Austin, TX vs. Silicon Valley: Can You Really Build A Successful Company "Outside the Bubble"?

After 10 years in the Bay Area, and two years after that in San Diego, I’ve finally ended up in Austin, TX. I know you’ve been clamoring for a post on what I think about the startup climate (and the general “scene” here in Austin); this is that post. I’ll also outline when I think you should head to the Bay Area vs. another city like Austin.

My Unique Perspective

I actually haven’t met many people who have spent significant time in the Bay Area, absorbed in the startup/tech culture there, and then moved to Austin. I expect they’re out there, but since I haven’t been able to find a chronicle of that, I’m writing this one.

I moved to the Bay Area in 1999, at the peak of the complete dot-com insanity. I attended the lavish parties (mostly snuck in, since I was under 21 at the time), then watched the bottom fall out. I worked for Sun Microsystems, and then founded my own hosting company. By 2007, I had made over $2 million (first making a million dollars with my company, then selling it for $1.1 million to a competitor.) I completely bootstrapped my business and never took on investors.

I knew pretty much all the “cool kids” in San Francisco, got invited to all sorts of interesting parties, and met many of the famous names who were there at the time. My company sponsored the first BarCamp (and I was in the IRC channel where they originally planned it), I was at the first SuperHappyDevHouse (and 19 out of the first 20 of them!), and I was at the first meeting in San Francisco where about 20 of us put our heads together to figure out this “coworking” thing. That eventually culminated in Tara Hunt, Chris Messina, and others setting up Citizen Space.

I say all of this not to brag, but to give you an idea of what was happening in the Bay Area while I was there. My hosting company hosted many of the popular startups at the time, since everyone knew who I was. There’s no doubt about it–being in the Bay Area did give my company an advantage.

Having said all that, and now knowing how deep my roots were in the Bay Area, why move?

Why Move?

Certainly, if I was building a consumer startup that all the “cool kids” would use (like Foursquare or Twitter), I’d have wanted to stay in San Francisco. (Foursquare seems to be doing quite well in NYC, though!) The problem I have with those types of startups is that I like to make money. (Just call me Kevin O’Leary.) Those startups focus on “eyeballs” and “stickiness”, and I focus on the bottom line. I knew I wanted to create something that businesses would pay a recurring monthly fee for. “Sticky” is great–as long as I can make money doing it.

I knew I wanted to bootstrap–though I am not ruling out taking an investment or two in the future, I want to own the majority of my company, give generous equity to my employees, and be profitable quickly. (Yeah, I know! Totally weird, right?!)

There were several reasons I left the Bay Area, but what it basically boiled down to was the idolization of “consumer Internet” companies, and a pervasive attitude of “it’s who you know that matters.” I always can pinpoint a “Bay Area” resume–it’s filled with name-dropping. Look, no one should give a crap that you had lunch with [insert big-name VC or angel investor here.] It really shouldn’t even matter if the big wig handed you a check after lunch.

Yet the tech blogs are choked with this sort of “news”. Look, yet another startup you’ve never heard of raised another insane round and is valued at nearly a billion dollars! Yet they haven’t made a dime. It’s nuts.

I wanted to escape the bubble. I’m not interested in my “valuation”. I’m interested in working my butt off (heck, I’m writing this in the office on a Sunday afternoon!), making money, delivering awesome value to my customers, and eventually selling my company and moving on to something even bigger. I love building businesses. I love our customers. I go above and beyond to make sure they have an amazing experience. But I got frustrated with the Bay Area, because that’s not what seems to count there.

So–what about Austin? What’s it like vs. the Bay Area?

Austin vs. the Bay Area

The first thing I’ll say here is that the startup folks here are different. They party less–although the dinner/house parties here are awesome! They tend to be more serious about their businesses. Here, it is less about who you know and more about what you are doing. This fits perfectly in line with my beliefs, and is one of the things that attracted me to this city.

That’s not to say that there’s not partying going on–walk down 6th Street on any Thursday, Friday, or Saturday night and the streets are packed! But you’ll typically find a younger, college-aged crowd there.

People here are more conservative than people in San Francisco, and less image-conscious. There’s a general attitude of “use what works” vs. using a certain brand of product. I see plenty of people bagging lunches, or just buying 5 pounds of BBQ to share! And the cars (or trucks!) are generally the “workhorse” type, vs. the luxury cars you see a lot of in the Bay Area.

There’s plenty of talk here about guns. Shooting is a hobby, but underlying that is a passionate belief that we have the right to bear arms and defend ourselves.

The thing that surprised me most about Austin is how many people go to church here. I grew up in an agnostic, non-religious household, and then moved to the Bay Area, where no one my age went to church. I had assumed that meant that church was “dead” for people my age. Turns out it’s just dead there–here, people go to church. But I haven’t met any crazy “Accept Jesus as your savior or you are going to hell!” sort of folks here. Actually, the church-goers, by and large, are respectful and don’t push their beliefs on you. It’s just part of their lives.

The startup culture here is like a microcosm of San Francisco. It’s definitely smaller, but there are angel investors around, and even an incubator program. The community is just starting to figure out how to band together and work with each other. So far, from what I’ve seen, the community is extremely supportive and friendly. There are enough tech meetups here for you to go to a different one every day of the week–if that’s what floats your boat.

The thing I keep coming back to is how darn nice everyone is here. People you barely know will offer you a guest room to crash in, share a beer & BBQ with you, or will invite you over to watch movies with them and their friends. And the people who work at the restaurants and bars here are the friendliest people I’ve ever met–Brian and I went to a pizza place where the cashier offered 10% off if Brian beat him at “rock, paper, scissors”, for instance. (Brian won, and we got 10% off!) And that’s what makes me genuinely love Austin–the fact that the people here are some of the nicest people I’ve ever met.

Austin vs. San Diego

What about Austin vs. San Diego? San Diego’s startup scene is very small. I helped out there, starting the first SuperHappyDevHouse there and hosting two of them at my house. We had a nice turnout. The Hacker News meetup there, run by two of my good friends, is definitely worth attending.

The main problem I had with San Diego is that we kept losing people to the Bay Area. People would go to college at UCSD and then head up to San Francisco. Bay Area companies would frequently drop in on San Diego to try to poach talent. San Diego suffered from a ton of “brain drain”–the perception was that once you wanted to get serious about running your tech company, you’d have to move to SF. I was really disappointed in this. I eventually decided it wasn’t a battle worth fighting–and left for Austin.

Recently, I closed on my first house here in Austin. I picked an older, established area (just south of the 183, off of Burnet, if you know Austin.) I put 20% down and financed the rest, and my mortgage payment is $1789 per month on a 30-year fixed. This is for a 3-bedroom, 2-bath house about 15 minutes from downtown by car (45 minutes by bus, with a direct bus route to a block away from my office downtown.) That payment includes principal, interest, taxes, and insurance.

Now interestingly, that’s what usually sells people in the Bay Area on moving to Austin. (Not to mention that you can save $20,000+ a year on taxes here if you have a decent income, as there is no state income tax!) But what I’d like to emphasize is not just the cost of living, but the opportunities here. It seems to me that a lot of people are scared of making a change. But if you feel like the Bay Area is a bit of an echo chamber, your company doesn’t need the “cool kids” to endorse it, and you’d really rather attend more dinner parties and hang out with some genuinely awesome people, and be a bigger part of a smaller startup community, consider Austin.

What About the Weather?

I always find it puzzling that so many people are concerned about the hot summer weather in Austin. (And yes, though I haven’t lived through an entire summer here yet, I’ve been here during the summer multiple times, and I grew up in Indiana, where it’s also hot in the summer.)

I look at it like this: You are running a business. You are probably indoors most of the time. Air conditioning was invented a long time ago. And when you are not indoors, it’s a short trip to your car or bus. You will survive!

And just in case even that isn’t acceptable, you can always do what we’re planning to do with Whoosh Traffic next year–take the whole business somewhere else for a few months. Three months of heat shouldn’t be a dealbreaker for what is otherwise an awesome change of pace.

I love Austin, and plan to make it my home for the next several years. With the tax money I’ve saved, I can afford to fly back to the Bay Area and rub shoulders with all the name-droppers. (I expect I’ll fly back there at least once or twice a year.)

If you’re running a startup or consultancy, and don’t really feel like you’d fit in the “who you know” bubble, I highly recommend Austin. As a bonus, Austin has the best pizza and best BBQ I’ve ever tasted, and you’ll never hunger for a good craft brew. Give Austin a shot.

Recommended Reading:

• The End of an Era. My recall of my complete journey through Silicon Valley, including building and selling my web hosting company.
• One Million Dollars, The Hard Way. Another detailed recount of how I built and sold my first business.
• Dear California: I’m Leaving You. Here’s Why. Why virtually no one who wants to build a 7-figure or 8-figure business should do it in California.