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Expand chart
Data: PitchBook; Chart: Sara Wise/Axios

Austin has been one of the top beneficiaries of the pandemic-era reshuffling of tech entrepreneurs, investors and workers.

“From an Austin perspective, I’d characterize it as ‘it’s never been better,’” Next Coast Ventures managing director Mike Smerklo tells Axios of the local startup scene’s growth over the past year, adding that his firm is busier than ever.

Flashback: “I remember way back in 2014 — I can’t remember exactly which firm it was, but they said ‘we really like you guys but we only invest in Bay Area companies,’” says Sunroom Rentals CEO Ben Doherty, who co-founded on-demand delivery startup Favor in 2013 in Austin.

  • “Back in 2014, a good portion of investors believed that if they invested in a company that’s in Austin, it wouldn’t be the category winner,” he adds.
  • Investors believed Favor and others would be outmatched by rivals like Postmates and DoorDash that can access Bay Area talent. With the increased comfort around distributed teams, an influx of tech workers in Austin and the willingness of job candidates to move there, that’s no longer a concern for VCs.

What’s changed: More investors on the coastal hubs are not only willing, but even eager to meet and back startups in Austin and the like, according to Doherty. “I think Silicon Valley VCs might have a bit of [fear of missing out],” he adds.

  • The past year has also boosted Austin’s growing VC industry with the arrival of investors from places like the Bay Area — a welcome trend for Smerklo, who notes that the dominance of a couple of local firms was stifling for Austin.
  • Yes, but: While sources of seed funding are even more plentiful in town today, late-stage capital is not, says Doherty. Even raising a Series A round still requires meeting with VCs on the coasts.

The bottom line: “The risk to a market like Austin is geopolitical — you need housing and roads for people to get to their jobs,” says Smerklo. “You’ve got to make it so that college graduates can move to Austin.”

Go deeper

Northwest Arkansas trolls Austin

ExperinceOz.us. Courtesy: OZ Brands

OZ Brands is offering to buy 10 Austinites a one-way ticket to paradise.

What's happening: The Bentonville-based company is accepting applications through Oct. 29 from residents of Austin, Texas to win an airline ticket to XNA, a $350 Visa gift card and a $150 gift card from Ropeswing Hospitality (The Preacher's Son, Pressroom, Sunny's). The promotion is called One Way Out.

  • Applicants must be 18 or older and provide basic contact information.
  • Entries will be judged on their 250-word essays that answer: "Why do you need a break from Austin?"
  • Originality, humor and creativity will be considered.

Context: The gimmick, of course, is the one-way ticket because "... once visitors see the hidden gem of the Northwest Arkansas region, they won’t want to leave!"

  • OZ Brands (OZ Art, OZ Trails and Fly OZ) claims Austin residents must be tired of the traffic, tourists and cost of living.

Why it matters: There are an estimated 10,000 open jobs in NWA and not enough people to fill them.

  • Workers in Austin — especially those in tech fields — are coveted by NWA recruiters and economic developers. Getting them to relocate here is seen as a win-win due to the high quality of life.

Flashback: The Northwest Arkansas Council recently launched a snarky ad campaign in various markets, including Austin, to encourage residents to move to NWA.

What to watch: Winners will be announced on Nov. 5.

Venture capital in Arkansas up 151% from 2020

Expand chart
Data: PitchBook & NVCA; Chart: Jacque Schrag/Axios

After largely taking a year off, angels are back in Arkansas. Angel investors.

What's happening: Venture capital invested in Arkansas companies through the third quarter was valued at an estimated $89.7 million. That's up 151% from $35.7 million for all of 2020.

  • The numbers, shared with Axios, are from PitchBook, a private equity database company.

Why it matters: Private investment gives startups and young companies resources to grow more rapidly, often before sales can catch up with the need to expand.

  • Since the investment usually comes with both risk and potential, investors stand to make a higher return.

By the numbers: An estimated 77% of the statewide total was invested in Northwest Arkansas companies in the first three quarters of the year.

  • Companies in the Little Rock metro, which includes North Little Rock and Conway, received the rest.
  • The number of deals in Arkansas remains low with only 18 so far this year in NWA and 5 in the Little Rock metro.
  • Still, the value of deals for 2021 is at an all-time high and will end well over the $71 million reported in 2019.

Zoom out: While investments in Arkansas slowed during 2020, they didn't miss a beat at the national level.

  • Total deal value in the U.S. through the third quarter of this year is estimated to be $54.7 billion, up about 24% from $44.2 billion in 2020.

Venture capital deals in Austin, Texas — a metro many like to compare with NWA — were valued at $3.78 billion so far this year.

Zoom in: The leader in NWA is Fayetteville's AcreTrader, a company that helps consumers invest in shares of farmland. The company has received about $18 million in venture capital this year, which is below PitchBook's estimate of $22 million.

  • AcreTrader's investor relations team told Axios the anomaly is probably due to how some of the company's investments (on behalf of its consumers) get reported in the news and then are inadvertently added to data used by PitchBook.

💭 Worth's thought bubble: Economists, entrepreneurs and those who consult entrepreneurs have told us there aren't enough investments made in NWA companies.

  • Given the disparity between values, our region has a long way to go to be competitive with economies at high-tech hubs across the country.

The traffic death of a promising Austin teen

Posters in memory of Aaliyah Martinez at a Hutto football game in early October. Photo courtesy of Hutto ISD/Rebekah Hawkins

One Monday evening earlier this month, Aaliyah Martinez, a 16-year-old from Hutto and beloved daughter, sister, friend, classmate and teammate on the high school soccer squad, was driving on a North Austin overpass when she lost control of her 2004 Honda CRV.

Details: Austin police have not said what led to the accident.

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