Austin, Texas, is dubbed the Silicon Hills for its venture capital scene. The scene is growing as the city emerges as a leading technology and startup hub in the United States.
Given Austin’s growing tech clout, it is important to understand the key venture capital players shaping the Silicon Hills landscape. Venture capital firms based in Silicon Valley, New York, and elsewhere finance many of Austin’s largest tech startups. But Austin’s venture capital scene is playing an increasingly sizable role.
A survey of Austin seed rounds in 2018 and 2019 revealed that most seed stage financing went to software and software as a service (SaaS) companies. A smaller fraction funding cleantech and life sciences startups.
Silicon Hills Home to More Early Stage Startups
Some view Austin’s venture capital scene as lacking in available capital. VC investments by Austin-based VC firms tend to skew toward earlier stage startups, rather than growth-stage and later-stage companies. This results in lower average valuations and exits that are smaller in magnitude.
On the other hand, some take the view that Austin’s Silicon Hills have an abundance of capital. Yet investment tends to favor B2B companies. Compared to B2C companies, B2B companies can take longer to gain market traction. B2C, or business to consumer, models sell products or services directly to consumers. These include some of the most successful companies of the sharing economy and on-demand service startups. There has recently been an increased number of successful B2C startups in Austin, and the talent pool of entrepreneurs with B2C experience is likewise growing.
Austin’s Top VC Firms
Some of the top Austin-based Silicon Hills venture capital firms to know include ATX Ventures, Silverton Partners, LiveOak Venture Partners, and S3 Ventures.
ATX Ventures has approximately $25 million of funds under management and focuses on making early-stage seed investments. Some notable exits of companies in its portfolio include the acquisition of Fantasy Sales Team by Microsoft in August 2015 and the acquisition of Ridescout by another mobility platform in 2014.
Silverton Partners focuses on startups across a range of industries in Texas, with its initial investments in the range of $200,000 to $2 million. Founded more than 16 years ago, Silverton has always placed its bets on Austin. Silverton is a generalist fund—rather than focusing on a particular industry, it instead focuses on spotting entrepreneurs with ambitious visions. The firm recently led a $10 million round for TurnKey, a short-term vacation rental service.
Silicon Hills Grow Live Oak Ventures
LiveOak Venture Partners focuses on seed and Series A financing rounds in Texas. Typical rounds are between $250,000 and $4 million. One notable company in its portfolio that exited was StackEngine. Oracle acquired it.
Largest: S3 Ventures
S3 Ventures is the largest venture capital fund that focuses on investing in Texas-based startups. Over its fifteen-year existence, S3 Ventures has provided funding for over 45 startups based in Texas. S3 Ventures has over $600 million of funds under management and supports companies in the technology, consumer, and life sciences industries. The firm focuses on providing seed, Series A, and Series B funding for Texas startups.
Other rising VC players in Austin include Elsewhere Partners, Next Coast Ventures, Build Group, and E3 Angel Network. The E3 Angel Network specifically makes investments in startups with ethnically diverse and female entrepreneurs.
On the fintech and cryptocurrency space, Multicoin Capital has grown into a formidable player. Multicoin Capital, a crypto fund, focuses on making investments in blockchain and decentralized projects. It began in 2017 and is based in Austin, while also maintaining offices in New York and Beijing.
The Future of Austin’s Silicon Hills
Eric Engineer of S3 Ventures forecasts that the Texas startup ecosystem could become one of the largest in the nation over the next ten years. Engineer states, “Tech ecosystems benefit from virtuous cycles. As more talented people move to Texas, more capital will follow them, which will then attract more talent, and so on.”
The influx of talent to Austin will drive in further talent. While many workers are drawn to the city’s growing tech scene, many are also attracted to the lifestyle benefits of living in Austin. The combination of warm weather, a vibrant culture, and an entrepreneurial spirit have been key draws. Austin’s culture is far from just being tech-centric—it also is known for great live music, arts, and outdoor activities.
“There’s a lot of vibrancy and momentum to the startup scene here that is reminiscent of the early days of Silicon Valley—the growing number of businesses being launched, the number of companies being funded, the amount of talent flowing here eager to engrain themselves in the tech community,” comments Krishna Srinivasan of LiveOak Venture Partners. “Yet we know there is something unique to Austin that sets it apart from any other tech hub—the collaborative spirit of the people here.”