When it comes to tech, Texas’ regional economy is a powerhouse

It’s only a short bus ride to get from one major Texas city to another, and as a kid growing up in Dallas, that proximity was beneficial to me as it fueled my thirst for adventure. Now, as an investor, advisor and coworking space owner in Dallas, I see this proximity as a key component of the statewide startup ecosystem.

The result of the proximity between these major markets, each of which have their own unique culture and attractions as well as their own unique twist on barbecue, is an ongoing increase in economic regionalism. As one united business and tech community, Texas represents 27 million people (8.5 percent of the U.S.), 54 Fortune 500 headquarters and thousands of startups occupying over one hundred incubators, coworking spaces, accelerators, and makerspaces. (Not to mention the 25 billionaires that reside in Dallas. Now that’s some capital.)

As you think about the Texas tech ecosystem, I encourage you to view the state not as wide open spaces with pockets of tech activity, but rather view it as a highly interconnected set of four major tech community nodes: Austin, Dallas, Houston and San Antonio.

I interviewed two of the most knowledgeable people about Texas startups to get their thoughts on why businesses choose to launch in Texas and what the state’s biggest tech successes have been. Here’s what they had to say.

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First, I spoke with Marc Nathan, who runs the Texas Squared Startup Newsletter and is the Vice President of Client Strategy for the tech startup law firm Miller, Egan, Molter and Nelson. He also serves on the board of the Texas Freelance Association with me.

What are your thoughts on the Texas startup community?

Texas has a vibrant startup and technology community that radiates from the heart of Austin to nearby San Antonio and reaches major population and business centers of Houston to the South and the Dallas/Ft. Worth Metroplex in the North.

Texas practically invented the modern PC business back in the ’80s with companies like Dell, Tandem and Compaq. (Editor’s note: Dell was founded in Austin and is now headquartered in Round Rock, just north of Austin, while Tandem has roots in Austin and was later acquired by Compaq, which was founded by three engineers from Texas Instruments.)

San Antonio, Texas, home to Clear Channel Communications, NuStar Energy and Rackspace. (River Walk in San Antonio by f11photo via Shutterstock)

Texas also enjoys a rich legacy in technology infrastructure firms represented by companies like Rackspace in San Antonio, CyrusOne outside of Dallas and SoftLayer, the Dallas company which was acquired by IBM in 2013 for a reported $2 billion.

Dallas is known for telecom companies and giants such as Texas Instruments, Houston has oilfield and commodity-trading software and IT firms such as BMC Software and Austin is renowned for semiconductor design, testing and manufacturing (AMD, National Instruments, Cirrus Logic, Silicon Labs) and enterprise software (Trilogy, Tivoli, SolarWinds).

Large companies relocate to Texas and startups choose to start in Texas for a variety of business-friendly reasons that hover around:

1. a highly educated workforce from the University of Texas system and other private schools like Southern Methodist University and Rice
2. a lower cost of living relative to either coast and
3. the fact that Texas has a large customer base of Fortune 500 and smaller companies all while being centrally located in the middle of the continent.

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Next, I interviewed Paul O’Brien, who works in venture capital economic development and is known online as SEOBrien. Paul and I are both moderators of the Texas Startups Facebook Group where newcomers get plugged into the Texas startup community.

What are Texas’ best-known tech companies?

NASA, Dell, AT&T, AMD, Shell, Hewlett-Packard, 3M, Broadcast.com and the Houston Chronicle come to mind. Not the companies you’d suspect but that’s because Texas’ history in technology is so extensive and diversified that it’s woven into the DNA of the entire country. Of course, those last two are hardly considered what you might think of in tech, with Broadcast.com (founded by the reasonably well-known “shark,” Mark Cuban and acquired by Yahoo nearly two decades ago for $5.7 billion) leading to our era of streaming media, and the Chronicle, unknown to most as such but one of the first newspapers repurposed for the internet — thanks to Matt Cohen, more recently founder of OneSpot and now an Austin resident.

Technology in Texas is and always has been ingrained in every other industry of our country from retail to oil and gas. If you want to work on the internet, you might consider Silicon Valley but if you want to work in the technology that’s a part of everything else we do, Texas is where we’re even disrupting how we build homes.

Why do companies decide to open up shop in Texas? What are its advantages?

Consider Texas relative to the other great tech ecosystems of the world. We tend to compare cities and neglect that “Silicon Valley” is a region wherein the appeal of tech in California is not that of just San Francisco but the collective of cities, universities and characteristics that comprise one of the largest regional economies in the world.

So why do companies actually choose Texas? The press and politicians love to cite the lower cost of living, the better business climate, talent depth and so forth but at the end of the day, it’s that the four major cities that make up the Eastern region of Texas comprise the largest regional economy in the world.

Texas is one of the hottest places for entrepreneurship and that’s buoyed by exceptional depth in the industries we’re turning to as a country to transform next: education, real estate and the home, transportation, energy, and politics. The cost, tax benefits, talent pool and more are all compelling reasons companies are favoring Texas but at the end of the day, it’s that within spitting distance of one another are Dallas, Fort Worth, Houston, Austin, San Antonio, and even beyond, within an hour more, Oklahoma City and New Orleans. It’s my belief that nowhere else in the world can you reach such significant local economies, healthy ecosystems, vibrant entrepreneurs and dozens of top universities increasingly focused on technology.