Startups And Investors React To Apple’s Expansion Plans In Austin

Apple’s Dec. 13 unveiling of its plans to spend $1 billion to build a massive new campus in North Austin came as a shock to most of us in the city.1

Although perhaps it shouldn’t have. The tech giant already has one campus here with nearly 7,000 employees—its second largest location outside of its headquarters in Cupertino, Calif.

Apple’s newest Austin campus will be located less than a mile from its existing facilities. The 133-acre site will initially accommodate 5,000 additional employees, with the capacity to grow to 15,000, and is expected to make Apple the largest private employer in Austin, per the company’s official statement.

The news made global headlines and takes Austin’s growing standing as a true emerging tech hub to another level. The city has already been growing like crazy with increasing startup activity and funds like Peter Thiel’s Mithril Capital Management moving its headquarters here from the Bay Area. Now, we’ll likely see even more tech-related headlines coming out of the Texas capital.

But in the meantime, we wanted to get some local reaction to Apple’s announcement and not surprisingly, most of it was pretty bullish.

I talked with Charlie Plauche, a partner at Austin-based S3 Ventures, who said it’s been “crazy” watching all the buildings go up over the last few years. In general, he believes that Apple’s “massive” additional investment here “only further solidifies the city as the major tech hub it has been for years.”

At the same time, Plauche is realistic that there will be some near-term competition for jobs “in an already really tight labor market.”

Apple reportedly wants to do a lot of engineering and R&D hiring, which Plauche said is notable. Historically, the company has focused more on hiring back-office operations and customer support in Austin.

“Other large tech companies such as Amazon and Google are also doing more engineering and R&D hiring, so this could add some pressure [on startups] when it comes to recruiting and retaining,” he told Crunchbase News. “But I think in the longer term the larger companies will attract more tech workers to Austin, so it will be net positive.”

Plauche also believes Apple’s expansion, in combination with the presence of the other large tech players, will only lead to increased M&A activity in a city that’s already had some impressive exits as of late.

Michael Smerklo, co-founder and managing director of Next Coast Ventures (who himself moved to Austin from Silicon Valley in 2015), said the move by Apple is an example of why his firm has its name.

“We think Apple’s decision to open a new campus in Austin is a true testament to a shift that we founded our firm on: Austin is poised to be the next major innovation hub outside the coasts,” he told Crunchbase News. “Austin has a great legacy of building major tech companies, paired with outstanding tech talent coming from the University of Texas and the town’s founder-focused ecosystem. It’s no surprise the largest tech company in the world selected Austin as its second home.”

For Madhan Kanagavel, founder and CEO of cloud computing startup FileCloud, the news is generally positive. He believes the city’s “unique blend of arts and technology” aligns with the Apple’s “progressive” mindset.

He agrees with Plauche that the new campus will certainly have an impact on hiring.

“As Austin continues to deal with a figurative war for talent, Apple’s new commitment to Austin will both create thousands of jobs and likely a talent migration from the startup ecosystem, especially within the engineering and sales realm,” Kanagavel told Crunchbase News.

Kurt Rathmann, founder & CEO of accounting and finance startup ScaleFactor—which raised $10 million in a Series A funding round in July—believes the news is a natural progression of the city’s growth over time as people and companies have increasingly moved to Texas in part due to its lack of state income tax. (To that end, a recent Dallas Business Journal article reported that 1,800 companies left California in a year—299 of those going to Texas.)

“While some startups may groan that a tech giant coming to town will make it harder to find talent, it feels like the company is simply following a wave of talent that has been streaming into Austin for years,” he said.  “Attracted to the low cost of living, good food, live music, friendly culture, and — as more than one of my employees reminded me — tax benefits, talented employees have chosen Austin over coastal tech hubs at a growing rate. It comes as no surprise that tech giants are following suit now, and I expect that we’ll see VC funds from Silicon Valley and New York do the same.”

  1. Disclosure: My husband is an Apple employee, but that has no bearing on my reporting.

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