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Austin’s Friendly Climate

Austin, Texas skyline
Austin, Texas. Photo by Jeffrey Zeldman.

Austin is a friendly place. As a recent visitor, I found it so for its people; when I was researching this column about the most promising places to start a company, I found this is the case for new ventures as well.

My original research centered on the most sensible way to measure a location’s suitability for business startups. As a recent Crain’s article noted, there are a variety of ways to approach the question of which places are the “best” for new businesses. The one that makes the most sense to me is to look at the number of new businesses that a region actually generates. That is how the Kauffman Foundation approached the question in a recent report. The foundation’s Startup Activity Index is a “comprehensive indicator of new business creation in the United States,” and measures activity across states and the 40 largest U.S. metro areas. In 2017, the top five cities for startup activity were, in order: Miami, Austin, Los Angeles, San Diego and Las Vegas.

I also looked at other ways to measure the best place to start a business, for comparison. The commercial real estate firm Cushman & Wakefield went about the task differently. It looked for resources and attributes that a new firm, especially one built around technology, presumably needs – a highly and technically skilled labor force and available venture capital, for example. Unsurprisingly, Silicon Valley topped that firm’s list of Top 10 Tech Markets, with nearby San Francisco right behind. But Austin made that list, too, at No. 7. Real estate firm CBRE also placed Austin eighth in its ranking of tech talent pools in major North American cities.

For venture capitalists, deal flow is everything. They want opportunities to find the most promising startups (often, but not always, tech-centered) early, and typically to cash out at a hefty profit not too long afterward. When the National Venture Capital Association sliced and diced its data, Austin made the list yet again. With 60 transactions in the second quarter of 2017, it placed eighth.

After all this research, I was left with a new question. With such different criteria driving each set of rankings, why does Austin do so well, so consistently?

It comes down to that vague but meaningful term we often toss around, “business climate.” Much as it likes to consider itself a place apart from the rest of Texas culturally, the Lone Star State’s capital benefits from the many factors that make Texas, overall, a fine place to do business. There is no personal income tax, corporate income taxes are moderate and reasonable, regulation is generally light and – notably in Austin, which is also home to the University of Texas – talent is plentiful. Throw in a still-tolerable cost of living, an outdoorsy lifestyle and some of the best music and barbecue around, and you have – Austin.

Given all of these factors, it is not terribly surprising that a network of entrepreneurial resources has grown up to support businesses in Austin. The University of Texas at Austin hosts the Austin Technology Incubator; the prestigious Techstars accelerator program has an Austin branch; and Austin Startup Week has steadily grown into a collection of events that draw dozens of companies and thousands of attendees. And many business owners in Austin praise the warmth of the small business community, one in which entrepreneurs offer one another mutual support.

It just so happens that Austin is also the site of our firm’s fifth and newest client service office. We don’t count as a startup; in fact, next year we will mark Palisades Hudson’s 25th anniversary. But when Ben Sullivan, one of our senior client service managers, wanted to plant our flag in Texas at the end of 2015, I was more than happy to send him there. Exciting stuff is happening in Austin, and I want us to be part of it.

Oh, and did I mention the music and barbecue?

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