The Texas Startup Manifesto
Texas is the most promising technology investment opportunity in the United States and Capital Factory is going to turbocharge it. Already the 10th largest economy in the world, there is still untapped potential and more growth in its future. By connecting Austin, Dallas, Houston, San Antonio and the rest of the state into a Texas Startup Megatropolis we can unlock billions of dollars in capital and unleash thousands of diverse entrepreneurs.
The time has come for the Texas startup community to band together to change the world once again. Texas has produced world-changing startups in the past such as Dell Software, National Instruments and Whole Foods Market but all of those were founded more than 30 years ago. What will it take for Texas to produce startups of that kind of scale and impact in technology, food, retail, entertainment, energy, education, real estate, transportation and health? I believe it will take all of Texas working together.
Texas cities have traditionally been competitive, but now is the time to be collaborative. Instead of arguing why Dallas might be better than Houston we should be talking about how we can work together to get our share of venture capital dollars more in line with our population size and startup activity by unlocking additional capital sources that have been previously inaccessible to tech. We need to help talent, startups, mentors, investors and opportunities flow freely between all of the major cities.
Texas cities are diverse. We are rural and we are urban. We are Latino and we are African American. Asian-Americans are now one of the fastest-growing groups in our state population. We are red, we are blue, we are LBGTQ. We are immigrants from all over the country and all over the world.
Austin is different from Dallas which is different from Houston and San Antonio. Houston is one of the most racially and culturally diverse cities in the country. Austin is good at software, Dallas is good at retail, Houston is good at oil & gas, and San Antonio is good at cybersecurity (just for a few examples). There are places where certain cities (like Austin) can improve on diversity, but when you look at the whole state our diversity is one of our biggest strengths.
Many businesses expand geographically city by city. Sometimes it’s because the business grows market-by-market, like Favor, or sometimes it’s that the business needs to grow its sales or programming teams in multiple cities. Launching in Texas gives access to 4 of the 11 largest cities in the country that are all within driving distance of each other. Some businesses can service all four cities with a single distribution hub in one of the cities, making it a unique market for launching new businesses.
No Texas city will be a world class startup hub by itself, but the Texas Startup Megatropolis can take on any other city, state or country in the world.
One state — one Accelerator
When Capital Factory opened our space in Austin in 2012, we were able to create a true center of gravity and then use that to connect together entrepreneurs, investors, customers, talent and press in meaningful ways. More connections means more business, more investors, more revenue, and more growth. We truly are an accelerator of the Austin startup ecosystem. Now we are ready to do for all of Texas what we have done for Austin for the past 5 years.
Texas is one of the only places where we can run a single Accelerator program across multiple cities. Capital Factory isn’t duplicating our program or franchising it — we are running one program and treating all entrepreneurs and mentors the same no matter where they are based. This is one way that Dallas, Houston and San Antonio can benefit from some of the extra attention that Austin sometime receives. Austin stands to benefit a lot from Dallas, Houston and San Antonio as well.
The foundation is a single mentoring program built on top of the 1776 UNION platform. Every startup has a profile and so does every mentor and every event. Based on the stage of the startup and what industry it is in, the system recommends the most appropriate mentors to meet and events to attend. Capital Factory implemented the system in November for Austin and has on-boarded more than 150 mentors who are now accessible by entrepreneurs all over the state. This number will double by the end of 2018 as we invite new mentors from Dallas, Houston and San Antonio.
You can find a lot of great videos, blogs and books on the Internet, but there is still no replacement for direct one-on-one mentoring. There is nothing more personalized, more intimate, or more impactful.
Capital Factory focuses on hosting community programming that educates and inspires entrepreneurs, programmers, designers, and community leaders. On any given night you might find the Austin on Rails programmers meeting upstairs, the Women Who Code in the big classroom, Startup Grind in the event space and Austin Coding Academy teaching in the smaller classrooms. On the weekend you might find a 3 Day Startup hackathon happening upstairs and a kids coding camp going on downstairs. We don’t plan or execute all of these programs, we just support them with space, staff, marketing and sponsors.
The Internet is full of great videos and blogs. That’s why Capital Factory focuses on creating unique content that you can’t find online or through any other channel. In addition to our mentoring program, we host “Ask Me Anything” sessions with entrepreneurs, angel investors, and venture capitalists designed to help get new people plugged in as efficiently as possible. “Epic Office Hours” is a speed dating event with dozens of entrepreneurs, mentors and investors meeting in rapid fire.
We’ll be kicking off our first event in Dallas with a How to Meet Investors in Texas and Ask Me Anything session at The DEC with venture capitalists from around the state — but we’ll be live-streaming it back to an audience in Austin. Then we’ll take it to Houston, to San Antonio, and back to Austin. Many of the events that we have traditionally done monthly in Austin will now rotate monthly from city to city around the state.
It won’t just be Capital Factory staff traveling around the state from event to event. We’ll be bringing other entrepreneurs, mentors, investors and corporate partners with us.
When we do a session on How to Meet Investors in Texas at The DEC in Dallas, we’re going to bring along some venture capital investors from Austin to be on the panel. The next time we host it in Austin, we will invite venture capitalists from Houston. We’re going to get people moving from city to city more often — and we’re optimistic that will result in more money flowing from city to city, too.
Over the past few years, our value proposition to startups has grown from just “we can help you meet investors” to add “we can help you meet your first customers.” Partnerships with innovative global companies in major industry verticals provide unique opportunities for customer validation, pilot programs and strategic investment. We’re fortunate to work with partners such as Booz Allen Hamilton, Daimler, Google, Merck, Walmart and The U.S. Department of Defense. We’re looking forward to adding new partners from the many global companies based in Dallas, Houston and San Antonio and plugging them into the Texas Startup Megatropolis.
Capital Factory is going to help connect the critical components of the startup ecosystem across Texas. For example:
- Entrepreneurs in Dallas will connect with mentors in Austin remotely over Skype or Cisco telepresence.
- Capital Factory will host community events in Houston with Venture Capitalists from Austin.
- Startups in Dallas will open a customer service office in San Antonio.
- Entrepreneurs from Austin will drive to pitch Fortune 500 companies in Houston.
- Entrepreneurs in San Antonio will drive up to Austin for a day of office hours with guest mentors visiting from Silicon Valley.
- Entrepreneurs from all over the state can easily find resources online and do office hours in-person or virtually.
Texas is a powerhouse
- Texas has 4 of the 11 largest cities in the country by population. Houston is number 4, San Antonio number 7, Dallas number 9 and Austin number 11. Texas is the second largest state by population. If you want to launch a new business, this is a great market to target first.
- As a standalone economy, Texas would be the 10th largest country in the world with a GDP of 1.6 trillion. Texas exports more than California and New York combined.
- More than 50 Fortune 500 companies are headquartered in Texas and 6 of the Fortune 50. Only California and New York have more. These are all potential customers and strategic partners for startups.
- Texas has world-class educational institutions across the state. The University of Texas System is massive with UT Austin, UT Dallas, UT San Antonio, plus Baylor, Rice, St. Edwards, Texas A&M, Texas State, Texas Tech, and Trinity to name a few. Our community colleges are excellent as well.
- Texas is a leader in health innovation. Houston is our hub with the Texas Medical Center and MD Anderson Cancer Center but there is also the Dell Medical School in Austin and numerous other Health Science Centers around the state.
- Texas is a leader in New Space — the commercialization of space. With a strong foundation from the NASA Johnson Space Center in Houston we have attracted test sites for Blue Origin, Firefly Space and Space X.
- Texas has strong regional tech hubs and leaders in each major city. The DEC and Trey Bowles in Dallas, Station Houston and John Reale in Houston, Geekdom and Lorenzo Gomez III in San Antonio, and Georgia Thomsen and Capital Factory in Austin. And of course Texas has Mark Cuban!
- Texas has SXSW which attracts 100,000 innovators every year and has helped put Texas on the map internationally as a technology and innovation hub.
- Texas dominates every top ten list. This may not be the most important or authoritative measure but it does show that we’re top of mind in the press and in the public eye.
Texas is still full of opportunity
For being so large and having so much going for it, Texas is still largely untapped from a tech startup perspective. It’s not Silicon Valley. It’s not a mature market— in fact it’s still nascent. It’s big compared to other up and coming cities but that still is a long way from being Silicon Valley or New York City.
There are no recognizable investor brands in Texas. There are some great investors, but they generally fly under the radar. There are some great investors from Silicon Valley, the Midwest, and the East Coast who have made a few investments here, but nobody has really planted roots.
Consequently, Texas is underfunded, as has been well documented by David Altounian and his colleagues. We don’t attract as much venture capital funding as you would expect for our population size and startup activity. Stephen Straus and David recently compiled a comprehensive survey of the funding resources in Austin.
Fundraising across the state is currently a missed opportunity that could bring new dollars into the market. The angel investor groups such as the Central Texas Angel Network and Houston Angel Network syndicate deals with each other but it’s still the exception not the norm for an Austin startup to have investors from Dallas or Houston, even thought that’s where much of the wealth in Texas is.
If we can get money flowing better across Texas then we won’t need to attract as much money from outside Texas.
The trends are in our favor
It’s only going to get easier to create great companies outside of Silicon Valley, not harder. If there is one complaint about Texas it’s that we don’t get our share of investment dollars relative to the number of people that we have. This doesn’t stress me out much because the trend here is in our favor, too.
More and more talent is moving to Texas. More and more companies are moving to Texas. More and more VC funds are being raised in Texas, and more and more VC firms are making their first (and second, and third) investments in Texas. With so much talent moving to Texas, both startups and big companies are following and the funding will follow the talent and the startups.
Investors go where the startups are. Startups go where the talent is. The talent is moving to Texas and has been for many years.
Texas is part of a global ecosystem
No city lives in isolation anymore. We are all connected. Our economies are connected. Our food systems are connected. Our health systems are connected. We all use the same Internet. And cities around the world, with their CEO-like Mayors, are increasingly where things are getting done while national solutions are mired in bureaucracy and gridlock.
Digital and technology startups are global from day one. You can launch a business in Austin or Houston but eventually you will probably need to sell to customers in California or raise funding there. You can start by selling in the U.S. but if the product is world changing then others will copy it in other countries if you don’t go global.
It’s only getting easier to start a business from places outside of the traditional startup hubs. Steve Case, co-founder of AOL, chairman and CEO of investment firm Revolution, created the Rise of the Rest platform to promotes startup hubs outside of Silicon Valley. Google for Entrepreneurs has established the Google Tech Hub Network of startup hubs and Google Campuses in major cities all over the world.
Successful startups aren’t based in just one city. They must open offices for sales, software development and services in many other cities to attract the talent that they need and to be close to their customers. Being in multiple cities can be a drain on productivity and increase travel expenses but it’s not as bad if you’re all in the same time zone and within driving distance.
The Texas Startup Megatropolis
As the world gets smaller and each of the four Texas cities get larger, the borders blur and they start to look and behave more like one big city. It’s easy to get from Austin to Dallas to Houston to San Antonio on big Texas highways with high speed limits. You can do a day trip between any of the cities and sleep in your own bed at night.
They are all close enough that it’s just as fast to drive as it is to take a short plane flight. Southwest offers flights for as low as $86 each way and Megabus as low as $5 each way!
- Austin to Dallas — 3–4 hour drive or 45 minute flight
- Austin to Houston — 2.5 hour drive or 30 minute flight
- Austin to San Antonio — 1.5 hour drive
- Dallas to Houston — 3–4 hour drive or 45 minute flight
- Houston to San Antonio — 3 hour drive or 45 minute flight
Alternative transportation solutions are making it easier to get from city to city both affordably and conveniently. I expect the next few years will see more transportation options, not less.
- MegaBus runs 8 routes a day each way between Austin and Dallas with wifi and power outlets for anywhere from $5 to $28 each way.
- VonLane is like riding in first class on an airplane but you take the bus instead.
- Rise (recently acquired by Surf Air) offers daily executive air service between the cities at 9am and 5pm each day.
- Texas Central is working its way through the Texas legal process to run a bullet train from Dallas to Houston.
- Texas is likely to be an early location for a Hyperloop track.
Technology makes it easier to do business from anywhere to anywhere. Every laptop and cell phone has the required hardware and network do video conferencing and if you’re really lucky you can afford a Cisco or Lifesize setup for premium quality.
If you’re interested in plugging into the Texas startup ecosystem, find us at an upcoming event in your local tech hub, on the web, or on Twitter @CapitalFactory.
Special thanks to David Altounian, Trey Bowles, Jason Cohen, Gordon Daugherty, Mellie Price, John Reale, Fred Schmidt, Eugene Sepulveda, and Georgia Thomsen for their contributions to this post.
Alexis Ohanian, co-founder of Reddit “I like how in Texas, y’all refer to yourselves as the 10th largest country in the world, and I think that’s absolutely the right mindset.”
