It’s no secret that Austin is rapidly becoming one of the nation’s hottest tech markets, with industry giants like Google and Facebook opening massive satellite offices downtown. Even in the midst of the pandemic, a reported 154 companies announced plans to either expand or relocate to Austin, including TikTok and Samsung.
This speaks to the much larger trend of Austin becoming an increasingly popular destination for Silicon Valley expats — companies looking to flee the high taxes, expensive housing and wealth inequality that’s been plaguing the area for decades.
Late last year, software giant Oracle, which had called the Bay Area home for more than 40 years, announced that it was moving its corporate headquarters to Austin. Just last week, billionaire founder and new Texas resident Elon Musk told Joe Rogan that he believes Austin will become “the biggest boomtown that America has ever seen in 50 years.” Musk’s own company, Tesla, is opening its next gigafactory in Austin and some believe the electric car maker’s entire headquarters might be next.
Moves like these have many locals wondering (or even worried) whether Austin could be swallowed up by this wave of newcomers — potentially to the detriment of its own companies and tech professionals.
That’s what was running through Higinio “H.O.” Maycotte’s mind when news of Oracle’s relocation started making the rounds.
“I couldn’t help but think, like, Austin isn’t becoming Silicon Valley, this is really just an invasion of Silicon Valley,” Maycotte told Built In. “My first reaction was: ‘We have to take back our skyline.’”
Maycotte is a longtime Austin resident. Originally from Mexico, he moved to the city when he was in high school, earned his bachelor’s degree at the University of Texas–Austin, and has been here ever since. He’s now the CEO of data virtualization startup Molecula, which just raised a fresh round of funding in January.
Maycotte has since developed a more positive opinion of Austin’s newcomers, accepting the city’s changing ecosystem as inevitable. He says he is even excited by the possibility this fresh wealth and talent brings.
“I think we have something really special here in Austin, and I can’t wait to see what it blossoms into,” Maycotte said. “I don’t think it’ll resemble Silicon Valley, I don’t think it’ll resemble any other hub in the country. But I think we are going to have something incredibly, incredibly awesome here.”
I think we have something really special here in Austin.”
What’s the Secret Sauce?
So, what makes Austin such an attractive place to live? Many have cited Texas’ low taxes, friendly labor laws and overall anti-regulatory economic philosophy as big draws for large companies and small startups alike.
Oksana Malysheva, a newcomer who co-founded Sputnik ATX, an Austin-based VC fund and accelerator that aims to nurture homegrown startups, says all of this feeds into the entrepreneurial spirit here. The city is still small enough and (relatively) affordable enough that founders can actually nurture and grow a company the right way without having to “starve and live under a bridge,” as she puts it.
And let’s not forget the weather.
“There is something about the sunshine and just being able to be out there with jeans and a T-shirt most of the year,” Malysheva told Built In. “Those little things add to your creativity, they add little bits of motivation that help you do the impossible, like starting your own business.”
Incidentally, many Austinites feel this mass exodus from Silicon Valley could jeopardize the very things that drew these newcomers in the first place.
After all, other, wealthier tech markets like Seattle, San Francisco and NYC have fairly significant housing disparities, disproportionately impacting the cities’ communities of color. Meanwhile, Austin has been dubbed the most expensive city in Texas, and the average monthly rent for a one-bedroom apartment here is about $1,380 — an outrageously high rate for Texas but a relative steal when compared to the costly rents in the Bay Area.
That being said, Austin is home to a pretty robust “Yes in My Backyard” movement, which advocates for more affordable housing. Plus, in recent years, Austin voters passed a $250 million bond to add more affordable housing.
This more welcoming sentiment could feed into the inclusivity of the city’s burgeoning tech scene. In fact, Malysheva says Austin has more racial and gender diversity among founders and funders than many other markets. If you look at Sputnik ATX, for example, its most recent diversity index found that it is outperforming other VC funds in terms of the number of Black and women founders it is funding.
Looking ahead, Malysheva says Austin could potentially set a good example for how to grow a tech hub responsibly.
“Sometimes when you are smaller and you’re just building the ecosystem, it might be easier to do the right thing. So I think we are actually an interesting petri dish,” Malysheva said.
Competing for Talent
Another area of concern is poaching: These new, wealthy companies from Silicon Valley are going to come in and scoop up all of the city’s tech talent, promising them salaries and plush perks that smaller, Austin-born companies can’t.
Steve Rodda, another Austin-based CEO says some of these fears may be “overblown” and that the extra competition will likely do more good than harm.
To be fair, Rodda is also new to Austin — he was made the CEO of API design startup Stoplight in July. Before that, he lived in California for a few years (“Don’t tell anybody that,” he joked) and then spent most of his career as a tech executive in Colorado, another region that’s been experiencing a wave of Silicon Valley expats lately.
“There was a ton of that going on in the Denver and Boulder area,” Rodda told Built In. “Yes, it does make hiring harder. Yes, it drives salaries and things like that up. But it also brings a lot more tech talent to the market that wouldn’t have been there before. Maybe I have that take on it because I’m kind of new here myself, I just moved here about six months ago. But it certainly wasn’t a problem in Colorado, finding good technical talent.”
Yes, it drives salaries and things like that up. But it also brings a lot more tech talent to the market that wouldn’t have been there before.”
Malysheva has a similar take, drawing from her years of experience working at VC firms in cities like NYC and Chicago.
“I’m a staunch believer in capitalism. I believe that competition creates the best situation, no ifs and buts. I’m completely unapologetic. But I also think that there is enough talent and enough grit here that there’s no reason why homegrown entrepreneurs will lose,” Malysheva said. “I don’t buy the argument that it’s going to be a bust for Austin companies when Californians move here.”
If anything, Malysheva says that this migration from the Silicon Valley to Austin is good news for local entrepreneurs because that means big venture capital firms are moving there too, and they’re hungry for new and exciting companies to invest in.
“There’s room for people here. No question about it. Someone will lose — with any migration, someone will win and someone will lose. But I think, as an overall ecosystem, we’re going to have more of a critical mass, more funding, more of a reputation. And it’s going to be better to start a company here,” Malysheva said. “I believe that the venture capital and startup industry, at its best, is a collaborative sport.”
I believe that the venture capital and startup industry, at its best, is a collaborative sport.”
Keeping Austin Weird
Sky-rocketing rent and talent poaching aside, there’s another, more nebulous area of concern: Could this influx of Silicon Valley transplants jeopardize Austin’s culture? In other words, what can be done to keep Austin, Austin?
For one, Maycotte says locally grown companies need to do a better job of holding themselves to a higher standard, breaking through that “$10 billion valuation barrier” that so few companies have been able to do here.
“We’ve always been OK with selling our companies early. Selling a company for $100 or $200 million is a big success here in Austin. But for any really sophisticated West Coast or East Coast VC that would not be OK, that would be a complete failure,” Maycotte said. “Really leveling up that ambition is important.”
Maycotte cited EverlyWell, a rising star in the healthtech space, and fintech startup Q2 as just some of the Austin-grown companies in the midst of breaking that barrier now.
He also says Austin needs to continue to celebrate the folks who built this city in the first place. Maycotte himself does this with a gallery wall in one of Molecula’s conference rooms, which is filled with photos of influential Austinites that he can show off to newcomers.
“I want to see a commitment from everyone who’s coming here to remember those that built Austin. We have some tremendous forefathers and foremothers that helped turn Austin into what it is today,” Maycotte said. “The environment we’re all enjoying today is really based on the foundations that they all set.”
Beyond that, where Austin goes and how it evolves is really for the city’s residents, new and old, to decide. Either way, Rodda says locals should rest easy knowing that most new arrivals don’t want Austin to lose its charm either. After all, they left the Bay Area for a reason.
“I’m sure there’s some people that are the exception to this, but the people leaving California don’t want to move to another California,” Rodda said. “Most folks are coming here to experience Austin for what Austin is, and not change it to be something else. I think for Austin to retain its ethos they just need to teach these new people — myself included — how things are done in Austin. Then we can all grow together.”
