Blog Post

Affordable Austin: No Longer a Tech Mecca

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

iStock_000000398202XSmallAustin is among the places that people are flocking to in the recession, according to BusinessWeek. Other magazines have given Austin (and all of Texas) similar praise, mostly because it’s so darn cheap to live here. But I don’t want to lie to y’all — Austin may not be the best place to build your tech startup. Or even look for that great tech job. It’s not that I don’t want more transplants coming here (I work from home, so traffic woes don’t stress me out, and more tapas bars downtown are always a good thing), but Austin has gone downhill as a tech town.

We were big in the dot-com era because we had a handful of companies (among them Tivoli, Dell (s dell), Trilogy and Silicon Labs (s SLAB)) that helped put Austin on the map. We also had a big presence in semiconductors after a 1988 decision to locate Sematech here. Applied Materials (s amat), AMD (s amd), Motorola (s MOT), Samsung and Tokyo Electron helped build a thriving chip manufacturing and design industry in the heart of Texas. Now the Austin area is full of chip designers, enterprise software experts and a few promising video transcoding startups such as Kulabyte, Media Excel and team members from RipCode. There are some one-off consumer tech companies as well, but it definitely doesn’t feel like Austin is a nexus for up-and-coming technology anymore, especially with wireless and consumer technology is becoming so crucial. The BusinessWeek article seems aware of that:

Why does Austin look so affordable? The city’s economy lagged the U.S. for much of the boom as one big driver, the tech industry, struggled. First, the dot-com bubble imploded in 2000; Intel’s chip design center stood half-built as a painful reminder of the tech bust until it was demolished in 2007. Then big local companies such as Dell and Freescale Semiconductor ran into trouble. But Austin is on the upswing, with major employers, including the state government and health-care sectors, hiring.

Austin has always depended on the state government and The University of Texas to help it through recessions. To augment that, the city has tried to cultivate several tech areas, but so far has failed to replicate the success it had with enterprise software and semiconductors. And lately even our access to the rest of the world has felt tenuous, with our broadband providers thinking about usage-based access and direct flights to California being cut. The service provider community has shrunk and the city, which has historically been a one-VC city — doesn’t have access to a ton of smart capital. We do have a lot of educated, smart people, but many of them seem to be using their tech knowledge gained here for companies based someplace else. I should know.

costchart courtesty of the Austin Chamber of Commerce

16 Responses to “Affordable Austin: No Longer a Tech Mecca”

  1. I too think that the article somewhat overstates the situation in Austin.

    Perhaps Austin’s biggest new industry of late is simply being Austin. We continue to be a major draw for a lot of reasons. I’ve helped numerous people relocate themselves to Austin, often without a job lined up, and I’ve seen small business owners not related to tech move their businesses here from California. Several of those – one is closing on a new house this week.

    We have a high percentage of elective relos, people who can live/work from anywhere in the U.S., or run their business from anywhere in the U.S., who conclude that Austin offers the best set of metrics for them. It helps greatly that Texas is for the most part a business friendly state. Oddly, the elective relos are just as likely to be young as old, and you might find either hanging out on S. Congress or at Barton Springs pool. There is just something about Austin that makes it attractive across a wide range of generations and lifestyles.

    Finally, we will have a shortage of housing in the next 2 or 3 years. Austin is creating household, even without inmigration, faster than housing is being created. The builders have over corrected. And since our fine city leaders have it as their mission to make it ever more expensive to create housing in the city limits, we will continue to see the outer rings sprawl while the central neighborhoods continue to lose families in favor of young, hip people or empty nesters.

    • Hi Steve,

      I just returned from my first trip to Austin and came away pleasantly surprised. Had heard all the write up about how it’s a great place to live so figured I’d visit and check it out for myself.

      I’m not a techie at all but have a startup catering company. It would nice to buy a home (condo or house), but I’m a startup and I have minimal W-2 income to report. Met some people who work for Dell and a spinoff of Motorola. You indicate that there will be a shortage of housing in 2-3 years. Does this take into account Southeast Austin which I understand is next for development?

  2. Ernst Breternitz

    I’m a Software Engineer from Austin and I gotta tell ya, pardner, there’s a lot of good developers here looking for a job, me included.

    And besides the startups you’ve mentioned let me add Spawn Labs,, a 100% Austinite company doing no-lag, remote access gaming hardware and software that just blowed my mind the last time I’ve tried it.

    Go Longhorns!

  3. Chris Treadaway

    I just relocated to Austin a little less than a year ago, and I think that the picture Stacey paints is a little extreme.

    There is a lot of early-stage activity in Austin. The difference is that many early stage startups in Austin are constrained by the local VC attitude toward revenue first — many consumer plays are never funded here in Austin because of this town’s orientation towards semiconductor & enterprise software businesses. So for Web 2.0 type companies, this is an environment for more bootstrapping and smaller victories/singles than perhaps the next Google or Twitter home run. I’d prefer an environment that supported the latter, but the former isn’t so bad and may just end up being more efficient and sustainable in the end.

    Add to that the fact that there are a lot of promising companies that either have recently IPO’d or are in a position to do so (SolarWinds, Bazaarvoice, HomeAway, etc.). Austin isn’t dead — it’s just different (as it’s always been) and it’s going to be defined in the future by different types of businesses.

  4. I’ve lived in both Atlanta and Austin.. not convinced that their Cost of Living is so close. Transportation costs vary greatly because of Atlanta’s immense sprawl and horrid traffic.

    As for tech jobs, there are plenty of competitors for positions in Austin..I’m thinking there are more people than opportunities, not the other way around.

  5. It could seem like it’s going downhill if your definition of success is the same as it was 10 years ago. Things are changing so fast, that you can’t measure today by yesterday’s standards.

    Tons of money flowed into venture capital as an asset class, while at the same time the costs to build technology companies were dropping. This horrible mismatch has created an early stage funding vacuum. Therefore startups have to get to revenue quicker, on less capital. Which isn’t a bad thing.

    Austin has a ton of smaller tech companies that are bootstrapped, profitable, and growing despite the economy. But they’re more focused on their customers than PR, and they’re not as sexy to write about as Facebook or Twitter. What Austin is lacking is enough tech talent that truly understands today’s technologies. Almost every startup I know is constrained by tech talent, and that keep innovation from coming to market.

    • Leeland Heins

      Are you kidding? You can’t swing a dead cat around Austin without hitting a tech job seeker. You can easily find just about any skill set you would like and I think the quality here rivals anywhere in the country. Check out places like the Austin High Tech Forum and Geek Austin. Tons of people looking for work, and some of the profiles of people are truly impressive with extensive experience including the latest “hot” buzzwords and lots of advanced degrees.

      No… lack of talent sure isn’t the problem here; quite the opposite — ask any recruiter (and I’ve talked to a lot of them) there are not nearly enough good opportunities for the number of people looking.

      The reason for that is exactly what you are talking about — startups here have no money to hire people. If they are not getting the quality of candidates they want, it is probably because too many of them are looking for senior level supermen at entry level salaries. That obviously isn’t going to work, the people will just stay where they are or they will continue to work remotely for people who will pay.

      Any business who can’t find the people they are looking for in Austin just doesn’t know how/where to look or they’ve got very unrealistic ideas about what they are looking for.

  6. Ian Morison

    About ten years ago I looked at Austin, Phoenix and a couple of other cities as possible alternatives to California. Now Phoenix is being severely punished by the housing crash and Austin has seemed iffy for awhile. A guy from Austin was desperately trying to recruit me for his start-up, but it was clear he was having a terrible time finding talent — not sure I wanted to fix the problems others had created.