My love letter (and goodbye?) to Austin | Hacker News Reader

My love letter (and goodbye?) to Austin

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If you don't have an ironclad way to make money, you will not get funded in Austin. No one in Austin cares about growth of users if those users are not actively contributing to the bottom line. Relying on some sort of soft advertising or vague monetization hand waving for sometime in the future will get you absolutely nowhere. It's been like that since the first bubble burst and maybe a little bit before.

This attitude has some serious pitfalls, no doubt. You don't hear about many 'grow users to the stratosphere and sell for obscene piles of cash before the first hint of profit' stories here. Or 'critical mass was achieved and now we can't help but make rivers of cash' stories (which, to be fair, are fairly rare).

But you also don't hear about the 'we poured money into this unprofitable thing because of an impressive growth curve and it imploded because we couldn't find a way to turn users into money' stories here either.

Fewer headline grabbing stories, no doubt. But what you do end up with is a whole host of solid companies that either make money from almost the beginning or that go away quickly. Investors here want to pour gas on a fire that's already burning (doesn't everybody?). They shy away when there is no spark in sight.

But that doesn't mean there's not a lot of innovation happening. There absolutely is, but just not in the 'get the users and the rest will follow' realm of high-risk.

You're going to have to get lucky with the right investor with an appetite for risk in a competitive area of social apps where even the most successful companies struggle to turn a profit or show how your current user base can be solidly monetized today.

Well the problem with something like that is that when you think about it the Ubers and airbnb's of the world would never have made it in Austin based on those criteria. Thats a bit of a problem for me and the city in a way, because when people think "startup" they're thinking more about stuff like that and less about the pragmatic "show me the money" software businesses that Austin tends to fund ... and even at that, not very much.

> Ubers and airbnb's

Uber and airbnb were not profitable right away but their mechanism for making money couldn't have been clearer. Uber -- sell rides, get a cut. Airbnb -- sell places to stay, get a cut. These were not 'let's get a bunch of users and see what happens' kind of deals.

That's exactly why Homeaway and SpareFoot got funded. Still a hard problem building that two sided marketplace and reaching profitablity...still a risk. But the mechanism for making money couldn't be clearer.

A better example would be Waze. Offers great value but how how do you capture that in terms of profit for the company? Waze would probably not have been funded. But it worked out since they were acquired. But counting on getting acquired is a sure way /not/ to get funded in Austin. The business has to stand alone.

Hi, Joah Spearman here. I wrote the piece. This was a personal account, my account, on both my own journey to entrepreneurship, to Austin and to fundraising. I tried to touch on location, race, the business, raising money and a few other things that would help convey the position I'm in. Some people are downplaying the role of race or geography and I'm almost certain they're probably not Black founders or in Austin. My goal with the post was simply to give a personal, open and honest take on my experience here. You wouldn't find me commenting about the scene in NYC or LA from a local's perspective because I'm not a local there nor would you see me doing a lengthy Medium post about how gender isn't really an issue for women trying to raise VC funds. That's not my experience. I shared mine, nothing more, nothing less. I appreciate you all for reading and sharing your commends/feedback in the comments.

I’m sure a lot has changed since 2014 when I last raised in Austin but in my experience it is possible to raise money for consumer businesses in Austin. Before we pivoted to Cratejoy we had raised a significant seed round from almost entirely Austin investors. It’s also possible to get west coast (and really all over the world) investors to invest in you and stay in Austin. We’ve raised $11M, about 80% of it from non-Austin investors.

For me the secret for raising successfully in Austin was getting individuals on board — high net worth individual investors that I established a personal rapport with. With the exception of the Capital Factory all of the angel funds (for me) were operating off of FOMO and social pressure more than fundamentals. The VC scene does contain some bad actors, and I probably wouldn’t spend a lot of time looking for institutional money in Austin. I would get my growth funding west or east coast.

Having raised millions in both SF and in Austin I can say that it is definitely easier in SF. However, the cost of living is so much lower (and I would say quality of life is so much higher) in Austin that I’m glad we’re based here. It’s also relatively easy to recruit from all over the world to Austin, everyone has seen the continuous stream of articles rating Austin as one of the best places in the US to live.

There’s also another great side-effect of being Austin which I didn’t notice until we were already scaling very quickly. There’s a smaller number of startups in Austin that are producing millions in revenue very quickly (as compared to SF) but the enthusiast and talent pool is very large. When we started to hit scale we had way more advocates than we ever expected. Austin wants home-town winners and it throws its weight behind the ones that look promising, but you have to have something to show.

My cofounder and I consider having Cratejoy based in Austin a competitive advantage.

Anyone remember the day where you just made a business, and built it over time, and nourished it into a successful company? Where you didnt beg for money from investors and build your entire plan around using someone else's money? Where the best businesses came out on top, and not the best flashy idea or happenchance encounter with a VC? I don't get why every freaking idea has to be tied up in investors to take off, when if its a valid, profitable business, it would build on its own, and prove itself a strong business without needing help...

Im just tired of seeing so much tech tied up in the politics of investors...

I think it's that those are the only businesses you hear about in the press.

You seem to have an ideal of purity in mind that I don't believe ever existed. I certainly can't think of a time when "the best business came out on top" as a general rule, unless you make the definition tautological.

No one is forced to "beg" for money from investors. Every entrepreneur has the choice to go it alone and build things the way you describe. Parsimoniously, that means that the VC market adds value to those who choose to use it.

First and foremost I really want to acknowledge the great tone, reflective nature, and clear chronicle of spending talent, time, and effort to build up Localeur into a going concern. I think the piece does an excellent job describing to an outsider the personal challenges of both tech and the cultural considerations that come along with being a Black founder. The apparently repetitive 'dismissiveness' from within the tech community (re: location) is tough to read but certainly strikes a chord.

My experience with Austin as a city and with its own culture really soured me on the place, in that I discovered the "Live Music Capital of the World!" to be self-congratualtory hype that wasn't true (e.g. New Orleans can toast Austin any night of the week, full stop). I've watched as 'up and coming' cool-factor-wow stuff like SXSW lost most all of its local roots.

I saw tons and tons of well-to-do people moving into Austin, driving costs up and creative types out. I saw a town where there's a seemingly endless glut of up and coming talent by way of the University; a glut that depressed wages and made companies comfortable offering no-benefit wage-slave work just to work as a sub-contractor in a "cool" place like AMD. I saw a town that desperately wanted to be cool and had long ago forgotten what it looks like outside of a smart-phone screen.

My point is that I hope the best for the founder to use his experience wisely, to look toward SV with the same skepticism that has been developed after all those years in Austin, and be careful. Don't let reputations fool you - Austin thinks its such a great music town, but it only takes a quick minute to realize that Leon Bridges, St. Vincent, Justus, and a load of other up and coming artists do their thing in Dallas/Fort Worth/Denton, not Austin. It might not seem a clear correlative to many, but I honestly do believe support for creative industries and taking risks on new business efforts are quite analogous - so be wise and prioritize which matters more, coolness or success.

Austin is indeed (!) the "self-proclaimed music capital of the world". They should invite musical delegates from all other lesser cities (like New York) to represent at the Austin Capitol.

I do love a lot about Austin -- just not the self-promotional parts.

It reads like a marketing piece or a resume. I could feel that there is some important topic that the author tried to convey, but it was completely lost for me behind list of achievements and recognitions.

Yeah, it's one of those things where there's a good story to tell, but it needs focus and editing. But hey, Austin is alright.

This article raises important questions and observations. I've lived in Austin, DC, and Silicon Valley. I've met Joah (the author), and I wish him, his company, and anyone like him good luck!

Given that VC's often move as a herd (more or less; e.g. seeking signals from others before acting), there is a hurdle to cross. Perhaps it would be better for Austin and companies there if VC's were a bit more numerous, diverse, and willing to act first. By 'diverse' I mean all senses of the word; in particular, covering more industries, models, and risk preferences.

Austinite here. Interesting article.

> how can I go about doing that if I’m not being supported > by VCs in Austin?

As a three year old firm, you might be running out of runway. I don't disagree with your statement that Austin VCs are more risk adverse than SF, but in my experience we do have a serious funding environment that many cities would be envious of.

Austin is not really competing with SF, but occupies a niche with a nice tech ecosystem while simultaneously remaining affordable with a nice work-life balance. [The affordability is rapidly eroding as the city-center grows]

Austinite here too.

I agree the funding infrastructure in Austin is lacking. I think that's a function of time though, not of interest/capability. We'll need more and more diverse funding sources to get 'there'.

Generally, the way startup ecosystems go - people make a big exit, fund locally. We're still riding the first bubble (Baer et al, Trilogy etc). There's a good book on this too.

Of course, that diversification is happening naturally, but yeah, we lack the funding infrastructure of a lot of other cities, and acknowledging that fact, and making that fact explicit, and not denying it ("Look we have customer service shops of big companies!") or a slight of hand ("SV has something different to offer, we're unique!") would be a giant step forward.

Austin's not there (yet).

(Also, it's hilarious how CPG is huge in Austin thanks to Deep Eddy, Rhythm, and SKU but it's not as sexy famous as even the enterprise software stuff.)

It could be runway, it could also just be timing - there's lots of talk about how the economy is slowing, so investment in anything that doesn't currently produce profits, with strong indications of increased profits in the future, is probably going to be difficult to get.

Austin definitely does it's own thing. And gets derided as "the home of the lifestyle business". But if you're profitable and have happy customers, absurd valuations and the drama that goes along with them aren't really needed.

As a note to Joah - I was surprised I couldn't enter a zipcode.

I would disagree that Austin is all that affordable any more.

I can't comment on the venture scene here as my projects are boot-strapping right now.

Austin is certainly still more affordable than Boston, as someone who made the move from the latter to the former.

I almost included another line that Austin is probably more affordable than SF, NYC and Boston but I guess I would point out that Boston is likely more affordable than London.

Interestingly enough, this has renewed my interest to move to Austin. There are more opportunities in the States than here (Canada) and Austin looks like an appealing spot to relocate to.

Be very careful with this decision. Austin has a reputation and the name of the city moves lovingly across the lips of starry-eyed dreamers, but I must warn you that Austin these days is an East-Coast city in the middle of Texas. I am from a town in Kansas that probably would have made a great sister city to Austin in the 80s (Lawrence), and so I understand viscerally what people love about Austin. But enough people from the east coast and Los Angeles have diluted almost all of the things that once made Austin special. Real Austinites do exist, and they are as cool as you have heard, but they have moved and live outside of Austin in places like Elgin or New Braunsfels. The city does not live up to its reputation, unlike other places (for example Portland is as weird as you hear about and Austin doesn't hold a candle to that weirdness). Just an opinion from a guy that's lived in a bunch of places.

As someone who spent a decade there and moved on, I second this sentiment. Austin has a homogenous weirdness and a southern corporate consumer culture, and its fabled affordability is a thing of the past.

What more affordable city did you move to, if you don't mind me asking?

I visit tech cities across the US often for work and in comparison I find Austin is incredibly affordable.

those summers tho!

Maybe I don't care about the weirdness as much as you, but I've lived in Austin for the last 8 years and I think it's only getting better. Rent has gone up but it's nothing compared to the bay area or other large tech cities especially considering that salaries are in the same ballpark.

No, I don't care about the weirdness, really. Weirdness isn't some commodity. Things are just weird or they're not. Maybe that's what makes me weird. But anyways, if you are enjoying Austin more and more as time goes by, you should try living in Los Angeles. You would really like it.

While cool, LA has all the bad parts of Austin exemplified; actually ridiculous housing, insanely bad traffic, a lot more taxes, cool and weird people are greatly outnumbered by douches, a real serious drought, and I can't shoot guns.

I am being totally honest with you when I say that I ran into more and bigger douches in Austin than I ever did in Los Angeles. LA has a reputation, as well, and certainly deserves a lot of it, but also I was surprised that Austin had such a huge population of douchebags. They're everywhere! And mostly from what I understand from friends, the douchebags are the imports. People that bring their anger from Elsewhere.

I'd be curious to know where you (and sibling posters) lived and how that correlates to impressions of Austin weirdness. I live south and while I wouldn't say it's outrageous, there's a pervasive, low-key level of weirdness in the neighborhoods down here that is agreeable. Haven't seen much weirdness north.

Having moved from Boston, not sure what's East Coast about Austin. Certainly not the (lack of) Mexican food.

I lived in Allandale but spent a lot of time downtown at the bars, and a lot of time south with friends. I did not venture out into the suburbs, which I am guessing are even more not-Austin than where I lived. You're right that the weirdness is low-key and agreeable. What I mean is that people hold up the "Keep Austin Weird" and it is nothing like the weird of Portland for example. There are microcosms of weirdness inside Austin proper, but you have to go looking for it.

Also, I must apologize for specifically saying "East Coast" when describing Austin. It's unfair to you and everyone else on the East Coast. Well, mostly unfair. I've spent most of my life on the West Coast and so it was a subtle insult, but you're right, Austin is less like the East Coast than it is like Los Angeles. But one thing is for sure: Austin is nothing like Austin from the 80s, and I am just the messenger for that last statement, having spent most of my time in Austin hanging out with life-long Austinites of lore. So I apologize for the "East Coast" comment. But, I really do want some Chuy's now that you mention it.

Affordability is relative. There's lots of real estate investment going on - a coworker had a Chinese family buy three homes on his street to rent out (total transaction was well over $1 million). So prices are going up pretty quickly because there are bidding wars going on.

So far as livability - are you ok with 41C temperatures and constantly being in a drought? With summer peaks to 46C?

Hey, I live in Toronto dude. I am absolutely OK with it being too hot for a change. & we are having the same real estate issues over here too. Rich Chinese investors totally polluting the real estate market making it difficult for native Canadians to rent, much less purchase homes in the area.

You are describing the worst summer in Austin. Last summer was much cooler.

But what will this summer be like? Just trying to set expectations.

That was a really long way to go just to attack local politicians for not giving in to Uber's (empty) threats of leaving. Their entire business model is based on breaking the law and yet people are shocked when local governments don't just roll over for them.

Seriously. I remember a time when people protested their local governments when they gave in to corporate blackmail of the "let us do this illegal thing or we'll take our business elsewhere" variety. And now some of them are instead protesting when local governments don't give in. God help us.

I follow reddit Austin as well and while the sleaziness of Uber's actions is apparent to many, they also have a lot of fans. Recently it came out that one of the councilpersons who resisted Uber had a recall petition filed against her by some notorious political operatives (1,2) and with that, the pro-Uber voices seem to have died down as the identity of the operatives became known. It was never clear if the pro voices are shills or genuine fans as traditional taxi services have genuine issues.

1: https://www.reddit.com/r/Austin/comments/43fco8/can_someone_... 2: https://www.reddit.com/r/Austin/comments/46q8z5/ann_kitchen_...

I remember a time when people protested their local governments to enact laws and policies which they thought were best. Which is exactly what's happening here.

I haven't followed the situation with Uber closely, I don't know what laws they're supposedly breaking, but my general citizen layman opinion is that the service should be allowed, so if my local taxi mafia has gotten laws passed that prevent Uber, then those laws should be changed or repealed.

Your characterization just seems really weird to me. This isn't some company dumping chemicals in our backyards. It's a service that many people like, of course those people are going to petition their government to let them use it.

I've said that town's reputation is a sham for years.

The reason it's hard to get funding is because there's never really been a large VC there except for Austin Ventures, who 1) everyone saw as a Faustian bargain 2) has been hammered by investors for the past 3-4 years 3) is now broken up.

To make matters worse, there aren't any large enterprise customers. There's two Fortune 500 companies - Dell and Whole Foods, and the later is not a tech company. Sure, Apple, Google, Samsung, etc. all have presences there, but decision making is still in San Jose and New York.

This may seem like a stupid question, but does your home office really need to 100% tie to your funder's office? I go to KPCB [0] and see a lot of Bay Area companies, and quite a few that aren't. As a Bay Area local, I hear a lot about "Put whatever you can in a place like Austin for lower costs are more employee stability."

If the business is a good deal for investors, they won't let an Austin zip code stand in the way.

[0] http://www.kpcb.com/companies

Why is the color of his skin so important to keep noting throughout the essay?

When you boil it down, VC's only care about one color: green. I highly doubt skin color is the reason you aren't getting call backs or having VC's roll out the red carpet.

> When you boil it down, VC's only care about one color: green.

Do they? Do you have personal experience to suggest that VCs in Austin are color-blind when it comes to race?

What I see is a person's personal account of living in the Austin startup scene. They consider their race to have been a factor in that experience. Who are any of us to turn around and say "actually, you're wrong, your race doesn't matter at all"?

Do you have personal experience to suggest that VCs in Austin are color-blind when it comes to race?

Do you have personal experience to suggest that they aren't?

The personal account here seems to conflate the possible race factor and the definite business factors that go into a pass. It's up to us, the readers, to decide whether or not we agree with the author's analysis.

> The personal account here seems to conflate the possible race factor and the definite business factors that go into a pass.

I'm curious how can you actually determine that if you haven't actually ever been passed on for being black?

> It's up to us, the readers, to decide whether or not we agree with the author's analysis.

Actually its not. I've never menstruated in my life, but if a woman tells me about her experience of menstruation (as long as it matches the data), I really can't dispute it since because I have zero context to determine anything past cold hard fact.

And the fact is that the numbers are pretty stark when it comes to black founders being funded by Venture capitalists ...

And no. I'm not going to provide you the data. Educate yourself a little on the topic ;)

Because it's important to the narrative about opportunity.

It is important because black founders are rare and highly unusual in the tech startup scene. Why is him taking note of this such an issue?

& if you ask me he actually barely mentioned race. In the initial parts of the essay he highlighted his poor upbringing, and it wasn't until the middle that I realized what his race was.

If it were me writing the article, race would have easily taken up 75% because years ago I realized the futility of catering to you "it's a color blind utopia" types.

> if you ask me he actually barely mentioned race

"Black" appears 17 times, and the article leads with a large picture of his wrist (maybe that's not present on mobile).

I felt the article was a bit oddly focused on race as well considering the business just doesn't seem like a great way to make money. Especially if the VCs are flat out telling you they're more interested in B2B portfolios.

Your ad-hom seems out of line.

The story opened strong since I've lived in Austin, Cedar Park, Belton, Troy, went to church and the mall in Temple (where my mom worked at Scott & White Hospital). It ticked some nostalgia boxes for me. But the main complaint about funding and risk... I'm just not all that convinced. But again, I'm not a VC so best of luck to him either way.

I don't disagree that he mentions race quite a bit in the article but the first reference to him being black in the text is when he says that he was "named the Emerging Business Leader of the Year by the Greater Austin Black Chamber two years back." This is after he talks about growing up poor and his experiences in college.

The picture of his wrist could easily be someone who is of a different race/ethnicity, e.g. South Asian.

> The picture of his wrist could easily be someone who is of a different race/ethnicity, e.g. South Asian.

I thought he was a bearded white guy initially because it is difficult to make fine facial details from the tiny avatar representing him on Medium.

> the article leads with a large picture of his wrist

TIL that the simple act of uploading a photo of yourself is making a statement about race.

That's a BS comment. Of course it isn't.

It did counter the "I didn't realize he was black until halfway through" however. I think most reasonable readers assumed he was black pretty early on.

> It did counter the "I didn't realize he was black until halfway through" however.

I don't know about that. I saw a picture of a tattooed wrist. I'm not claiming that I'm Mr. Color-Blind Progressive 2016, but that photo didn't lodge a note in my mind that said "the author is black". I saw a photo of a wrist and didn't think twice about it.

That was kind of my original point, the implication that a black person posting a photo of themselves is signaling "I am black" in a way that a white person is never seen to be signaling "I am white".

I think your original point was way off base. "Signalling" certainly sounds a lot more loaded than seems reasonable. I'm not even sure what exactly you're trying to say with that, but it certainly doesn't seem very charitable.

I took the photo to signal the dude really digs Austin (not my fave city; but whatever). I assumed he was black because he took a picture of his arm, with the tattoo that he talked about having. I dunno. I live in a predominately black area and it's just not that unusual for me I guess. If you live in SV maybe it's worth talking about. In the less affluent parts of Dallas it just isn't. Talking about his father being an unfortunate statistic just reinforced it. I guess that didn't click the same for most.

I'm just not sure what it has to do with what the VCs were telling him about his business in the rest of the article. There were two articles for me I guess. A short story up front I found pretty compelling. And a frustrated (for lack of a better word) diatribe about financing I found tedious, unfocused, and not all that compelling for the latter half-ish.

But if it was a white or asian dude that posted a picture of his wrist with an Austin tattoo, then yeah, I would have been surprised to read later on that the tattoo he described having, and put up a picture of, didn't actually belong to him. Not sure if that falls under "signaling" or not.

"Aggressively being non-white in public". The dude probably showed up black to all his VC meetings too - playing the race card!

You're trying pretty hard to put words into my mouth I never used.

I'm not an investor, and I probably wouldn't be investing in this niche if I was. Which is why by the end of the article what the VCs were saying resonated with me, and race in that context didn't.

Some observations:

First, it's odd that the author claims that their ethnicity is not the point or not an issue, and then several times says that VCs and folks are not willing to put money on an ethnic founder. Like, pick one: either they're racist shitheads, or it doesn't matter. I know at least one local startup CEO here in Houston who is of color, and I've seen nothing but respect and success for him--mostly because he's a brilliant businessman.

Second, the author is grumpy that consumer plays aren't getting funding. This could be because consumer plays are not worth funding, especially in the current wave of (finally) conservatism. It's a space filled with stillborn and decaying unicorns.

Third, the author's project Localeur (http://www.localeur.com/) is kinda jank. It doesn't recognize locations outside of Austin, it seems to rely on Facebook for signing in (which while boneheaded is unfortunately SOP in that space), the location bar doesn't even take keyboard focus/input, the "How this works" thing pops down a tab that covers half the screen but has no obvious hint on how to close it...it's just not super compelling.

Fourth, the product seems to be "report on cool stuff nearby and vote on it and get internet points"--this, without an obvious way to pay them money. They're in, incidentally, a niche already covered well by such little-known startups as Yelp, Foursquare, and Google Maps. It does not take Marc Andreesen to figure out that the space might be pretty competitive and without great returns.

I'm from Houston, and we all wish we lived in the magical circlejerk of entrepreneurship and hip tech culture that everyone else seems to believe Austin is. Yet, we still find ways of building good businesses and raising funding if needed.

If the author can't hack it there, maybe moving to the land of even more farcical business is the answer: that said, they shouldn't blame Austin.

> the location bar doesn't even take keyboard focus/input

Going all the way from the OP to that petty a smackdown of the author's app is a real stretch, and feels more like an attack than respectful conversation. That's not in the spirit of this site.

I respectfully disagree that it is a petty smackdown: the core feature of the app is this location-based business discovery, and on the current production site you cannot even enter your location in the provided input box.

If a person is trying to build a business in a very tight space (Yelp, Foursquare, etc.), then their product needs to be on point.

If it isn't, that's fine--but then they need to be honest when trying to review why the may not be raising funding. This article (and associated product) kinda fail in both ways, and I think my criticism is completely fair in that light.

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