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How Austin, Texas became the world's tech boomtown

Austin is now staking its claim as a global tech powerhouse. The city is a haven for companies large and small looking to establish a pied-à-terre, but it's not merely outsiders fueling this surge. Austin has increasingly become the place where unicorns are born. As a tech PR agency, we've taken note of all the big news coming out of Austin on the tech scene.

“The growth and energy in Austin feels like Silicon Valley in the ‘90s,” Morgan Flager, managing partner of Silverton Partners, one of the city’s most active investors, told TechCrunch last year.

The Lone Star State’s capital is now home to a rapidly growing ecosystem of tech companies carving out niches in tech arenas like artificial intelligence, advanced manufacturing, and data management.

As the ecosystem continues to mature, yesterday's successes are fuelling today's local entrepreneurs, and investors from across the US are turning to new opportunities in Austin.

So many cities have been keen on luring the sector’s brightest minds and deepest pockets out of the Valley for years. Austin beats them out year after year, and has shown no signs of slowing down. All of this necessarily begs the question – why Austin?

Startups surge in Austin

How Austin, Texas became the world's tech boomtown

There are more than 5,000 startups in Austin collectively worth over $128 billion. And that’s set to grow as the economy bounces back.

Those numbers are steadily growing, thanks to the city’s network of accelerators and incubators, including the Capital Factory, Austin Technology Incubator, and Techstars, to name just a few. Let’s look at some of their tech clusters.

The new wave of AI is also a big part of the story in Austin, with just about every new company showcasing its AI edge.

Austin's metro area saw 118 generative AI-focused startups founded between 2018 and 2023, making up about 3.4% of all startups. Today, the local AI sector thrives on the strengths of some standout players.

Jasper (which attained unicorn status in 2022) is redefining machine learning processes, while CognitiveScale, Valkyrie Intelligence, and Mythic AI are pioneering new frontiers in AI. SparkCognition, another formidable AI player based in Austin, has also championed the city’s AI scene, and in 2021, opened a 50-acre AI research hub, HyperWerx, to explore the capabilities and applications of AI with physical systems.

Austin goes all-in for high-tech manufacturing

Elon Musk is bringing new dynamism to Texas. The Boring Company, which is creating transportation and freight tunnels to solve the problem of traffic, raised $675 million in Series C funding last year. Austin is also home to Tesla’s Gigafactory (now the EV manufacturer’s global headquarters), and SpaceX last year opened a Starlink factory in the region.

This is really just an extension of Austin’s growing manufacturing capabilities. Austin has long been a leader in advanced manufacturing, semiconductors, and electronics R&D. The region is also home to a growing number of fast-scaling startups in automotive technology, medical devices, nanotechnology, and aerospace manufacturing, including Infinitum, Radiance VR, Firefly Aerospace, Parasanti, and EIO Diagnostics.

Austin is Texas’ (and pretty much the USA’s) clean power capital

With unparalleled connections to global energy titans, Austin is home to top-tier EV manufacturers, system integrators, and solar enterprises. Notably, the city's progressive environmental policies (Austin often ranks highly among the greenest cities in the US) set it apart from much of Texas, which has given rise to a thriving cleantech sector in the city. Daylight Energy, Blumen Systems, ATX Solar, and Bodhi are just a few of the names you might hear on the ground.

Austin is a bastion of big data innovation

At the core of Greater Austin's tech-driven economy lies an expanding data management hub. Thanks to its central time zone, minimal risk of natural disaster threats, and access to cost-effective telecom and electricity rates, local techies have touted Austin as the sweet spot for companies looking to open data centres. Startups innovating in this arena include Bestow, Enverus, Granify, and HUVRdata.

Austin’s startups aren't just launching; they're also scaling, and often reaching staggering heights. Beyond household names like Bumble and Indeed, emerging luminaries such as Workrise, ZenBusiness, The Zebra, Abrigo, ZenBusiness, and Iodine Software, and Iodine Software are fast becoming the city's new icons. As of May 2023, Austin has birthed 11 unicorns - most of which attained that milestone valuation in the last three years.

An in-Dell-ible mark. How Austin’s tech scene got its start

Austin's tech zenith wasn’t born overnight. In fact, it's a legacy half a century in the making. The 60s marked IBM's entry to Austin, followed by Motorola in the 70s. Come the 80s, M.C.C and Sematech stepped onto the scene, bringing names like Robert Noyce, the brains behind Intel, to the city. Yet, the real seismic shift began inconspicuously in a University of Texas dorm room, where Michael Dell launched PC's Limited — what would later be known as Dell Inc.

By 1992, Dell would go on to be the youngest CEO of a Fortune 500 company, and was Austin’s first homegrown billionaire. The term 'Dellionaires' was coined, signifying those who prospered during Dell’s golden era.

Austin began attracting elite talent from institutions like Harvard and Stanford, as well as from Silicon Valley. While it didn’t quite create the same startup seedbed as, say, the PayPal Mafia, Dell’s success in Austin demonstrated that a tech company could thrive outside traditional hubs like Silicon Valley.

Austin is attracting the big tech companies that matter worldwide

Austin Texas. Tech PR spotlight on their highway to innovation

By the late aughts and 2010s, tech behemoths like Oracle, Facebook (Meta), Apple, and Google had set their sights on Austin, primarily for their secondary headquarters. In their shadow, a surge of local startups emerged. What began as a modest influx over a decade surged into a tidal wave in recent years.

It arguably started with Elon Musk. Famously no stranger to audacious moves, Musk moved SpaceX and Tesla from Silicon Valley to Austin in 2021, following a spat with the California government over its shelter-in-place mandates. Musk hasn’t been shy about his bullishness on the city, most recently unveiling plans to build a tech-centered community within the Austin metro area.

"It's going to be the biggest boom town that America has seen in 50 years," Musk said of Austin back in 2021.

To the rest of the world, Musk’s migration underscored a few of Austin’s natural perks. Its central location offered businesses a strategic time zone advantage. Musk himself has also likened Austin to a “mini California.”

Texas leans heavily into pro-business policies and deregulation, contrasting sharply with California's more heavy-handed, tax-intensive approach. Texas’ lack of state income tax, combined with its many corporate incentive programs, have also made the state particularly attractive to businesses.

While Austin has benefited from these business-friendly policies, the city is also known as the blue dot in Texas’ red political sea, which has created a unique blend of policies that strike an attractive balance for coastal dwellers looking to set up shop.

Capital converges, talent touches down

The COVID influx did not end with Musk. More than 150 companies moved to Austin during the pandemic period, and venture capital began to take notice. Investors like Jim Breyer of Breyer Capital, Palantir's Joe Lonsdale, and Geoff Lewis of Bedrock Capital, were all drawn by Austin's allure, and in 2022 alone, a staggering $4.9 billion of venture capital was invested into 416 Austin companies.

As the money has flowed, so too has the talent. Historically, Austin has boasted a relatively low cost of living, particularly in comparison to tech hubs like Silicon Valley and New York. This, in addition to its high quality of life index, has drawn in fresh talent seeking greener (or cheaper) pastures compared to tech hubs like San Francisco or New York City.

Austin has also been able to not only draw in talent, but get them to stay. The city has been described as the cool, offbeat city to start a tech career in, thanks to its vibrant music scene, local flavours, and events like SXSW, but it’s also thought of as an ideal place to purchase a home and put down roots.

Austin’s talent explosion also stems from institutions like the University of Texas, which produces a steady stream of highly skilled graduates each year in fields like computer science and engineering. Roughly half of adults in Austin have obtained a degree, making it an attractive market for firms looking for talent.

Austin takes on the frontiers of tech

Today, Austin is one of the world’s most important tech hubs. This reality speaks to what is possibly the city’s biggest natural advantage: its culture. Austin is the place where bold ideas flourish and unconventional thinking is welcomed. As Joe Lonsdale of Palantir puts it, “There’s this spirit of the Texas frontier—strong people confronting challenges and doing so boldly.”

Are you an Austin-based tech company looking to tell your story? We can help. Reach out to Mind Meld PR today


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