Austin is seeing a startup boom. Meet Austin's top VCs, giving Silicon Valley investors a run for the money.

tom ball mike Smerklo

  • Austin, Texas, has long been a hub for sales and customer
    service outposts for some of Silicon Valley’s largest tech
    companies. 
  • In recent years, the
    city has seen a revival of entrepreneurship
    , and with it,
    venture capital.
  • The city’s ecosystem was
    long dominated by Austin Ventures
    , a major venture capital firm
    with significant influence over Silicon Valley’s traditional VC
    firms. 
  • Several Austin Ventures alumni left to start their own firms,
    which has helped breed healthy competition among investors to the
    benefit of founders across many industries.
  • Here are some of Austin’s most notable venture capital
    firms.

  • Click here for more BI Prime stories
    .

Austin has yet to land an outpost of popular fitness studio
Barry’s Bootcamp, but that hasn’t stopped venture capital from
creeping into the Texas capital.

Once a long-time sales hub,
Austin is just as awash in entrepreneurs
and venture capital
dollars as it is in slow-smoked barbecue and live music venues. The
arrival of major tech companies like Amazon and
Google has
spurred the shift along as entrepreneurial employees leave the
mothership to start their own companies, and increasingly find the
funding they need right at their doorstep.

“We often get criticized for not thinking big enough,” Tom Ball,
cofounder and managing director of Austin VC firm Next Coast
Ventures, told Business Insider. “Frankly, our job is to make sure
entrepreneurs do think big enough. There are instances where there
are $1 billion things created here.”

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Austin’s venture capital scene was once dominated by Austin
Ventures, the “800-pound gorilla in the room,” as Ball described
it. Ball said that, because Austin Ventures was the only major
investor in town, it put a lot of pressure on partners to find
every good deal coming out of the city before founders went to
fundraise in Silicon Valley. It was a lose-lose situation, and
Austin’s startup scene suffered.

“Austin has changed quite a bit relative to the VC ecosystem
that’s existed here” Silverton Partners general manager Kip
McClanahan told Business Insider. “Back in the day, Austin Ventures
[was] kind of like the only shop that existed,” he explains. “It
was sort of a traditional old school firm, raised very large funds
and larger funds and over time, fell out of favor.”

Today, Austin Ventures is mostly focused on private equity
investing, leaving the venture capital opportunities wide open. In
fact, many former Austin Ventures partners have formed or joined
their own venture firms in recent years, creating what is now a
legitimately competitive VC landscape. But this time, investors and
entrepreneurs win.

Meet Austin’s top venture capital firms betting on the Lone
Star state’s next billion-dollar companies:

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BuildGroup

BuildGroup was founded in 2015 by Jim Curry, Peter Freeland, and
Lanham Napier, former executives of Texas-based RackSpace. Because
of the team’s expertise with enterprise software coming off their
time with RackSpace, BuildGroup tends to focus heavily on investing
in enterprise startups like data analytics startup Anaconda.

“So when we were building Rackspace, we had Norwest and
Sequoia,” BuildGroup partner Klee Klaber told Business Insider. “To
be honest, I mean, they came to board meetings. They could give us
a number of somebody to call, but they didn’t have any idea what we
did.”

The firm focuses on making a handful of Series A investments per
year, and currently has $330 million assets under management,

according to PitchBook data

Capital Factory

Austin has an answer to Silicon Valley’s most notable
accelerator Y Combinator, and that is
Capital Factory
. The 10-year old accelerator operates much in
the same way as Y Combinator in that startups participate in a
batch, and Capital Factory provides seed funding upon
graduation.

Several investors that spoke with Business Insider credited
Capital Factory with almost single-handedly nurturing the
burgeoning startup ecosystem in the city. And because it doesn’t
have a specific industry of focus, graduates are successful in
everything from consumer packaged goods to robotics.

LiveOak Venture Partners

LiveOak Venture Partners was founded by
three former Austin Ventures partners
Benjamin Scott, Venu
Shamapant, and Krishna Srinivasan in 2013. In the six years since
founding, LiveOak has become a major investor in early-stage
startups and
announced its second fund
in April.

The majority of LiveOak’s portfolio companies are based in
Austin, but the firm has a global presence, according to marketing
and business development associate Mayra Del Bello.

Next Coast Ventures

According to Next Coast Ventures cofounder Tom Ball, the venture
capital ecosystem in Austin is to Silicon Valley as college
football is to the NFL. And, he alleges, Next Coast is the Nick
Saban, head coach of the University of Alabama’s star football
team, of Austin venture capital.

“It’s a different game and we love our game,” Ball said.

The firm is one of the largest in Austin, and has some of the
closest connections with Silicon Valley’s venture firms. It has
invested alongside Accel, Andreessen Horowitz, Floodgate Fund, and
others, over the course of its 4-year history.

“I moved here four years ago from the Valley, and I ran a
company there,” cofounder Michael Smerklo told Business Insider.
“What Austin was offering, and has gotten better, was a lot of the
goodness of markets like the Valley. Anyone who says we’re trying
to create the next Silicon Valley, just give up because it’s like
trying to say Hong Kong or London or whatever prominent city you
think of.”

Silverton Partners

Silverton Partners was one of the
earliest spin outs of Austin Ventures in 2006
, and has
maintained a prominent position among early-stage investors in the
decade-plus since. As managing partner Kip McClanahan described it,
Silverton fits in to a company’s funding strategy post-accelerator,
around the Series A period of quickening growth.

Silverton Partners is similar to other venture firms in Austin
in that it works closely with other investors on deals, a world
away from the backroom deals and competitive board rooms on Sand
Hill Road.

“In Austin, the ecosystem for startups is so rich that we really
don’t, it’s not a competitive environment,” McClanahan said.
“That’s worth saying because I think if you look at the West Coast,
it’s a highly competitive environment.”

Silverton’s general partner Morgan Flager is a Bay-Area native,
but permanently relocated to Austin with Silverton because the
risks of doing so have decreased. In his role with Silverton,
Flager has used his experience as proof when recruiting San
Francisco-based executives to Austin-based startups in his
portfolio.

“I mean, it’s still not the Bay area in terms of the volume, of
companies but like that complaint’s kind of gone away,” Flager
said.

Source: FS – All – Economy – News
Austin is seeing a startup boom. Meet Austin's top VCs, giving Silicon Valley investors a run for the money.