ATX sign at Whole Foods on North Lamar in Austin, Texas.
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Is Austin Emerging as the New American Technology Hub?

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Continuing our series of the state of U.S. tech hubs, we look at the growing city of Austin and why so many techies are pouring into the state of Texas.

They may want to "Keep Austin Weird" in the southernmost U.S. capital city. However, “Keep Austin Growing” may be more appropriate for Austin these days.

Austin continues its surge as one of the top American tech hubs. Many say it now rivals Silicon Valley and may be crawling out of the COVID-19 pandemic in a business sense even better than its California counterpart. Austin has regained 96% of spring 2020’s pandemic-related job losses, according to a report last month by the Austin Chamber of Commerce. Not that Silicon Valley is doing poorly in this arena, though California as a whole doesn't have great numbers.

We covered Silicon Valley in our first installment of our post-COVID US regional tech tub tour. We now move on to the Lone Star State's capital. The advantages of being a tech company in Austin are well-documented by now: much lower cost of living than other tech cites, no state income taxes, terrific year-around weather and a lively social life and music scene, Austin business people told us.

What’s the biggest appeal? You could start by asking people like Ethan Parker, founder and CEO of Austin-based public relations firm Treble. Parker made the move from Silicon Valley to Austin.

“Previously, I would have named the cost of living,” Parker said of the top benefit of having a business in Austin. “However, the rise of Austin’s housing market has made that less of an advantage than in some other Texas markets. The number one advantage that Austin has is its culture. The 'Keep Austin Weird' mantra has deep roots, and there is a priority on work-life balance here that is alluring to recruiting and keeping top talent. The pressures of scaling a venture-backed startup are immense, but companies in Austin seem to have found that optimal balance between working hard and playing hard.”

Growth and Accolades for Both Austin and the Lone Star State

Austin has seen more than five times the nation’s population growth rate between 2010 and 2020, at 33.7%. It’s more than double the growth of Texas itself (16.8%). Austin has nearly doubled in population from 2000 (1.24 million) to 2020 (2.29 million), according to the United States Census. Employment growth in Austin has remained consistently above Texas’ and the U.S. between 2010 and 2020, according to the Texas Workforce Commission

The accolades dovetail growth in Austin, too. CompTIA’s Tech Town Index 2020 named the Austin-Round Rock metro area No. 1 for the second year in a row, rising from No. 3 in 2018. Tech companies just keep coming, according to the Austin Chamber of Commerce: there were 46 new tech companies in Austin in 2018, and 58 in 2019 that translated to 4,648 new jobs. CompTIA reported 68,323 IT jobs in Austin posted between August 2019 and July 2020, an increase of more than 19,000 over the year before.

Further, CBRE Research, based on strong job and population growth prospects, reported in its Investor Intentions Survey 2021 that Austin displaced Greater Los Angeles as the most preferred market in 2021, buoyed by proven labor market resilience during the pandemic and a steady growth outlook. Dallas/Forth Worth came in second, making it a 1-2 Texas combo at the top.

Inc. 5000’s list of top-growing U.S. private companies places five in the 100 from Austin:

  • 28. Empowering a Billion Women (EBW2020)
  • 49. OJO Labs
  • 77. Literati
  • 79. Sips by
  • 87. AdOutreach

“Austin attracts a really bright and diverse workforce, which fuels growth,” said Monica Ho, chief marketing officer for Austin-based SOCi, a marketing software company. “We are centrally located, which allows for better connectivity through travel or remote work with both coasts. It’s an open-minded, forward-thinking city with a relatively low cost of living. Austin has a spirit and is a fun place to live and work.”

Related Article: Can Silicon Valley Remain the Top US Tech Center in a Post-COVID World?

Texas Receives Some High Marks

Texas ranked number 1 for best places to start a business by WalletHub, and the same outlet had Austin as the eighth best place to start a business for cities. This mainly because of its business environment, according to WalletHub analyst Jill Gonzalez. More specifically, it has the fifth largest share of engaged workers (35%) and over 11% growth in the number of small businesses. 

Texas is also a very digitized state and ranks high in terms of employment specialization. Other factors that contributed to the ranking include the over 9% growth in the working age population — second highest nationwide — and the large amount of spending on incentive programs, Gonzalez noted.

"Texas and Austin have an advantage when it comes to the existing business environment,” she added. “Austin in particular also tends to have easier and better access to resources than most other cities. This means more venture investment capital, but also higher education assets and a growing working-age population."

The states that will be emerging as more attractive in 2022 and beyond will be those that can provide ideal conditions for business creation. This means, Gonzalez added, access to capital and skilled workers, but also things like affordable office spaces.

Can It Really Be Silicon Valley, Though?

Will Austin surpass Silicon Valley as the new American tech hub? Who makes that call anyway and what metrics are used? One data point, certainly, is that Silicon Valley, in some ways, is coming to Austin. Can't beat 'em so join 'em? According to a Bloomberg report, Austin has taken in more residents from the Bay Area than from any other region outside Texas. 

Not to mention, Oracle in December moved its headquarters from Redwood City, Calif. to Austin — 2300 Oracle Way. Google and Facebook have expanded into Austin. Heck, even Elon Musk packed his bags and moved to Austin and predicts some serious growth for the city in years to come.

"When you look at all the major players investing in Austin, I think you see them clearing the way for midsize companies to consider the same move," said Jim Eustace, founder and CEO of Austin-based Bound, which provides marketing personalization. "Tesla, Oracle, Apple are all investing in Austin so I’d expect many midsize tech companies to follow their lead."

If you’re looking for head-to-head data on Austin vs. Silicon Valley post pandemic, LinkedIn data found Austin was the winner in terms of tech workers migrating to major US cities from May 2020 to April 2021. It gained 217 tech workers for every 10,000 existing tech workers. The biggest loser in the pandemic? The San Francisco Bay Area, which lost 80 tech workers for every existing 10,000 tech workers, according to LinkedIn data. 

Learning Opportunities

More in LinkedIn findings:

Biggest migration of tech workers out of cities:

  1. San Francisco Bay Area, -80.4, per 10,000
  2. Boston, -54.4
  3. Chicago, -53.4

Biggest migration of tech workers into cities:

  1. Austin, 217
  2. Nashville, 154.7
  3. Charlotte, 145.8

And of course, there is always the cost of living comparison between two cities. NerdWallet data finds San Francisco at an overall 98% higher cost of living than Austin, including:

  • Housing costs: 242% higher.
  • Transportation costs: 52% higher.
  • Food costs: 37% higher.
  • Entertainment costs: 32% higher.
  • Healthcare costs: 20% higher.

San Francisco's median income is $112,449, while Austin's is $62,843, according to U.S. Census Bureau data, so there's that. And it's hard to compete with these numbers from the 2021 Silicon Valley Index report by Joint Venture Silicon Valley:

  • In aggregate, researchers found, Silicon Valley and San Francisco companies increased their market capitalization by 37%, reaching nearly $10.5 trillion by the end of 2020.
  • 2020 was a record year for venture capital ($46 billion), which fueled a record 67 mega deals in Silicon Valley and 41 in San Francisco. The region is also home to an elite-eight of 12 US Decacorns, private companies valued at more than $10 billion.

Related Article: Austin-Based Social Marketing Platform Raises $50M

'Worldwide Prominence'

While Austin is not Silicon Valley, technology companies from that area like Apple, Google, Facebook, Tesla and Oracle have established large workforces and office campuses in the Austin metropolitan area, noted Alfredo Ramirez, co-founder and CEO of Vyopta, a 68-employee venture capitalist-backed collaboration intelligence company headquartered in Austin.

“Austin has gotten expensive for locals, but it does still offer a considerably lower cost of living compared to prices in other U.S. tech hubs," Ramirez said. "Austin also has significant music, art, food and outdoor options. Annual music festivals like Austin City Limits and music, film and tech festival South by Southwest (SXSW) have helped Austin grow in prominence worldwide. There are many greenbelts and parks in and around the City of Austin such as Barton Springs Pool, Barton Creek, Hamilton Pool and Pedernales Falls State Park.”

Parker of Treble said venture capitalists in Austin are happy to broker introductions and lend their time and insights. “There is a widely held belief here that a rising tide does indeed lift all boats,” he said, “and that was a refreshing change from the intense competition of Silicon Valley that shaped the earlier part of my career.”

The Evolution of Tech in Austin

Ramirez noted tech is nothing new in Austin. It started as a high-tech hub in the '80s known as “Silicon Hills.” The initial tech industries hosted in Austin included semiconductor (AMD, Samsung, Motorola/Freescale/NXP, Applied Materials), enterprise software (IBM, Trilogy, Tivoli, National Instruments) and computer hardware (Dell, IBM, Apple). 

Over the past 15 years, he noted, the city has become a hub for high-tech companies across many other areas of specialization, including a plethora of start-ups offering SaaS and mobile applications.  Venture Capital firms have also been an integral part of Austin's high-tech business community since the '80s. The number of investment funds ranging from early stage to private equity have multiplied in recent years. In addition, there are now at least 15 startup tech incubators, which include the Capital Factory and Texas Innovation Center that have helped startup founders turn their dreams into reality, according to Ramirez.

Final Tally for Austin Post-COVID?

It remains to be seen how COVID-19 has changed Austin permanently. Not all Austin executives are sold on hybrid work. Vyopta's kept its Austin office open to provide that option for employees.

For tech workers, choosing a company in a post-COVID world is a lot about learning if companies allow employees to choose how and where they work. Which tech hubs will be most supportive of hybrid work and even full-time remote? Tough to tell, but there's certainly some tension in Silicon Valley.

Hundreds of companies have relocated their offices to Austin during the pandemic (154 by one count) so office space vacancy is very low. The availability of labor, quality education and capital, a favorable tax environment, and lower operating costs have made Austin an in-demand location so while some may be leaving, many more are moving in, according to Ramirez.

Nothing’s perfect. With growth comes natural problems. Austin’s tech rush has spurred a home availability and affordability crisis as companies and workers pour into the city, according to Ramirez. And homelessness remains a problem, too.

“Gentrification, rising housing costs, homelessness, and issues with traffic and overcrowding are issues that Austin will now need to grapple with in 2022 and beyond,” Rodriguez said. “We believe Austin has a lot of potential to grow in terms of both available land, talent, and capital and will continue to play a unique and major role in the global economy.”

Ready for the Boom

Still, many feel Austin will ultimately be a winner after COVID and is ready to take on its challenges.  Brandon Pindulic, digital marketing lead for Austin-based Apty, a digital adoption platform, called Austin a major winner from COVID. “There was certainly a pullback with office leases, but we've already seen that come roaring back, and I expect it to eclipse pre-COVID levels rather soon once we're fully back to normal, which may take a bit longer with the Delta variant,” Pindulic said.“I believe Austin will be a Tier 1 tech hub in the not-so-distant future. I don't think NYC or SF are going anywhere, but Austin is here to stay, and both startups and large companies will continue to flock to Austin.”

Keith Nealon, CEO of 1,300-employee Bazaarvoice, including 500 in its Austin headquarters, called Austin a boomtown, noting that migration to the city will continue to grow exponentially over the next few years. 

“We will continue to see the different types of technology flourish,” he said, “from software, to AI, to healthcare, to fintech. With all the brainpower relocating to Austin, definitely expect innovation to accelerate.”

About the Author

Dom Nicastro

Dom Nicastro is managing editor of CMSWire and an award-winning journalist with a passion for technology, customer experience and marketing. With more than 20 years of experience, he has written for various publications, like the Gloucester Daily Times and Boston Magazine. He has a proven track record of delivering high-quality, informative, and engaging content to his readers. Dom works tirelessly to stay up-to-date with the latest trends in the industry to provide readers with accurate, trustworthy information to help them make informed decisions. Connect with Dom Nicastro:

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