Austin Startups Need More Funding Sources

Austin skyline, photo licensed from iStockphotos

Austin skyline, photo licensed from iStockphotos

Austin ranks first for startup activity but 12th in the nation for venture capital funding, according to a new report.

The report released Tuesday from an assistant professor at St. Edward’s University, backed by the Austin Technology Council and the Austin Chamber of Commerce finds the city needs more funding sources.

The report compared Austin to nine other cities that are also tech startup hotbeds of activity. Austin has plenty of startup activity and it has “a strong representation of seed and early stage funding sources,” but it needs more late stage and mezzanine venture sources such as private equity and investment banks, according to the report.

The report found Austin has 144 funding sources, compared to 785 in Silicon Valley, 739 in New York, 475 in New England and 371 in Chicago and the Midwest. And Austin’s average deal size is $5.4 million, compared to $10 million to $11 million in most metro areas. The figures are based on data from the National Capital Venture Association.

Last year, total venture capital investment was $620 million in Austin, compared to $4 billion in both New England and New York and $1.2 billion in Seattle and $2.6 billion in Southern California.

ATC, the Austin Chamber of Commerce, the City of Austin and Capital Factory will host a panel on Nov. 5th to discuss solutions to the funding problem.

“It’s time for Central Texas to expand its investment vocabulary,” Julie Huls, President and CEO of the Austin Technology Council, said in a news release. “By shedding light on the distinctions between all stages of investment, we now have a report that will serve as a baseline for us to understand future data and trends and arm our region with the information we need to retain and attract the most critical technology funding sources to strengthen our region’s economy.”

“In order to create an environment where Austin’s most promising companies can reach their full potential, we need to make a concerted effort to engage our existing funding network and recruit additional capital investment sources to Austin,” Michele Skelding, SVP, Global Technology and Innovation at the Austin Chamber of Commerce said in a news release.

David Altounian, assistant professor of entrepreneurship at St. Edwards University, led the research study. He is a partner at Capital Factory and former chairman and founder of Motion Computing.

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