Recently Paul Kedrosky initiated an interesting discussion about the top technology startup hubs in the USA. His article was an excellent summary of the topic. He even posits how Buffalo could make the list!
The discussion that followed included Fred Wilson arguing that NYC should be #3 on the list, ahead of Seattle and Austin. Of course, Silicon Valley and Boston are #1 and #2 respectively.
This all culminated in this study by O’Reilly Radar that attempts to finally truly rank these startup hubs with relevant data and synthesis. I’ve read too many articles that make claims to ranking the top US startup hubs, yet do not believe the results. My skepticism is mainly because my current hometown is Austin, TX, and it routinely ranks #3 or #4 in these articles. In living the startup scene in Austin for over 9 years now, spending a ton of time in the Bay Area, Boston, and NYC, and having many friends working in Seattle, I am absolutely sure that it is not ranked #3 or #4. Austin does a great job marketing itself, but the substance can be lacking in its marketing claims. It is a very hip town, has a major university turning out solid technical talent and major companies with R&D centers, and a large percentage of its activity is startup-oriented. Also, a lot of rich people live here. However, on a comparative basis, it is way behind Silicon Valley, Boston, Seattle, NYC, and maybe other areas.
Take Austin versus Seattle. These routinely tussle for the #3 spot in most of the startup hub articles. Austin has Dell (which by the way has little track record of people spinning out to do their own startups). Seattle has Microsoft, which has spun out a large number of entrepreneurs. Austin has Whole Foods, Seattle has Starbucks – these help create some rich people and contribute to the startup culture. The next level down makes a big difference. Seattle has Amazon, Real Networks, Blue Nile. Where are these companies in Austin? They do not exist . Silicon Labs is the lone $1B in market cap startup success that I can find. There is no $15 Billion comparable to Amazon (yes, entrepreneurs spin out of Amazon too). Seattle has also had a lot of smaller liquidity events that are not as prominent than what we see happening here.
The O’Reilly study gets to the core of some true metrics of startup activity – the jobs data. It’s one thing to say you have a lot of startup activity, it’s a totally different thing to prove that in terms of true economic value-added activity, such as jobs creation.
Austin has all of the ingredients that Paul Kedrosky outlined in his article on startup hubs, and it does a great job with PR. What it lacks is a significant group of profitable, growing startup companies. My purpose here is to highlight the gap between hype and substance here, becuase without the substance the hype eventually wears out. Every other ingredient seems to be here in Austin, we just need more startups that turn into growing profitable entities …. soon.
PS – if you don’t believe me, read the comments on the O’Reilly and Fred Wilson pieces. You’ll see Austinites and former Austinites living in NYC or Boston making similar claims