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.”

Read More: Female-led robotics startup Diligent raises $3.15 million in seed funding to bring its hospital assistant robot Moxi to Texas hospitals

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:

SEE ALSO: The flopping of the IPOs: Tech’s biggest investors came to San Francisco for a major startup conference, and one topic stole the show

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.