America’s deep south might not be the first location that springs to mind when you hear the phrase ‘start-up’ but, if a recent influx of capital investment is anything to go by, you’d be wrong. Over the past few years Austin, Texas has emerged as a viable contender to the tech powerhouse that is Silicon Valley – and the new normal created by the coronavirus pandemic has only served to accelerate its growth.
The evidence? Cold hard cash, of course. In the past few months alone Sapphire Venture, Draper Associates, 8VC and Breyer Capital, all capital investment firms specialising in tech start-ups, have either opened or plan to open offices in the city. Apple, too, recently announced plans to build a $1 billion dollar campus housing up to 22,000 staff in North Austin while the presence of Google, Facebook and Oracle has seen Austin affectionately dubbed ‘Silicon Hills’.
But with nearly 1,750 miles between Palo Alto and Austin – and state cultures that are worlds apart – what is driving these tech companies to Texas? The easy answer, again, is cold hard cash. Texas offers famously favourable tax advantages to corporations with rules that are particularly beneficial to tech companies. There is, for example, no corporate income tax, no sales tax on R&D-related materials, data centres, software and computing equipment and no tax on labour for constructing new facilities.
In addition, the Lone Star State has also devised a whole range of incentive programmes designed to lure in big business – and big money – to Texas. These include a ‘deal closing’ grant that awards money to businesses choosing Texas over another viable state, an award of up to $750,000 for business real estate development and tax breaks for businesses relocating to the state. All of which add up to an expansion plan guaranteed to get the accountant’s seal of approval.
However, it is also highly possible that tech companies are following workers as much as money. With the sky rocketing cost of living in San Francisco, Austin is becoming an increasingly attractive location for both young and experienced tech professionals and, accordingly, they’ve been pouring in – with an average of 145 people moving to the city per day between 2017 and 2018. With around 25% of its population aged 20-34, if companies are looking for the rising stars destined to create the tech innovations of the future, Austin isn’t a bad place to start.
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