization that aims to create “high quality jobs and economic opportunity across America” by connecting companies and talent with emerging technology hubs.

In general, One America Works is attempting to help companies see the value of hiring people in markets outside of Silicon Valley and San Francisco, especially as so many are now working remotely.

“Instead of hiring someone who just graduated from the University of Wisconsin’s IT program or from The University of Texas, and moving them to California, why not just leave them where they are? It takes the pressure off the housing stock in the Bay Area,” McKenna said, “which makes the quality of life better for the people there. Companies can hire great talent at a lower cost. It’s a great way to distribute work around the country.”

Indeed, I’ve been seeing all over Twitter that more people are eyeing lower-cost locales such as Austin. An April 27 tweet by CNBC reporter Christina Farr alluding to this got more than 2,300 likes, for example. She said:

“I have friends who are moving out of NYC and SF because they’re convinced their offices won’t ever re-open. They’re looking at cities like Austin, Denver, Miami, as well as more remote/suburban areas. I wonder how common this will become…”

So do we, Christina. So do we.

Illustration: Dom Guzman