Texas

Silicon Hills 2022: How Texas Is Winning Over Tech

Find out how Texas is becoming a rising hub for tech start-ups and why it is pulling the industry away from Silicon Valley. Discover what Texas, with its low taxes and strong economy, offers the US tech industry.

 March 17, 2022 | 4 min read | Mount Bonnell Advisors, Austin TX 

The state of Texas is proving to be the new mecca for tech start-ups. Silicon Hills is challenging Silicon Valley, the long-standing center of tech innovation. The pandemic has fueled this trend, and so have the advantages of a state that was, until recently, largely untapped. The biggest of them is probably its low taxes. Some are calling the tech industry's move to the American South "Texit".

The massive tech boom

According to New York-born entrepreneur and visionary Peter Diamandis, we will see more technological progress in the next ten years than in the last hundred combined. A McKinsey study backs this up: in e-commerce, a sector that relies heavily on innovative technology, three months in 2020 brought growth that would normally take ten years. 2021 followed a similar path. The fast-growing space industry and the wave of digitization during the COVID pandemic are just two recent examples of how quickly innovation is moving.

The pandemic and the search for a new tech hub

The pandemic has changed the way many people live and what they prioritize, for good. Months of lockdowns called the status quo into question. Necessity is the mother of invention, and it opens up new perspectives too. Silicon Valley established itself as the center of tech innovation decades ago. Giants like Google, Apple and Facebook are tied to its name, companies that have changed the daily lives of countless people forever. But every boom brings unexpected change. As the area grew more popular, the cost of living in California rose. House prices shot up. California now tops the list of the most expensive property markets, with the average home costing $1.38 million. In Texas, it is barely a third of that. Texas also wins on taxes: like Florida on the East Coast, it has no personal income tax. For top earners in tech, moving from California to Texas is effectively a 13.3% pay rise. Gentrification has also steadily widened the gap between rich and poor in California, which has more homeless people than anywhere else. Tech innovator Elon Musk still runs some operations in California, but he has already moved to Austin, Texas himself. Tesla has a four-million-square-meter factory there and plans to create more than 5000 new jobs. At a summit of Wall Street CEOs, Musk said California had been on top for too long and had grown complacent. Venture capitalist Keith Rabois agrees: he recently moved from California to Florida for the same reasons. Industry watchers say the pandemic was clearly the turning point that brought these trends into the open. Around the world, people worked from home, which made offices obsolete in many places, especially in tech. Some employers will keep offering remote work after the pandemic, because tech entrepreneurs and employees have come to value working outside the office. Cities like Laredo and Austin are popular choices for headquarters. Many companies have already announced or completed their move from California to Texas, including Hewlett Packard, Oracle, 8VC, FileTrail, DZS, Question Pro and a number of venture capital firms.

Austin, a city on the rise

No other state has bounced back from the pandemic as fast as Texas. In fact, there are already more jobs available here than before the outbreak. Experts point to three factors: rapid population growth, the early lifting of pandemic rules for the labor market and a diversified economy. In April 2020, mostly national lockdowns had pushed unemployment in Texas up to 12.9%. Yet by December 2021, Texas had around 13 million non-farm jobs. That is almost 90,000 more than in February 2020. In an international ranking of the most attractive cities to live and work in, Austin came first, ahead of favorites like Rome and Paris. The weather, with an average temperature of around 20 °C, helps. Far more important are the countless jobs Austin offers across many industries: besides tech, there is science, manufacturing and finance. The average salary is $4478. The city also has excellent infrastructure and ranks third among cities for the performance and reach of high-speed internet. Rents are higher than in the rest of the state, but still well below the national average and nowhere near prices in cities like L.A. or New York. Along with excellent education for all ages, Austin has an international airport with more than 500 flights a day. Culturally, Austin has earned a reputation as a lively, young city, with countless restaurants, bars and a creative art and music scene, especially downtown. Do you have questions about Texas or another state as a place to do business? Are you thinking about settling in the USA and starting a company there? We are happy to walk you through the steps in a detailed consultation. To see why the Lone Star State does so well, read What makes Texas so attractive as a US location; for more updates, visit News.

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