these Texas cities … but the opportunity to cooperate with folks in Houston wasn’t there before,” he says. “The TMC’s creation is what’s led to these inter-city relationships.”
With the University of Texas Dell Medical School—along with an adjacent innovation district—coming online, Bagdonas says he expects that activity to increase.
Taking a bigger-picture view will also entice out-of-state investors to consider setting up shop in Texas, some tech leaders say. Right now, nearly 80 percent of venture capital is directed to only three states, which happen to be where a lot of investors live and work (California, New York, and Massachusetts), AOL co-founder Steve Case said in a TechCrunch article in May. “The reason [investing outside those states] doesn’t happen as much as it could is because most venture capitalists get in their cars and drive to these companies,” the article quoted Case as saying.
Case is trying to remedy that venture capital distribution through his organization, “Rise of the Rest,” an effort which is focused on helping develop tech ecosystems in different geographies to attract investment.
Even in a known startup hub like Austin, it can be difficult for startups to access capital, says Brunner at the Austin Technology Council. “The reason we don’t have funds of substantial size is our tech industry hasn’t produced enough big players,” she says. “The last two tech companies that produced an outpouring of talent and wealth [were] Tivoli and Trilogy; it’s been a while. We have a lot of early exits and don’t wind up with our own homegrown capital.”
In 2016, Texas attracted $1.35 billion in venture capital, with Austin accounting for $830 million of that, according to an analysis of PriceWaterhouseCoopers MoneyTree report data by longtime Austin entrepreneurs and educators David Altounian and Stephen Straus. But that figure is dwarfed by, say, the $18.5 billion raised by San Francisco companies or the $6.36 billion raised in New England during the same time period.
Greater connections between Texas cities’ tech communities, however, will lead to meaningful investment growth, according to Baer at the Capital Factory. “Instead of talking about why Dallas might be better than Houston, we should be talking about how we can work together to get our share of venture capital dollars more in line with our population size and startup activity,” he writes. “More connections means more business, more investors, and more growth.”
To be sure, Texas is a big state and geography will always be an obstacle of some sort. But Paul O’Brien, a startup advocate in Austin and founder of Media Tech Ventures, says policy makers could help bridge the distance by supporting infrastructure projects like a bullet train linking San Antonio, Austin, Dallas, and Houston. Face-to-face interaction is still important, he adds.
“Old-school connections still make so much more difference than a teleconference,” O’Brien says. “If we don’t invest in high-speed rail, we can write off being an innovative ecosystem.”
