Texas Keeps Attracting Tech Firms, Increased Venture Funding

Texas startups continue grabbing cash from venture firms, raising $1.3 billion in funding through March 11. The Wall Street Journal reported that the state’s growing tech sector is gaining on Silicon Valley in drawing investments.

The pandemic has added some new allure to the Lone Star State. In December, database giant Oracle said it was moving to Austin, Texas from Redwood City, California. Hewlett Packard Enterprise had earlier said it was moving its headquarters to Houston from Silicon Valley.

Remote work practices and policies made necessary by COVID-19 have made such moves easier. As a result, some iconic Bay Area companies are moving to, and growing in, locales with lower costs and less congestion.

Austin-based venture firm Capital Factory said this month it had raised its seventh fund for investing in Texas startups. In addition, the startup investing platform AngelList is operating a rolling fund that allows investors to commit capital on a quarterly basis, WSJ said.

“There were already a lot of people coming to Austin” and to Texas, said Joshua Baer, Capital Factory’s founder and CEO. “But now it’s like, wow, the dam broke. It feels like we’re going to have 10 years of growth compressed into one.”

Another Austin-based firm, Ironspring, raised its first fund in February to target heavy industrial technologies. “We’re not mandated to (invest in Texas startups), but we’re certainly excited about the Texas ecosystem,” Co-Founder and Managing Partner Adam Bridgman told the Journal.

The firm’s $61 million fund has made investments into four startups, so far. Two of those are based in Texas. Each of the firm’s managing partners has  background in Texas industrial sectors in addition to finance, Bridgman said.

Texas investment rose roughly 28 percent to $5 billion in 2020 compared with the previous year, the WSJ said.

Despite the gains made by Texas, the nation’s top venture funding magnets still far outshine the state. Startups in California, New York and Massachusetts took in 74 percent of U.S. venture funding in 2020, according to a report from PricewaterhouseCoopers and CB Insights. In contrast, the report said, Texas and several other states accounted for 15 percent of venture funding.