Words: Zoe Dickens
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.
And, while this migration was already underway before the coronavirus pandemic struck, the change to the way companies and workers operate now has only added heat to the fire. As Silicon Valley employees find themselves confined to tiny San Fransisco apartments and house shares, with the benefits of big tech’s famously generous on-site offerings and the buzz of the city gone, many are seeing the space and lower living costs of their colleagues in the south and wondering if, actually, Austin might be the place for them.
“Austin is where it all started for us,” Alexandra Williamson, chief brand officer of the Austin-based Bumble told Forbes in 2019. “It’s been exciting to watch the tech industry in Austin grow and flourish, and I think we will only continue to see more opportunities for tech workers in the city of Austin and the surrounding areas in the future — from more entry-level opportunities for recent graduates to more high-profile executive positions in the area, as well.”
After all, with no personal income tax and low housing costs, Austin is a haven for those who want to live large and still save for retirement. The recent influx of money and new inhabitants has also seen Austin’s arts, dining and hospitality scenes boom while its schools, and particularly those colleges specialising in tech fields, are now among the country’s best. Lifelong Californian Democrats needn’t worry about living in a red state either – Austin is the most liberal city in Texas and regularly ranks among the top places in the US for happiness among liberal-minded residents.
With tech accounting for nearly 16% of all jobs in Austin in 2019, up from 8% the year before, should workers decide to take the leap, chances are they won’t have too much trouble finding a new role either. The sector has grown at an average of 6% per year for the past few years – nearly double that of every other industry in the area – and the trend shows no sign of abating. And with an average annual salary for high tech workers of around $125,000 employees moving from Silicon Valley face almost no regional pay disparity.
With all this combined, it’s easy to see why Forbes recently published an op-ed asking “Is Austin, Texas, the best city in America?” Chances are a lot of tech companies – and their employees – are asking themselves exactly the same thing.
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