Just a few blocks from a forest of glassy new skyscrapers, including the tallest residential building west of the Mississippi, about 70 young women in yoga pants (and a few men) dance and stretch to a Cardi B song on an impossibly green lawn. At the head of the group stands Tyler Haney, the 30-year-old founder and CEO of Outdoor Voices, who uprooted her New York City athleisure e-apparel company to relocate to Austin in 2017.
"All right, everyone! Woo!" Haney shouts before leading the crowd into a huddle on the lawn next to her company's first store. Then off they jog to begin the company's inaugural "Hippie Triathlon," which will involve, among other things, laps at Deep Eddy Pool, a local institution, and burgers and beers at a tiki restaurant tucked behind a dive bar.
The scene verges on a parody of Austin circa 2018, no longer the scruffy college town known for its slacker culture, rowdy live music venues, and clothing-optional festivals. Today, the Austin area, with a population of 2.1 million, is one of the fastest-growing in the country. Funky old Austin still exists, but it lives in the shadow of the city's now-shiny lifestyle brand, one that's defined by the likes of Whole Foods and South by Southwest (both headquartered here; both formerly scruffy).
And now, too, by ambitious transplants like Haney, whose company has raised almost $60 million in venture capital and counts retail legend Mickey Drexler, of J.Crew fame, as its board chairman. The Austin store ("the worst retail location I've ever seen, potentially in the world," Haney remembers Drexler, a lifelong New Yorker, call it when he first saw it) now sells about as much as the company's stores in New York and San Francisco.
Haney was just starting Outdoor Voices in New York when she first visited Austin, in 2013. A former track athlete from Boulder, Colorado, who landed in New York to attend Parsons School of Design, she found herself at Barton Springs, a legendary Austin swimming hole just across the lake from downtown. "The moment I dipped into the water, I was like, 'Holy shit, this could be the spiritual home, potentially the long-term home, for OV,' " she says. New York was brimming with online apparel brands, but as Haney's company started to grow, she kept returning to Austin (where, at the time, she was dating a restaurateur). "It struck me that the city is super supportive of entrepreneurship," she says. She decided to make the move.
Haney's hardly alone. Startups from Nebraska (Spreetail), Tennessee (SnapShot Interactive), Arkansas (YouEarnedIt), and California (Optimizely, Outdoorsy) have all recently opened offices or relocated here, along with Peter Thiel's venture capital firm Mithril Capital Management, which in September announced it was ditching San Francisco in favor of the city. Tech giants including Facebook, Amazon, and Dropbox have all established presences here. Google recently planted a giant "G" logo atop a high-rise downtown. And in December, Apple, which already has its second-largest outpost in Austin--with some 6,000 employees--announced it will be investing $1 billion to build a new campus less than a mile away with a projected 15,000 new jobs. According to our Surge Cities Index analysis, Austin ranks first in the nation in population growth, third in its density of high-growth companies, and sixth in its rate of job creation.
But the city's rise has been three long decades in the making. When Dell minted a crop of so-called Dellionaires, the resulting wave of tech startups in the early aughts reinforced the Austin moniker Silicon Hills. After Whole Foods grew into a major force in the grocery business around the same time, it became a launchpad for dozens of startup food and personal care brands. After a late-'90s software outfit, Trilogy, lured hundreds of elite college grads to Austin with great perks, many of them went on to create a B2B software industry in the city. The Trilogy Mafia, as they're called, still control many of the most influential companies in town, such as the WordPress hosting platform WP Engine, run by an ex-Trilogy VP, Heather Brunner. Joshua Baer, another Trilogy alum, created and runs Capital Factory, an incubator, co-working place, and investment fund. And then there's South by Southwest, which began in 1987 as a music festival and has since ballooned into a two-week extravaganza of music, film, comedy, gaming, and all things startup.
According to our analysis, the amount of money being poured into Austin's startup scene still ranks only fourth in the nation when it comes to early-stage funding deals. Capital Factory's Baer says that's because Austin has yet to produce a giant, transformative consumer tech company, which typically leads to a flood of venture capital. But he believes it's only a matter of time. "Talent is the leading indicator, and funding is the trailing indicator," he says. "This is where all the talent is going."
As Austin's skyline fills with construction cranes, it's easy to draw parallels to cities like Seattle, where an Amazon boom has driven housing prices and homelessness to unsustainable levels. That may concern Austin locals, but for arrivals from places like New York and San Francisco, the city is still very affordable (the median price of a home here is $385,000, according to Zillow). The state's attitude toward taxes--"The only good tax is a dead tax," Governor Greg Abbott once said--doesn't hurt either.
When Haney decided to move Outdoor Voices to Austin, she had about 40 employees join her from around the country; 34 made the move with her--they all drove down in a caravan--and only a few have since left the city. The business has continued growing triple digits every year since its founding, Haney says, and now employs 130 people full time. She finds that Austin's lifestyle often seals the deal when she's hiring designers from New York--just as it did for her. "At first, I was nervous that we wouldn't be able to attract talent at all," she says. "But being away from New York has actually become an advantage."
Cracking the Austin Formula
Second-term Austin mayor Steve Adler offers his advice for other cities looking to discover their juju.
Create an atmosphere talent is drawn to. "Many of the kinds of people companies want to hire want to live in Austin. It's pretty nice here. But beyond that, it's a progressive city that leads on immigration and refugee protection, LGBTQ rights, and climate change mitigation. A lot of people see that it's a place that matches their values."
Be authentic to your roots. "Our identity goes back to the 'Keep Austin Weird' idea. When Willie Nelson was trying to reinvent country music, he came to Austin for that. The civic heroes here are the people who try something, learn, iterate, try, learn, iterate. And that is also, coincidentally, the formula for startups."
Make entrepreneurs constructive members of the community. "I talk to a lot of folks who have come from Silicon Valley, and a year into their being here, I ask them to tell me how it's going. Three-quarters of the time, I get something like, 'When I came here, people starting opening up their Rolodexes to help me, and I couldn't believe that was happening--it was so foreign. I was suspicious of the names they were giving me, and eight months later, I'm now doing it for other people.' That's a real phenomenon here."