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As Tech Companies Move In, Can Austin Keep Itself Weird?

Austin is losing some of its quality of life appeal as it attracts Silicon Valley giants.

(Bloomberg)—Three years ago, Brin Chartier went to Austin, Texas, for the South by Southwest festival and decided she wasn’t going to leave. The then 27-year-old found a job at a tech startup and moved there the following year. “I fell in love,” she said.

Lots of cities are trying to fashion themselves as the next Silicon Valley, but Austin is truly having a moment. Its economy, population and list of high-profile employers have all ballooned in recent years. Chartier is among a wave of Austin transplants, attracted by the mix of affordability, opportunity and eclecticism. “So many new people were moving in,” said Chartier, a Boston native. “It’s been wild. After a month or two, I was old news.”

Austin’s population increased 23 percent from 2010 to 2017, growing faster than any other U.S. metropolitan region, and far outpacing the national rate of 5 percent, according to data from research firm Statista. It’s slated to expand the size of the downtown area by half, based on projects under construction or planned, according to Austin’s economic development department. As a result, the city is becoming less affordable and driving longtime residents out. In other words, it’s starting to look more like the Valley in less desirable ways, too.

One draw for businesses is the local tax incentive program, which takes into account job creation and environmental impact. The technology industry is one of the biggest drivers of growth. And the city isn’t over-reliant on one employer—unlike, say, Arlington, Virginia, which Inc. plans to call its second home. In the past few years, Amazon, Apple Inc., Facebook Inc. and Google have established large Austin outposts, and each recently signaled plans to expand there.

Amazon spent $13.7 billion to acquire Austin-based Whole Foods in 2017 and is leasing nearly half of a new tower under construction, according to a local report last month. Apple’s presence in Austin is the biggest after its headquarters in Cupertino, California, and the company said it would invest $1 billion in Austin to build an office park capable of holding 15,000 additional employees, roughly double the current workforce there. Juul Labs Inc., the San Francisco-based maker of a popular e-cigarette, said it will open an office in Austin for some four-dozen employees to start. The plans, which haven’t been previously reported, would designate Austin as the head of Americas for Juul.

South by Southwest, which kicks off Friday, serves as the city’s annual showcase. Since the first music festival in 1987, organizers have added film screenings, a technology conference, video game competitions and political debates. This year will feature Democratic presidential candidates Elizabeth Warren and Amy Klobuchar, alongside acting lessons from Jodie Foster and an interview with the founders of Instagram.

A quasi-official slogan of the city is “Keep Austin Weird.” That a landlocked, lone liberal stronghold in the country’s conservative heartland became a tech hub is a suitably weird fact. Jeff Haynie, who has spent the last two decades starting tech companies in Atlanta and Silicon Valley, moved his family and his newest startup, Pinpoint Software Inc., from Mountain View, California, to Austin last year. The company’s investors include Bessemer Venture Partners, Slack Technologies Inc. and Bloomberg Beta, the venture capital arm of Bloomberg LP.

More affordable housing, a higher quality of life, relaxed business licensing rules and the absence of personal state income taxes convinced Haynie to come to Texas, he said. The state climbed to become the third-most-popular place to start a new business over the last decade, from 20th, according to the Kauffman Foundation. The recent migration of talent and a change in attitudes among VCs makes starting a tech company outside of the Valley more possible than ever, Haynie said.

Haynie has been coming to South by Southwest since 2009. He’ll spend the next week attending the festivities and entertaining friends and old colleagues from the Valley. More than 75,000 people are expected to descend on Austin for the event. “Some restaurants pay the whole year’s rent in just that week,” said Josh Baer, founder of a startup accelerator located downtown. “It’s hard to say whether Austin made South By or South By made Austin.”

The tech influx has been good for Baer. His accelerator, Capital Factory, worked with more than 100 startups last year, up from five in 2011. But he worries Austin could lose its cherished weirdness and replicate the urban woes of San Francisco, where high-earning tech professionals drove up the real estate market to extraordinary levels.

The median home price in Austin jumped 40 percent over the last five years, exceeding the national average, according to Zillow. Traffic is already a problem, and a population boom could put an even greater strain on transportation and other infrastructure. “Artists can’t afford to live here anymore,” Baer said. “The cool people are going off to live somewhere else.”

To contact the author of this story: Lizette Chapman in San Francisco at [email protected]


© 2019 Bloomberg L.P

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