The talk around startups, tech companies and Silicon Valley has lead a significant part of financial discussion in the U.S. for the past 20 years. The San Francisco Bay area has seen more growth and prosperity than almost anywhere else in the world, and working in the region is the pipe dream for many software developers and tech newcomers.
There is a newer, seemingly younger player in the mix that is starting to turn heads and generate massive buzz. You may not have heard of the Silicon Hills before, but this nickname is referring to the fastest-growing region for the tech industry. Where is this mythical region of opportunity? The new and future home to the tech world is none other than Austin, TX.
Austin Tech Boom
Since the turn of the century, Austin has been home to a major tech industry boom. Hundreds of companies have built headquarters within the city limits, and the industry currently employs 86,000 residents.
Some of the biggest players have been there the longest. Companies like Apple Inc. and Dell have been in the city for over ten years, and they account for major employment, but growth has mostly come from newcomers. Of the top 100 tech employers in the city, 69 did not exist 15 years ago, and 10 of those are less than 5 years old.
The best news for the city is how much of the boom is fueled by local efforts and talents. While investors from around the globe contributed to the $993 million that was invested in 2014 alone, the bulk of the top employers were founded in Austin or are currently headquartered there.
Trends suggest that startups will hold more revenue and employ more people than the established companies within just five years. Austin is showing far greater rates of growth in the tech industry than Silicon Valley, and it can surpass the giant as the top region for tech employment in as little as 10 years. That said, Austin alone is not responsible for its success. Take a look at some other major contributions to the city’s rise among tech giants.
Texas Business Advantages
A major part of the tech boom in Austin owes thanks to Texas regulation. In the last decade, the state has given more incentives and benefits to incoming and new businesses than any other, and the tactic has succeeded.
Since 2005, half of the nation’s privately created new jobs were in Texas. It hasn’t come cheap though. In 2012, the most recent year with reliable data, Texas spent upwards of $19 billion in business incentives.
Those incentives have led to a major migration of businesses into the state, creating a chain reaction that has caused private investing within the state’s borders to skyrocket. In 2014, private investing in Texas broke $50 billion, far surpassing and easily justifying the state’s investment.
Austin has been the biggest beneficiary of all of this spending, and the city has some of the lowest poverty, highest education and highest relative wages in the country. Of the current top 100 employers, roughly 20 are major players in Silicon Valley that have either moved or expanded to Austin.
Those 20 companies include enormous brands like Amazon, Facebook, Paypal and Blizzard Entertainment. The full list of monster tech companies in Austin is staggering and would take too long to list here. As impressive as this all sounds, all of the trends suggest that growth will accelerate, meaning Austin is far from hitting its peak.
Looking Forward
Just this past summer, Austin saw 20 additional expansions and startups that created 1200 new jobs. Exactly half of those new offices were for new businesses. While it is difficult to predict how new businesses will start and succeed, the past five years have seen net success.
More startups succeed than fail in Austin, and each year the number of new startups is increasing. With investment continuing to break records and successful businesses continuing to draw yet more business, it’s difficult to imagine a scenario where the trends reverse.
Taking It Home
The news around Austin is all exciting and promising. That said, it hasn’t eclipsed Silicon Valley yet, and despite the trends and predictions, Silicon Valley is hardly in trouble.
As you consider how to diversify your tech stocks, don’t buy into the hype too much. The bulk of long-term stability is still in California, so don’t jump ship just yet.
What you can safely take from this is that opportunity does exist in Austin, making it worth a little attention. Most of the new companies in the region are still private, but a number of them are ripe for an IPO, so if you want to take a chance, this is one of the best places to look.
Regards,
Ethan Warrick
Editor
Wealth Authority
