A Brief Numerical Overview of the Texas Startup Ecosystem

At Altalogy, we deliver software development services for two Houston-based clients. A few weeks ago, I was discussing the pros and cons of Houston startup ecosystem with Dommonic Nelson, Clever Box Company Founder.

The following point was made

“When it comes to startups and tech in Texas, Austin outperforms Houston by order of magnitude”.

I was a bit surprised by that fact and decided to see how other cities in Texas compare. As a source of information, I selected Angel List. I’m fully aware of the bias that some companies may not be present there though.

The comparison includes 4 Largest Cities — Houston, San Antonio, Dallas, and Austin.

Disclaimer: I live in Central Europe 7 hours time zone away from Texas, and the only time I’ve seen the Lone Star State myself was from an aircraft window. So, pardon me, Texas natives, for trying to analyze your state without even being there :)

Houston

With a population exceeding 2 million people, Houston is the 4th largest city in the United States and most populated metropolitan area in Texas. The city also has a global economy and only New York City has more Fortune 500 headquarters. This fact should make for a great, global startup hub — let’s have a look at the numbers.

As you can see above, there are 1861 startups in Houston according to Angel List. Is a good or bad result? We’ll find out later on. In the last eight months (Jun 2018 — January 2019), 166 companies were registered on Angel List which is nearly 9% of all Houston-based startups listed on angel.co.

San Antonio

San Antonio is the second largest city in Texas. Its economy revolves around defense, healthcare, and the financial services sectors. With almost 1.5 million inhabitants, it does make me curious why only 507(!) startups are located there according to Angel List.

I’m not sure what the reason is behind such a tiny ecosystem but I’m not going to try digress on that matter. Let’s move forward to Dallas.

Dallas

Most people around the world know Dallas mostly for what happened in ’63. It is the third largest city in texas(~1.3 M). The economy of Dallas is considered diverse, with dominant sectors including defense, financial services, information technology, telecommunications, and transportation.

We can see it performs better than Houston regarding the total number of startups. The average salary is lower, but not significantly.

Austin

Finally, let’s look at the smallest brother (<1M inhabitants) of the big four Texas cities. According to various sources, the Texas capital is hailed as a high-tech mecca calling it “The Silicon Hills.” Not to mention U.S. News & World Report named Austin the #1 place to live in the U.S. for 2017 and 2018.

There are over twice as many startups as in Houston, and four times more jobs than in Dallas. “The Silicon Hills” nickname is legitimate, undoubtedly.

Comparison

Ecosystem

Austin plays in a different league than Houston, Dallas, and San Antonio. 45 startups per 10 000 inhabitants put the city in pursuit of locations like Boston.

Number of startups per 10 000 inhabitants

Salary

Regarding salaries, Dallas and Houston are quite similar. Austin salaries are higher by $15k per year. Unfortunately, the data for San Antonio is missing, but that might be the case due to the low number of companies.

Average salary (source: Angel List)

Growth rate

Dallas is our winner when comes to the growth rate. Austin seems to perform a little weaker but on the other hand — it already has an established position as a tech hub so the growth pace might not be as relevant here.

Growth rate for the last eight months (June 2018-January 2019)

Conclusion

Austin is the place to be in Texas for entrepreneurs.

It is itself home to more startups than Houston, San Antonio and Dallas combined. But can we assume that the market is already saturated there and the city will leave more room for the rest of the cities to develop?It’s tricky to answer that question since Austin is also the fastest growing large city in the United States.

Dallas, on the other hand, performs best regarding growth rate, which shows it is gaining momentum.

I think Houston has huge potential thanks to its population and age distribution(45% of the population is between 18–44). As it is already a large corporate hub, it requires certain incentives and motivation to trigger the transition — the resources are already there.

For me, the most surprising fact is San Antonio’s poor result. I’d love to hear your suggestions what might be the reason for such a low number of young companies there.

In the end, I would like to emphasize the potential bias. Those data are collected manually from Angel List, and might not be accurate. My purpose was to find a criterion that applies correspondingly to all cases.

Last but not least: Do you find this story valuable? Is there any crucial factor I accidentally skipped in the comparison? Would you like me to write about other states/regions too?

I encourage you to share your feedback in the comments section below.

Thanks for reading!