Creating opportunity
These Startups Are Keeping Austin’s Economy Weird (and Booming)
Kim Lachance Shandrow | January 12, 2017

Coined at the turn of the century, Austin’s unofficial slogan – “Keep Austin Weird” – has since been embraced by residents and tourists alike. However, what today has become a tagline for the city’s offbeat music culture and outlier art scene didn’t actually start out that way.

Rather, it was introduced in the year 2000 to help boost the bottom lines of local mom-and-pop shops, startups and pit-stops.

Looking at the number of independent upstarts born in and operating out of Austin at present — approximately 2,876, per AngelList’s latest count — one could argue that it worked.

Related: THESE SUSTAINABLE STARTUPS ARE CULTIVATING A GREENER, CLEANER AUSTIN

Today, an estimated six of every 1,000 adults in the quirky-cool city have launched a startup there, according to the 2016 Kauffman Index. The report lists the fast-growing urban hub, now home to two million-plus residents, as the top metropolis in the U.S. for startup activity, ahead of Silicon Valley. Austin also recently ranked number six in the U.S. Chamber of Commerce and Washington, D.C.-based startup incubator 1776’s joint ranking of the leading 25 American startup hubs best poised to fuel the digital economy.

If you’re considering starting a venture of your own in Austin — or moving an existing business into town — there’s still room, and plenty of incentive to take the entrepreneurial leap in the heart of the Lone Star State. The startup founders we interviewed there say the locals generally go out of their way to support new companies and the new ideas — weird ones included, of course.

Here are three great reasons to start a business in Austin right now:

1. Access to a skilled, motivated and educated workforce.
To say that Texas’s capital city constituency is multiplying by leaps and bounds is no exaggeration. According to the Austin Business Journal, it’s on track to balloon faster than any other major American city in the next 25 years. The Chamber echoed that rapid growth trajectory, ranking the exploding metropolis (in the above-mentioned report) as the number one city in the nation for residential population growth.

Austin Capital Factory and Austin Greater Chamber of Commerce board member Joshua Baer founded his first startup in 1996 out of his college dorm room. He now teaches a class at the University of Texas for student entrepreneurs.

Austin Capital Factory and Austin Greater Chamber of Commerce board member Joshua Baer founded his first startup in 1996 out of his college dorm room. He now teaches a class at the University of Texas for student entrepreneurs.

“Moving from one city to another or one country to another is very entrepreneurial,” Joshua Baer, founder and executive director of startup accelerator and coworking space Austin Capital Factory, said in an interview. “There’s a selection bias in being the fastest growing city in the country for a few years in a row.”

As the number of incoming residents from elsewhere throughout the U.S. swells, so does the local talent pool — and generally the qualifications of those in it. In the Austin metro area alone, 41.5 percent of adults now hold a bachelor’s degree or higher, compared to 30.1 percent nationally, reports the Austin Chamber of Commerce.

Related: 20 AMERICAN TECH HUBS NIPPING AT SILICON VALLEY’S HEELS [INFOGRAPHIC]

Ranking 23rd in the U.S. on percentage of college-educated residents, Greater Austin is home to more than 70 colleges and universities. Many of them — including the University of Texas at Austin, Austin Community College and St. Edward’s University — offer STEM-based majors and learning tracks that equip eager young professionals to compete in the area’s increasingly technology-dependent workforce.

“The number one reason Austin is a great place to launch a tech company right now is because this is the place where all of the most talented, educated people in the country want to live,” Baer said.

2. The low tax burden and favorable business climate.
Based on its low tax burden, competitive regulatory environment and conservative fiscal policies, Texas is consistently recognized as one of the country’s best business climates.

Ranking at number 14 in the Tax Foundation’s 2017 State Business Climate Tax Index, it’s one of the few states to levy zero personal or corporate income taxes (the former being particularly appealing to migrating talent).

Students hard at work at Austin Coding Academy, which offers three levels of learning — intro, intermediate and advanced.

Students hard at work at Austin Coding Academy, which offers three levels of learning — intro, intermediate and advanced.

In 2008, Texas replaced its franchise tax with a reformed margins tax. The goal was to roll out a more equitable and expansive tax assessed at a reduced rate, paving the way for all Lone Star State companies — big and small, young and legacy — to better compete in today’s ever-complex and evolving economy.

Also adding to Austin’s attractiveness to scrappy bootstrapping entrepreneurs and other business owners is the $19 billion per year Texas offers in tax incentives for relocating companies there and creating jobs.

3. The relatively affordable cost of living.
Coming in at three percent below the national average for cost of living, and compared to other rising startup hubs, Austin remains a relatively affordable place to live.

Rents there are creeping up there, however, as more people relocate in and around the 278-square-mile burg in droves. Pushed out by exorbitant living expenses and grueling commutes, an increasing number of tech workers are fleeing Silicon Valley to found startups in Austin — and to work for big-name tech corporations in the Central Texas innovation hot-spot. Among them are homegrown Dell, and satellite locations of Apple, eBay, Oracle, Hewlett-Packard and many others.

Related: SILICON PRAIRIE: STARTUP HOMES ON THE RANGE

Meanwhile, the housing market in the city of Austin, excluding land outside the city limits, is not nearly as affordable as it was pre-population boom. The median home price in Austin currently hovers around $305,100, up 3.5 percent from the previous year, according to Zillow.

Still, scoring a house in the low-$300,000s in Austin is far less painful than breaking the bank for a home in San Francisco, where the median house price tag has skyrocketed to around $1.1 million, also per Zillow. Leasing office space in Austin also remains considerably more cost effective than renting commercial digs in New York City, Boston and San Francisco.

 Luke Filipos is co-founder and marketing director of Austin Coding Academy, which he launched alongside fellow University of Richmond alum Christopher Sica in 2014.

Luke Filipos is co-founder and marketing director of Austin Coding Academy, which he launched alongside fellow University of Richmond alum Christopher Sica in 2014.

Luke Filipos, a Maine native who recently lived and worked in New York City, moved to Austin in 2013 to launch web development boot camp Austin Coding Academy with his friend Christopher Sica.

“In New York or San Francisco, you’re spending a lot of money just to keep up with the startup Joneses, and to be startup-stylish,” Filipos said in an interview. “Whereas in Austin, at least for right now, you can have a really high quality of life, pay rent and living expenses, and still be able to put some money in your savings account and enjoy life.”

The former sales rep describes himself as “pretty frugal,” something he says heavily influenced his decision to start up out of Austin, and to live on the outskirts of the city.

The 950-square-foot, two-bedroom, one-bath apartment Filipos rents with Sica costs them $500 each per month. The co-founders are setting money aside from the money they save on rent in the hopes of eventually buying residential property in Austin, a place they plan to call home for years to come. (Or, as Filipos jokes, until he can “afford a $1 million dollar house on Pacific Beach in California and go surfing every day.” Until then, he says he’s not going anywhere.)

“Austin’s just a really fun city with an incredibly outgoing population,” he said. “It’s really inclusive because there are so many people like us who’ve moved here from out of town. Everyone’s been the new kid before, so there’s a really welcoming startup atmosphere. There’s a group — and enough room — for everyone.”