Austin, Texas is being billed as Silicon Valley v2.0, but there’s much more to its commercial landscape than a thriving hi-tech scene. Director hears from leaders of some of the British firms that have established a base in the Lone Star State’s capital
It’s the capital of a state whose name is derived from the word tayshas, meaning “friendly” in the native American Caddo language. Austin is, to put it mildly, an arrestingly likeable place. But there’s plenty more than its sun-kissed congeniality to prompt business leaders around the world to cast an envious eye towards the fourth-largest city in Texas.
The broader business credentials of the state, in whose Hill Country region Austin sits, are impressive enough. The second-largest state economy in the US after California, its output was £1.27trn in 2015. If Texas were a country, that GDP would rank it as the world’s 10th-largest economy behind Brazil, which has a workforce of 91 million – three-and-a-half times larger than that of the Lone Star State. The cost of doing business here is estimated to be about 10 per cent lower than the national average.
Its commercial attractions include no state taxes (Apple is among those lured here by that, setting up a base at Austin back in 1992); a burgeoning start-up community; and strong support networks. The Greater Austin Chamber of Commerce, for instance, offers backing for tech start-ups in the shape of events such as a bi-monthly meet-and-greet session for entrepreneurs and investors. Small wonder that Austin – which Forbes placed top of its list of fastest-growing US cities in 2016 while ranking Texas the fourth-best state for doing business – is enticing firms in their droves from all over the world.
The Texas oil boom of the early 20th century saw an agrarian society become heavily industrialised. But, with the recent downturn in crude prices leaving the oil industry’s share of the state economy below the 1990 low of 10 per cent (it peaked at 19 per cent in 1981), Austin’s prosperity no longer depends on black gold.
“Healthcare is becoming very strong, while alternative energy is also an area that interests Austin,” reports Haileigh Meyers, the UK Department for International Trade’s vice-consul for tech and creative media in the city. “We’re in the heart of the Texas oil and gas industry, but people are looking past these finite resources. There’s a lot of focus here on technologies that will help to offset a future decline in the demand for, and supply of, fossil fuels.”
Putting the techs in Texas
Austin is widely seen as the second Silicon Valley, but with much smaller overheads for workers than the famous Californian hi-tech hub. A recent study revealed that anyone considering a move to Burlingame, California, located between Silicon Valley and San Francisco, should expect to pay 271 per cent more than the national average for their basic living expenses. It found that the equivalent figure for Austin was 7 per cent.
“It’s definitely a tech hub with a lot of buzz going around. There is much coverage in newspapers and magazines about how big the city is on innovation,” Meyers says. “In fact, Austin and Hackney – London’s hub of tech innovation and entrepreneurship – have established a ‘sister city’ agreement to foster the exchange of ideas in areas such as hi-tech and digital media, the creative industries, economic development and sustainability.”
The fact that Austin has attracted providers of start-up support services such as Capital Factory, Techstars, Dreamit Ventures, WeWork and Tech Ranch also speaks volumes about the city’s attractiveness to ambitious hi-tech ventures.
One UK firm that has been drawn to the city is ThisWay Global, a Cambridge-based company. It set up in Austin late last year in response to demand from customers operating in both the US and UK, says Angela Hood, its founder and CEO.
“BA’s direct flights from London to Austin really contributed to our decision too,” she notes. “We don’t have long notice periods to contend with in Texas. There’s no state income tax, while the business taxes are structured to support growing tech businesses. Wages are comparable to what we pay in the UK, but the taxes are lower, so overall we find that our expenses are between 20 per cent and 25 per cent lower. There’s also a very strong talent pool.”
James Blake, co-founder and CEO of Hello Soda, a global big data and text analytics firm, agrees. “After a long deliberation and travelling across the US to find the ideal city for our headquarters, we completely fell in love with Austin,” he says. “As well as its obvious advantages, such as the weather, it stood out against New York, Houston and Chicago because of its reputation as an up-and-coming tech hub.”
Observing that Dell, Facebook and IBM have set up shop here, Blake is, like Hood, highly impressed with the quality of job candidates in Austin and the city’s commercial culture.
“The excellent local universities provide us with a high-quality talent pool for when we expand our US team,” he says. “We see so many similarities between Austin and Manchester, which is where our HQ is. They both celebrate new ideas; they encourage innovation; and they have a friendlier, more welcoming atmosphere than the traditional business capitals of New York and London.”
Come one, come y’all
It’s not only tech start-ups that see Austin as the ideal location for their US bureaus. Nick Roberts led the acquisition-based establishment of a 300-employee branch in the city for WS Atkins, a FTSE 250 engineering company. Now the CEO of its UK and European arm, he says of that experience: “The special relationship between the UK and US extends to business. Both as an individual and as a British company taking over an American business, I felt a high rate of acceptance.”
While Roberts admits that it was hard to establish the Atkins brand in such a competitive market, he compares Austin to San Francisco and New York as a place for start-ups to thrive.
“It has a strong technology culture and is a great place in which to live and work,” he says. “If you add to that good access to financial and intellectual capital, and a solid structure around a very strong university, it’s worthy of serious consideration for UK firms looking to establish a base across the Atlantic.”
Most of our experts also mention the city’s handy location, smack-bang in the middle of the nation longitudinally. “If you have an office in New York, you’ll spend almost a whole day flying out to a meeting on the west coast,” Meyers notes. “From Austin it’s three hours to either coast, giving you half a working day or so once you get there.”
Austin is six hours behind London, which gives an overlap of US and UK working days that San Francisco, two hours behind Austin, cannot offer. Meyers also points out that the city’s family-orientated culture and highly respected schools add to its appeal to foreign firms seeking a foothold in the US.
Offering advice to British firms considering Austin as a destination, Blake suggests that small outfits should start in a collaborative working space to take advantage of the networking opportunities this would offer.
Hood adds that seeking guidance from someone who has already made the move is vital. “Preferably, that will be someone who’s done it as recently as possible, as regulations change regularly here,” she warns.
Any other caveats? “Operating agreements between the US and UK arms of our business have brought a layer of complexity that no start-up would seek,” Hood observes, but she and her fellow expats have generally been pleasantly surprised, not only by the city’s conducive commercial environment but also by its congeniality.
“Austin’s a very relaxed, laid-back city,” Meyers says. “People often come here thinking that we’re all cowboys riding around on horses – that all of Texas is like Dallas in the 1980s. Each city in the state has its own personality, so they’re surprised to get out here and find a hipster vibe more akin to Shoreditch.”
So ditch the 10-gallon hat that you bought from the airport gift shop and instead come wearing your friendly, enthusiastic entrepreneurial one. You should fit in just fine.
Case study: Austin Fraser
The decision by Austin Fraser, a Reading-based recruiter specialising in IT, engineering and life sciences, to open an office in Austin had nothing to do with nominative determinism. It was more about identifying a local problem to which it had the solution.
“There is a high demand for technical talent in Texas and a short supply of quality candidates,” says its US business manager, James Lafferty (pictured). “Also, Austin’s innovative culture and desire for growth is infectious, aligning perfectly with the values of our business, so it has proved the ideal foothold for us in the US.”
Lafferty stresses the importance of networking in the city, noting that the Greater Austin Chamber of Commerce is eager to help: “After only one year we’re presidential members, partnering with it not only in business, but also in social and local economic, matters.”
Competition for talent is fierce, reports Lafferty, adding that making the right offer extends beyond pay. “Employers often go above and beyond to make their company the most desirable, just in case they can’t win the bidding war that usually occurs,” he says. “We’ve seen exceptional benefits and widespread flexible working opportunities – slides have even been installed in some offices. There are high standards to compete with, so you need to be constantly agile and evolving.”
Lafferty adds that incoming firms should choose a location close to their talent pool, as the city’s poor public transport makes commuting difficult.
“With Austin welcoming so many new businesses, it’s essential to stand out,” he stresses. “Be social media savvy and also organise face-to-face meetings. In Texas, people like the personal touch.”
Above all, running a relaxed ship is the key to success. “Despite their hardworking attitude, people here are generally laid-back,” Lafferty says. “Your working environment needs to reflect this.”