“Why I Moved My Company to California”

By SUSAN LAHEY
Special Contributor to Silicon Hills News

Moderator Laura Beck of Stripedshirt.com hoped the panel would spark fiery debate. But it turned into an event along the lines of Eeyore running out of Prozac during the rainy season when the Austin Technology Council 2012 CEO Summit hosted several entrepreneurs speaking on the topic “Why I Moved My Company to California.”
Panelists James Beshara, co-founder of Crowdtilt, Frank Coppersmith, COO of GameSalad, Matt Pfeil, co-founder of DataStax and Tom Serres, CEO of Rally listed numerous reasons why they moved to the San Fransisco Bay area or Silicon Valley, including vastly more venture capital money, a wealth of thought leadership and a pace of activity 20 times faster than that of Austin. The only thing they missed back home in Texas was the food—specifically barbecue and breakfast tacos with green chile.
The panel was part of day two of the second annual CEO Summit at the Hilton Hotel. The Austin Technology Council sponsored the two-day event in which more than 150 CEOs and other top level technology executives meet to discuss the outlook for Central Texas’ technology industry and how to recruit and retain technology talent. Though the agenda for Friday appeared to largely focus on what Austin needs to do to give its startup community more support.
Rally’s Serres said he went to Silicon Valley for the capital. “For every venture capital firm here there are about 1,000 in the valley,” he said. “And it’s a different style of investor here. In the valley, there’s a larger number of risk takers. I was going for a larger consumer tech play. I don’t think the talent is in Austin for a large consumer tech company.”
Beshara said he intended to move to the Bay Area only temporarily. But within three weeks, he’ddecided to stay. “Out there, things move so ‘friggin fast,” he said. “And speed is everything.”
Coppersmith pointed out that the thought leaders are in California.
“If you are in movies, you’re in L.A….if you’re in tech, you’re in Silicon Valley. It’s about getting access to the thought leaders.”
Pfeil pointed out that the Silicon Valley ecosystem is all about startups. Stanford graduates, he said, come out with a mission in life to “quit after their second year of work and become the next Google….UT is going to have to focus less on graduating great, world-class engineers and focus on graduating entrepreneurs who will start great, world-class companies.”
Panelists mentioned problems that were repeated throughout the day: Exponentially more venture capital money exists in Northern California; the Universities, the funders, the famous companies like Google and Facebook, in short the entire culture supports startups; access is immediate—startups can have face time with venture capitalists and angel investors regularly. In Austin, by contrast, a lot of investment money goes to oil and gas; funders are more conservative; there are inadequate flights in and out of the city making travel to and from Austin cumbersome; the University produces employees for Dell, not entrepreneurs.
Even the attributes Austin claims to have over the Bay Area, such as low taxes and quality of life were debunked by panelists. The taxes may be 60 percent higher, Beshara said, but his company’s valuation was 3.5 times higher. And, Serres said, he spends time at Napa, at Lake Tahoe “I have a great life (in California.)”
Beck kept hoping for a fight from the audience but instead a deafening pall settled over the room.
There were some arguments made in defense of Austin. It’s less expensive to fail here, for example.
Serres said that many tech areas, such as Boulder, Colorado and Raleigh, North Carolina, struggled with the same issue. But the important thing was for each of those areas to stop trying to be Silicon Valley and figure out what they do best.
Josh Baer pointed out that he knew a number of Austin entrepreneurs who had moved here from California and that not all of them needed the kind of heavy capitalization these entrepreneurs had sought. He acknowledged the shortage of financing on the traditional model but asked if there might be another model coming down the pike where Austin could excel. The consensus seemed to be “No.”
But while there was no battle in defense of Austin as a tech city, people afterward did talk in small groups about the fact that not every startup aimed to be the next Facebook or Google. Some entrepreneurs were just happy to build reasonably successful businesses from their ideas. Some are even happy to bootstrap those businesses. But there was agreement that Austin needed to fight against an identity as the place where the call centers for the Googles and the Facebooks of the world were located.
Later panels including one that gave the Investor’s Perception of Tech in Texas, addressed many of the same issues the first panel raised including the lack of nonstop flights and the lack of proximity to venture capitalists who want to play a hands-on role with the companies they fund.
The fact that there is a smaller number of startups in Austin than in the Silicon Valley means that top talent will be more reluctant to move here, because there aren’t “a lot of plan Bs” said John Stockton, Venture Partner with the Mayfield Fund.
Jimmy Treybig, Venture Partner with NEA pointed out that many Austin companies tend to think of their market as the U.S. with global expansion being an afterthought. In the Valley, entrepreneurs start out thinking of huge, emerging markets such as China, India and Brazil as key markets from the beginning.
Some advantages, Austin has, however, include the fact that companies don’t have to have a billion dollar target to get funded, unlike companies in the Valley. And SXSW is a huge caveat for Austin’s reputation as a tech center, Treybig said. By the end of the day, Austin did not walk away with any illusions it was gaining on Silicon Valley’s nearly 80 years of development as a tech center. But it did walk away with a laundry list of action items to push it to the next phase. And that might be more important.

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  1. […] This week I attended a panel at the Austin Technology Council’s CEO Summit titled, “Why I moved my company to California” featuring execs from 3 startups that moved from Austin to Silicon Valley and one that kept […]

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