Founder of Silicon Hills News

images-5No one disputes that Austin has become a major technology hub.
But some say that Austin tech entrepreneurs don’t think big enough when it comes to launching startups.
“Too many Austin companies are lifestyle companies not betting on world domination like Silicon Valley,” said Bob Metcalfe, professor of innovation at the University of Texas at Austin. Austin tech entrepreneurs need to focus on innovation and changing the world at scale, Metcalfe said. That’s what he did when he co-founded 3Com in 1979. They wanted to connect the world and that resulted in new jobs, but it wasn’t the focus, Metcalfe said.
“Our goal was innovation at scale,” he said.
Metcalfe was one of three experts on a panel titled “The Long Game: Building Tech Successes” at the Austin Technology Council’s CEO Summit Wednesday morning at ACL Live at the Moody Theater in downtown Austin. Mark McClain, CEO of SailPoint Technologies, moderated the panel.
Instead of building really big companies, some worry that Austin entrepreneurs sell their ventures too soon.
The hardest decision for the VC and the founder is when is the right time to take an offer, said Brett Hurt, vice chair, founder of Bazaarvoice and now venture partner at Austin Ventures.
John Arrow, CEO and Founder of Mutual Mobile, said there is certainly the possibility in Austin that companies are selling too soon. Last year, Mutual Mobile turned down an buyout offer for $50 million. “It’s something we very seriously looked at,” Arrow said. But the company’s ideology focused on making the world a better place through mobile technology, Arrow said. But if there was another zero behind the offer and it was $500 million that might trump their ideology, he said.
The way to solve the systemic issue resulting in a lack of innovative tech startups in Austin is to get more companies starting up in Austin, Arrow said.
“People are starting up companies in the Valley like people in Austin are starting up bands,” Arrow said.
He recommended starting a tech entrepreneur class in high school to get kids interested at an early age.
Mutual Mobile is four years old and has 350 employees. The founders just launched its stock option plan and the question they got asked the most from its employees was when is the Initial Public Offering, Arrow said. They needed to educate the employees on other ways to redeem the stock options other than an IPO like through free cash flow and share buyback, Arrow said.
Silicon Valley has the gold rush and swing for the fences mentality and Austin needs to adapt more of that attitude, said Hurt.
“I think the biggest thing missing in Austin is know-how,” said Hurt. He details his thoughts in a post “The State of Tech Entrepreneurship in Austin” on his blog.
He recounted how Sergey Brin and Larry Page tried to sell the source code for Google to Excite for $1 million but they got turned down. So they went on to create a world changing company. Hurt said Austin entrepreneurs have the potential to create the next world changing company.
“Let’s think bigger and not become the India to Silicon Valley,” Hurt said.
Austin needs to change the world through innovation, he said.
“Austin has a huge opportunity here,” he said.
Companies should not focus on IPOs as the ultimate accomplishment, Metcalfe said.
The IPO is just a relatively minor financial event in a company’s lifecycle and it’s not the end game, Metcalfe said. After 3Com went public, Metcalfe said he was still there.
“You’ve got a company to run right after the IPO,” Metcalfe said.
It wasn’t an exit. It wasn’t game over. He still had a company to run.
“I see a lot of product pitches, a lot of them, and too many of them have a slide about the exit,” Metcalfe said. “Someone is teaching our entrepreneurs to put an exit slide in their six minute pitches and it breaks my heart. Cause the company doesn’t even exist yet and they’re already talking about exiting. What’s the entrance?”
Another entrepreneur had a slide about the company’s philanthropic endeavors, and Metcalfe told him to focus on making money first before worrying about how to give it away.
Austin also needs to have more tolerance for failures, said Hurt. In Silicon Valley, they churn out failure after failure, he said. That’s why it turns out so many successes, he said. They continue to experiment.
Austin now has several incubators with Capital Factory, Incubation Station, DreamIt Ventures and Tech Ranch, Hurt said.
“Most people in incubators will never make money,” Hurt said. “Most experiments will fail.”
But it only takes a few to succeed to create a culture of innovation, he said.
One of the biggest things happening in Austin is the Dell Medical School at the University of Texas at Austin. The school will not only have doctors and biologists but engineers and entrepreneurs all over it, Metcalfe said.
Biotechnology, nanotechnology and 3-D printing offer all kinds of possibilities for entrepreneurs to develop startups, said Hurt.
Hurt also recommended the book Abundance, by Peter Diamandis and Steven Kotler, to encourage entrepreneurs to think about big ideas.
Diamandis has started a company, Planetary Resources, to mine asteroids, Metcalfe said. That’s a big idea, he said. At the University of Texas at Austin, undergraduate students suffer from ideas that are too small, Metcalfe said.
That’s true of a lot of entrepreneurs in Austin, Hurt said.
“They are thinking too small,” Hurt said. “They are thinking of an exit strategy too early.”
Austin has plenty of money, Metcalfe said. Venture capitalists know how to fly to Austin too, he said.
“We need to focus on having better companies,” he said.