There’s no denying that Austin is a hub for entrepreneurs and startups. In 2022, Pheabs, a consumer startup, released a report stating that Austin is a good place for business.
A separate study by personal finance firm WalletHub placed Austin at no. 8 in the U.S. in the list of the best large cities to start a business in 2024 with a total score of 59.37%. The city, together with Boise, Idaho, recorded the highest average growth in the number of small businesses.
A big factor in this growth is having one of the best business environments in the country; Austin is no. 3 in this list. Plus, being no. 17 for its access to resources surely helped businesses open and thrive in the city. Not too shabby of a location to start a business and claim Austin as the main headquarters.
“Starting a business can be very scary, considering one in every five startups doesn’t make it past the first year,” WalletHub analyst Cassandra Happe said in the release. “That’s why it’s especially important to live in a city that provides an environment where new businesses can thrive, with enough capital, workers and customers to keep it going long-term.”
What type of environment does Austin have that encourages businesses to thrive? Here are the things that set the city apart.
A Supportive Community
During the pandemic, Austin experienced an entrepreneurial boom. An analysis by the LinkedIn’s Economic Graph team showed that the city took the second spot in terms of growth in the number of people starting a business.
This mirrors the situation in the country, where nearly one in five people (19%) are starting or have started businesses in the past 3 and a half years, according to the Global Entrepreneurship Monitor, an annual report by Babson College. The Washington Post notes that this is the highest level of business growth the college has ever recorded since it began doing so in 1999.
“We’re seeing an upward trend in entrepreneurship that’s continued through the pandemic, and that’s a really great sign,” Donna Kelley, a professor at Babson College and the report’s lead author, told the publication. “It means businesses are introducing innovation, creating jobs and contributing to the competitiveness of the United States.”
A big factor that influences this is the environment, in particular the local community. Austin is blessed to have a community which supports diverse entrepreneurs and startups. The city has also become a hub where investors and mentors can connect and collaborate with entrepreneurs.
“Most people in the Austin business community will make time to help fellow entrepreneurs, even when there’s no apparent or immediate benefit for themselves,” Allen Stone, co-founder of PetCru, a start-up in the city that provides in-home pet care services, told Fortune. “From the day we launched PetCru, we’ve had Austin-based pet-related businesses seek us out to support us, participate in events with us, and share industry learnings.”
This spirit of cooperation and mutual support seems to be the secret sauce that binds the community. “[Austin is] very unlike any other startup culture I have ever seen,” Jaime Masters, a business coach based in the city and host of the “Eventual Millionaire” podcast, relates to Fortune. “The people here in Austin actually seem to care even more than the small town I came from.”
According to software development agency Develative, Austin’s startups have reached a record-high combined valuation of $128 billion. Tech companies are a big part of this, but the city’s innovative businesses also include healthcare, energy and companies from a wide variety of industries.
Talented People Abound
Another important factor that has led to Austin’s success as an innovative business hub is the abundance of many talented people. Entrepreneurs, investors and other professionals have all flocked to the city, and along with artists, musicians and actors, have made it a creative hotspot.
“People in all kinds of professions decide that [Austin and Atlanta] are the Grade-A destinations in terms of finding success for their careers, families and work-life prospects,” George Anders, LinkedIn’s senior editor at large, tells CNBC.
The influx of all these people means they need to buy homes, find contractors, choose schools for their children or themselves, and find a new favorite store or restaurant. So, there’s plenty of opportunity for entrepreneurs to tap into right there.
Plus, all these people also power the various industries that have made Austin home. The city boasts an unemployment rate of about 3%. Its robust job market includes employers from tech and retail.
Big wigs like Apple, Meta, Google and Amazon occupy more than 24 million square feet of office space in Austin and employ over 1,000 Austinites, according to a report from Aquila Commercial. In 2022, nearly 9,800 of the employers in the Austin metro area were in the high tech industries, notes The Austin Chamber. The industry created 16.3% of all jobs in the city, which is almost twice as high as the national percentage of 9%.
“Austin is the best place in the nation to grow a small business … because our ecosystem has it all: entrepreneurs, incubators, investors, business school involvement and community-building events,” Kevin Johns, director of the City of Austin’s Economic Development Department, told Fortune.
Access to Funding Sources
Even with a supportive community and a huge pool of talent, businesses will fail if they don’t have capital. So, access to funding is necessary to boost the economy and keep businesses afloat.
In Austin, funding sources include angel investors, venture capitalists and private equity firms. These include Silverton Partners, S3 Ventures, Capital Factory, Next Coast Ventures and LiveOak Venture Partners, to name a few. They provide capital and resources that grow the city’s economy and foster innovation.
A report by The Zebra, an insurance comparison site headquartered in the city notes that Austinites have access to venture capital deals and state SBA 7(a) financing. Because of this, Austin leads its list of the best cities for entrepreneurs.
On top of that, entrepreneurs in Austin don’t have to worry about income tax as it’s 0%. Even better, sole proprietors and those operating general partnerships are exempted from paying corporate taxes. And, even if you have to pay, the rate is just 1%.
Is Austin a good place for business?
Considering its supportive community, abundant talent, and access to funding sources, Austin is undoubtedly a prime location for business success.
*Photo Credit Christopher Sherman