Hi Ravi,
Good morning and thank you for responding to the previous articles. It is great to hear that you are building another business in Austin. That is a win for the city as a whole.
There is a major problem when the main way to get funding is to “hop on a plane and go somewhere.”
The next great tech business may be started by two young people who cannot afford the costs of flying to SFO several times a month. It is that requirement to building a business in Austin that will most certainly hurt them when it comes time to defend their valuation — as the numbers will reflect their lost focus to work on out-of-state fundraising.
Paul O’Brien said:
I’ve raised money in California and New York and no one ever talked about raising money “here,” because it’s local. Interestingly, Austin does, as though the proximity to your investors matters more than whether or not they bring value to your venture.
If you are building the next great search engine, then you probably need to jump on a plane because Austin investors may not have the appetite for such a big thing. But it shouldn’t be that every deal in Austin needs to go outside. It just doesn’t scale for anyone but Virgin Airways.
Bob Fabbio said (emphasis added by me):
… I do not think that Austin has been a great environment for entrepreneurs to raise capital. I think for years Austin has received more “entrepreneurial” hype then there has been capital to support it and success stories to validate it.
This struggle that Bob talks about is what several other Austin success stories have told me in recent weeks. You will read some of these stories in the press over the next few months and probably wonder — why did these rock stars have to get funding elsewhere?
I would add that the investors that we do have tend to be less forgiving on valuations.
And that is the other significant thing the original article was trying to relate. When Austin valuations are out of whack when compared with the valuations of out-of-state venture firms, younger entrepreneurs can get hurt and their businesses may never reach escape velocity.
And we are losing the battle
When very well-respected venture capitalist Mike Maples, Jr.sent this message, it should be the canary in the coalmine that he is not alone and we are going to suffer as a center for entrepreneurial ventures because of it.
So not only do we not have enough investors willing or able to write sizable checks to seed-stage companies, those that are investing are potentially going to pull back as we see with Mike’s statement. The folks at Favor should be worried about their follow-on rounds combined with a hair-trigger city council.
What we need to do is drive the startup community’s communication towards something cohesive with investors and entrepreneurs coming together. There will be more things coming out in the next few months on this and I am excited to see the openness.
I wish you well in your endeavors. A rising tide raises all boats. Thanks for reading this comment and my previous article. It means a lot to me.
Richard
