Hi Mike,

Thank you for responding to the article. You are right in that there are very few exits over $50MM in Austin. The reason, as I see it, is that the coasts come in and scoop up companies when they are still in their early-stages. Austin entrepreneurs are told to look for distribution from others to elevate their own. Investors in Austin may also push companies to sell early so they can see a quicker, albeit smaller, return on investment. I have seen both first-hand.

You bring up a good point in that Silverton and Live Oak account for 70% of Austin’s venture community. That means that if an entrepreneur doesn’t “click” with these two companies, they are out of luck for Austin-based venture funding and most certainly won’t find a lead investor here. That may be one reason we feel a distinct vacuum drawing companies to the Bay Area.

I disagree that there are a lot of other sources of VC and angel capital in Austin. Having been through the rigmarole in Austin’s angel and VC community, it is clear we don’t have a diverse set of investors.

Austin Ventures wasn’t the go-to company for Austin entrepreneurs and actually hurt the younger ones. They [AV] rarely saw deal flow in Austin and having worked with several of their folks, I can say that we brought them deals with very little hope of their interest. It was more along the lines of “kissing the ring” to ensure that AV saw it. But they certainly weren’t focused on startup deals (or at least the startup ones that Austin has been famous for in recent years). AV was focused on rolling up and taking public. I agree that AV leaving Austin will eventually be a good thing, and am saddened that nobody has come in to fill their shoes.

Partnering with Silverton is a great thing as they are smart guys. I really like Kip and Morgan. The downside is that without Floodgate, Austin entrepreneurs are left with two companies. The other VC’s in Austin are just not investing, or invest in too few deals to make it meaningful. Look at Covera Ventures — the last news we heard about them was in 2013 and they gained notoriety from a huge win from my friend’s company ITKO. Sadly, ITKO ended up being partially run by my friend in Austin but was a Dallas company — meaning Austin didn’t get recognition for it and the VC that gained huge returns has since stopped.

I don’t believe that Austin will create massive outcomes in the next 15 years because the recent years have created a culture of smaller acquisitions to put money into the founder’s bank account. The downside is that they [the founders] have no sense of reciprocity to the investment community because they don’t have enough to play with for much angel investing. This culture will have lasting effects that may take years from which to recover — if at all.

Let’s leave Lyft and Uber for another time, unless you want to talk about on-demand companies and how poorly they are received in Austin. Favor is an exception to the rule and was initially looked down upon when they first came out. It was through hard work and great fundamentals that they survived. The reason is that Austin values revenue over user [consumer] growth. Austin investors ask “how can you get to $1MM MRR” versus asking the Bay Area question of “how can you get to 1MM MAU?”

Being a serial Austin entrepreneur, I value our town for the lifestyle, not the availability and ease of raising funding. Had my 2013 acquisition by a famous SFO company not been killed 12 hours from signing the final docs, I would be living in the Bay Area. Like many before me, I would find it easier to move to the City than move to Austin to start a company.

All things aside, I would love to see Floodgate have a presence in Austin as Floodgate and would welcome the opportunity to help in any way that I can. The best way to see deal flow is to see it yourself, rather than through another’s looking glass.

Thanks for reading Mike and first margarita and queso is one me. :-)