While Austin may be considered by many to be the startup capital of Texas, it is facing a formidable opponent in nearby Dallas. 

In the late '90s, the city caught the attention of the business world and giant corporations like AT&T as the "telecommunications hub." This year, it nabbed an impressive 65 companies on Inc. 5000 list, and was recently named the "No. 1" market to watch in PricewaterhouseCooper's annual Emerging Trends in Real Estate survey. 

In early 2000, however, during the the telecom bubble burst, startups that had been eager to build million-dollar companies in Dallas were left with nothing. The $590 million in VC money spent in Dallas in 2000 had plummeted to less than $100 million dollars by 2002.

It wasn't until just recently when Dallas' startup scene found reason to celebrate again. In August, VC veterans Jeff Williams and Jason Story founded Hangar Ventures, a $50 million fund created to target early-stage tech companies in the city.

"Dallas, in particular, had lost its identity," says Williams. "We weren't the telecomm corridor anymore. Now, for the first time in a very long time, the city has rekindled itself." 

Here are 3 reasons for the resurgence of Texas' entrepreneurial village:

1. Increased access to mentors and and educational startup resources.

Born and raised in Dallas, serial entrepreneur David Copps always believed there was an abundant supple of VC money in his hometown. Most of it, however, was pouring into real estate and telecom. Copps wanted to change that and direct that support towards startups -- including his own, Brainspace Corporation.

The presence of high-profile serial entrepreneur Mark Cuban helped, but Copps and some other Dallas entrepreneurs decided that in order to get more money invested into up-and-coming tech startups, they really had to build a tech community that would raise the city's profile as more than just a "former telecom hub." 

In 2008, Copps and Blake Burris founded one of the city's first co-working spaces, CoHabitat. Although the center closed in 2012, it proved to be an important catalyst in connecting members of Dallas' tech community.

One of CoHabitat's original members, Gabriella Draney, is now the co-founder and CEO of TechWildcatters, one of the cities best-known seed accelerators. Over the past six years, Tech Wildcatters has graduated 72 companies from its program, 77 percent of which are still running today.

Dallas is also home to the Dallas Entrepreneurship Center (DEC) -- which, according to CEO Trey Bowles, was formed to "create a national brand for Dallas as a hub for innovation and entrepreneurship."

The DEC teaches aspiring entrepreneurs the ins and outs of how to start a business, such as  how to legally structure their company.

"You can start a company here, you can incubate it here--it's all here now," says Copps.

2. Large corporations nearby have shown increased interest in working with Dallas-based startups.

Home to nine Fortune 500 companies, Dallas entrepreneurs have the potential to land large corporations as customers. Particularly, this makes the city a great ecosystem for business to business companies, says Hangar Ventures' Jeff Williams.

Take Copps' Brainspace, which has so far raised $15 million in VC money, and counts Deloitte and PricewaterhouseCooper among its customers. Another, GENBAND, a provider of real-time communications software, works with service providers like AT&T, Sprint and Verizon. 

The recent formation of the Dallas Innovation Alliance, an initiative launched in September of this year, has also helped partnerships between big-named corporations and small startups in the city. 

3. Attractive, cheap, real estate.

There's a reason why Dallas was named the top real estate market to watch by PwC. One bedroom apartments rent for, on average, $1,263 per month, compared to $2,965 and $3,245 in San Francisco and New York City, respectively, according to real estate website Rent Jungle.

Both Brainspace's Copps and Hangar Ventures' Williams say they feel there's been an uptick in the past few years of developers, tech workers, aspiring entrepreneuers, and large corporations moving to Dallas, such as Toyota, which moved its headquarters to nearby Plano, Texas.

"Now we [Dallas] have money, we have people, we have culture," says Copps. "It's really created the perfect storm."

Published on: Nov 2, 2015