The Emerging Skyline: Austin Growth Financings

austin_growth_financings

Every year around this time, SXSW provides us with a reliable checkpoint for measuring the growth and evolution of Austin. If you have spent any time in or around downtown Austin since SXSW 2013, you know how quickly the skyline is changing. The transformation of the city’s center has actually been building for the past five years, but it is now exploding upward. Right now, in a 20 square block area encompassing downtown, there are at least 25 major buildings under construction or in the planning phases. This number doesn’t even consider the many more new restaurants, bars, museums, cafes and other destinations that are sprouting in the valleys between these projects. I think those of you who are back for the first time in a year will be shocked.

Parking is scarce. Traffic blows. Giant cranes loom in the skies at every turn. The angst is palpable inside firms all over town, as work crews outside pound out a relentless, skull-piercing symphony that disrupts conference calls and stirs a quiet rage among fellow employees.

While the inconvenience levels are high, there has never been a more exciting time to be in Austin. From inside the tornado, it reminds me of stories I’ve read about Dubai’s rise from the desert, though Austin surely has better breakfast tacos. And while it’s a lot for many to digest, a new, increasingly global city is literally rising around us. Over 100 people are moving here every day. Each year, a visit to SXSW convinces a few thousand more to pack up their jalopies and forge a new path in the ATX.

Another Austin Skyline

In parallel to all of this physical transformation, another equally exciting evolution is occurring for those of us in Austin’s software-focused startup community. And it’s happening at an increasingly breakneck rate. I’m talking about the flow of investment capital. Lots of it. Coming from an increasing number of geographically-dispersed sources. Into more and more Austin-grown companies.

We’ve had a full-scale revolution in Austin’s seed/angel-stage landscape over the past five years. The hard work of leaders like Josh Baer at Capital Factory, Jason Seats at TechStars Austin, and our team at Thinktiv (among many others) have helped to significantly increase the volume of investment-worthy early-stage deal flow in the Austin ecosystem, and to get those companies capitalized for growth.

Local capital firms like Silverton Partners, LiveOak Venture Partners and Corsa Ventures have recently announced new funds that diversify options for locally-sourced lifecycle investors.

Big companies like Bazaarvoice, HomeAway, RetailMeNot, Indeed and others have seen major liquidity events, while other smaller firms have hit doubles and triples in the $10M - $100M exit range. The result? We’ve got a fresh, new generation of smart-as-hell angels and self-funded entrepreneurs who have plunged into the game. They’ve made their mark - and some version of a fortune – locally, and are now investing their money and their expertise here as well. And the beast keeps feeding itself.

While the early-stage community generates a huge volume of excitement, it’s the later stage deals that have caught my eye recently. In the first two months of 2014, it’s growth capital that has been the story.

Want evidence? Check out the infographic. You’ll see several Austin-based firms that are undergoing new, large-scale ‘construction’ activity funded by growth capital investors – all of it announced since January 1st.

In this case we’ve defined “growth capital” financings as investment rounds totaling $10 million or more. With the announcement of Sparefoot’s $10M growth round several days ago, that makes seven(!) growth capital transactions announced in the last 9 weeks, totaling roughly $175 million of invested capital.

It’s telling that Austin Ventures is involved in only two of them. This is a big deal in a town where as recently as five years ago, all but a very few significant startup financings in Austin – early stage and late – were led by AV. The AV companies on the list - Spiceworks and Spredfast - are both great businesses, and AV has been in for the long haul, playing an instrumental role in getting them there.

However, I do I believe it’s a real benchmark of Austin’s progress to see no less than 16 firms listed as investors in these deals. Six of those are not part of an AV syndicate. Every one of those investors has made a statement. That they’re ready to make (and lead) investments in Austin. That they’re ready to put people on planes to perform due diligence, attend board meetings and help to govern these companies for the long haul. And there are more lining up behind them. Every exciting new company that is born in Austin’s early-stage world will have an increasing number of options for winning, and that is what makes this corner of the world go round.

Like the city itself, these shifts in the technology landscape have been occurring gradually for a few years. But heading into this year’s SXSW, things look and FEEL different. The Austin tech scene is exploding upward, and killer new ideas are sprouting below the new skyscrapers.

Cheers to the changing Austin skyline(s)!