[csa]

> Even in the United States the conditions for a startup ecosystem to thrive are localized mostly to California, both financially and culturally.

I largely agree with this, and I (mostly) love California for many of these traits.

That said, I think startup ecosystem 2.0 will be centered around Austin. It will look very different than the California startup scene, but it will be just as transformative (if not moreso) imho.

[908B64B197]

> That said, I think startup ecosystem 2.0 will be centered around Austin. It will look very different than the California startup scene, but it will be just as transformative (if not moreso) imho.

I've heard that before. "look at X, it's the Next Silicon Valley".

Every time, it was someone trying to sell me something [0] and every time the correct move has been to keep investments in the Valley.

Maybe this time it'll be different.

[0] https://en.wikipedia.org/wiki/List_of_technology_centers

[csa]

> I've heard that before. "look at X, it's the Next Silicon Valley".

Yeah. I don’t think it will be the next Silicon Valley. I do think it will be the center of startup ecosystem 2.0.

I personally think the biggest difference in startup ecosystem 2.0 will be the lack of Silicon Valley-style VCs. Whatever money is used to fuel the fly wheel will have a fundamentally different approach to investing, at least in the beginning.

I’m not sure what your investments are, but if SV works for you, then stick with it. The startup ecosystem 2.0 probably will not be a good fit for you or them.

[908B64B197]

> I personally think the biggest difference in startup ecosystem 2.0 will be the lack of Silicon Valley-style VCs. Whatever money is used to fuel the fly wheel will have a fundamentally different approach to investing, at least in the beginning.

Where are they going to get investments from?

[csa]

> Where are they going to get investments from?

Great question.

Probably people and organizations who are not looking for a typical SV portfolio (essentially many strike outs and a few home runs that are determined over a specific and relatively short timeline).

SV VCs started out as financiers that were supplying a lot of capital to start capital-intensive businesses (e.g., chip fabs). They are still largely designed to do that, but many businesses can be started and often grown with relatively small amounts of capital. These cheap-to-start businesses are often not served well by the SV VC model.

Some ideas:

1. The companies that are looking to control a complete market will still go to SV VCs.

2. For the companies whose business model doesn’t match the SV VC model, they will go elsewhere. They are doing it now. Specifically, some companies may be capped at growth due to the market size, the nature of the market, etc. When these companies use SG VC, they usually end up just fizzling out, even though the company could have been viable and stable at a small market cap (specifically, a number that would not move VC overall returns but would be large for most founders).

3. I expect the money will come from people and organizations that are happy with consistent, long-term, above average returns — basically focusing on more singles and doubles rather than home runs (to continue the baseball analogy). This might mean more debt rather than equity (unless a company chooses to go public). This might mean that institutional investors could struggle to find a single place or set of places to park large chunks of their money. This might mean that the investors play a key role in the business (e.g., a payment processor supplying short term loans based on historical cash flow).

4. Some of SV’s largest funders (LPs) may find themselves struggling to have significant access to this market, at least at first. Many of the companies and people who are in the best place to make these investments don’t need their money to participate. This could change — for example, payment processors could open up tranches of debt for companies that use their service, or private equity could end up taking a more proactive role in buying and developing businesses. It’s tough to say.

5. If I had to take a stab at what the “end game” of startup ecosystem 2.0 looks like, I would guess that most of these startups remain founder-led until exit. Exits will be relatively small (9 digits or less, usually less). Startups will be purchased by PE and will be developed and flipped. At some point in the chain, the amount of money involved will be high enough to involve substantial institutional money, and the institutional money will get involved though some sort of PE vehicle.

Note that #5 isn’t exactly original — it’s happening now with some PE firms. The main differences I see is that viable small companies won’t be run into the ground trying to hit home runs, and PE will be much more proactive in business building from a much earlier stage.

To build on my original response… why Austin?

- Plenty of land to expand still. This means affordable housing somewhere near Austin should be possible for a long while.

- A great university with a solid engineering department is nearby.

- No state taxes (big strike against CA).

- Interesting city center that is walkable/bikeable if you choose to live there. Overall metropolitan area is desirable — people have been gravitating there for decades now.

- Moderate weather for most of the year (summers are rough but manageable). Definitely not California good, but definitely not Northeast bad either.

- A relatively quiet tech scene that has been growing for decades that can supply mentorship, contacts, and (if necessary) money.

[anamax]

You probably need more than one great university nearby.

SV has Stanford, Berkeley, and San Jose State. You may not have heard of SJS, but there are more (local) Apple employees who graduated from SJS than from Stanford and Berkeley.

FWIW, Stanford is relatively small. Berkeley's freshman class is larger than Stanford's entire undergraduate program.

[csa]

> You probably need more than one great university nearby.

Texas A&M and Baylor are probably close enough to be within the Austin sphere, certainly if the Austin metro area expands.

Rice, University of Houston, Trinity, SMU, etc. are also in the broader halo.

[yoran]

I don't think many people want to move to Texas, for instance abortion is illegal in the state. I doubt people want to move back to the 1950s, certainly not startup people, who tend to be more progressive. I personally would never want to move to Texas.

[mrep]

Texas was the 3rd fastest growing state in the country according to the recent census [0] so clearly many people are fine moving to Texas. And abortion at the state level is not something I would even consider in my list of priorities when choosing where to live when you can just drive to another state for a once in a lifetime event if you ever actually needed one.

[0]: https://www.aarp.org/politics-society/government-elections/i...

[csa]

> I don't think many people want to move to Texas, for instance abortion is illegal in the state. I doubt people want to move back to the 1950s, certainly not startup people, who tend to be more progressive. I personally would never want to move to Texas.

I’m guessing you’re European based on your business. Do you live in the US?

I’m guessing you don’t know many people who live in Texas, especially Austin. Startup people and companies are flocking to Austin.

Texas politics are weird because the Republicans have gerrymandered the state to a comical level. It’s allowed to persist because none of the bodies that can serve as a check and balance are doing any checking or balancing (failure of US democracy, imho).

I would not consider what is happening there representative of Texas as a whole, and especially not representative of Austin. The overall feeling of the state is moderate with a wide range of perspectives (like most populous states). The elites, however, are very conservative.

A change in Texas politics/politicians will come at some point, and when it comes, it will be swift. I am not convinced that the politicians in Texas are particularly representative of the people, but they are highly representative of the special interests of the state.