Editor’s Note: GeekWire has partnered with UP Global and Chase to cover four Startup Week events around the country, starting with Tampa Bay earlier this month, Phoenix next week, and Dallas from Mar. 2 to 6. Tune in to GeekWire for more stories about the activities, and to learn more about this emerging startup hub.
When you think of Texas, and you think of startups, the city of Austin might first come to mind. It’s a place known for a thriving startup culture, one that consistently ranks highly on those “hottest startup hubs” lists and where the popular SXSW conference attracts thousands of innovators each year.
But just 200 miles northeast exists the nation’s fourth-most populated region, where nearly two dozen Fortune 500 companies like AT&T and ExxonMobil have their headquarters, where 25 billionaires call home, and where more than 50 colleges and universities produce talented graduates each year.
We’re talking about Dallas, y’all.
Big D has historically had a bustling business scene, thanks to favorable tax environment and a can-do spirit shared by many Dallas natives. Texas Instruments and Collins Radio (now Rockwell-Collin
Then, in the 80s and 90s, oil, gas, banking, and real estate markets flourished as the North Texas region became one of the nation’s leading business hubs.
Even so, DFW, as the locals call it, hasn’t exactly been known as a place to build startups — that is, until now.
Entrepreneurs, investors, community-builders, and economic development officers embedded in the Dallas startup scene all agree that the city’s entrepreneurial ecosystem is exponentially growing and on the verge of something special as it prepares to host a week-long Startup Week event next month.
“In the last 18 months, there’s been an explosion of activity,” said Trey Bowles, CEO of the Dallas Entrepreneur Center. “We’re beginning to see something really interesting. The community is starting to come to a place of being really effective, and a place where it sustains itself long term.”
“We are on the cusp of that lightbulb moment in Dallas, where people realize that we’ve got this booming startup scene,” added Clarisa Lindenmeyer, VP of Corporate Affairs and PR for the top-ranked Tech Wildcatters accelerator.
Even Mark Cuban, who moved to Dallas in 1982 and eventually sold Broadcast.com to Yahoo for $5.7 billion in 1999, is noticing the shift. Cuban told GeekWire that the scene in Dallas is “vibrant.”
“It has a lot of amazing entrepreneurs,” said Cuban, owner of the Dallas Mavericks and one of the investors on the hit show “Shark Tank.”
But it certainly wasn’t always this way.
Michael Sitarzewski knows what a thriving startup community feels like.
The veteran entrepreneur left Dallas nine years ago and lived in Boulder, Colo. for the next decade. He launched his own startup and simultaneously became embedded in the growing Boulder ecosystem just as David Cohen, Brad Feld, and Jared Polis created the Techstars accelerator.
Soon enough, there was a tight-knit network of entrepreneurs driven to build the next great company alongside experienced mentors and investors that were happy to offer guidance. The end result was a collaborative and supportive entrepreneurial community.
Whenever Sitarzewski would come back to Dallas, he wondered who in his hometown “was doing the same things we did in Boulder to make that place magical.”
Turns out, that wasn’t happening from a startup ecosystem standpoint.
“There were a bunch of great things going on, but no sense of community at all,” Sitarzewski recalled. “The vocabulary wasn’t there; the language wasn’t there. I asked about community and people said they didn’t have one.”
Sitarzewski returned to Dallas two years ago, inspired to apply what he learned in Boulder to the Dallas startup scene. There were certainly good things happening already. Tech Wildcatters, one of Forbes’ Top 10 accelerators, was mentoring and housing startups; the Dallas Entrepreneur Center (DEC) was set to launch; and cloud computing startup SoftLayer had just been acquired by IBM for $2 billion.
Yet something glaring was missing, and it was painfully obvious to Sitarzewski.
“A lot of tech and startups were here, but it wasn’t a ‘we,'” he explained. “It was always, ‘I’m going to do this and despite the poor environment in Dallas, I’ll make it happen.'”
Sitarzewski, along with several others, formed groups that could provide some glue between stakeholders in the ecosystem. Taking from what he learned in Boulder and other startup hubs, Sitarzewski started events like Dallas Open Coffee Club and Dallas New Tech that brought people together.
Along the way, the community builder has tried to instill a “give before you get” mentality among entrepreneurs.
“That starts to build a really cool place to be,” he noted. “It was already in Dallas, but it just needed a little corralling.”
Bradley Joyce arrived in Dallas six years ago and also noticed the same disconnect. There wasn’t a way for people to know what was going on in the DFW startup scene, and no way to virtually connect with one another.
So Joyce helped create a portal called LaunchDFW.com in 2010 as somewhat of an online news source for those interested in Dallas-related startup activity.
The site “has really taken off” in the last two years, Joyce said, and is now full of news, an event calendar — LaunchDFW hosts its own events, too — and a directory of accelerators and co-working spaces.
“People are just a lot more connected now,” Joyce said. “LaunchDFW played a small role in helping that along. There’s just more information being shared, more resources out there for people to tap into. It’s a combination of more stuff happening, but also everybody being aware of things going on.”
Part of that disconnect was a result of DFW’s geographical layout. While downtown Dallas is comparable to other startup hubs, what separates this particular region is the sprawl that spans across 9,200 square miles.
There is Fort Worth itself, of course, but suburbs like Plano, Irving, Garland and several others all have their own pockets of business activity with both big companies, and more recently, small ones, too.
For example, Frito Lay is based in Plano, American Airlines is in Fort Worth, Flour Corporation is in Irving, and GameStop is in Grapevine.
These towns aren’t a 30-minute walk from each other — more like a 30-minute drive. Joyce said the sprawl has kept the DFW startup scene from growing faster than it could be, partly because of fragmentation.
“It’s definitely something that slows things down a bit,” he said.
But there’s change happening. From an entrepreneurial perspective, each of these towns is developing their own identities, their own ecosystems.
Hubert Zajicek, CEO of the Health Wildcatters accelerator and local angel investor, noted that the idea of each suburb building its own startup community was not in the conversation three years ago.
“People didn’t identify themselves as being from these pockets,” he explained. “That’s changing. They used to be little towns, but now they’ve grown up with lots of infrastructure.”
The key now is to continue building connections between the pockets of innovation and maintaining ways to stay in touch with one another. That’s partly why Startup Week Dallas is hosting something called “City Fair,” where each suburb is invited to set up a booth and show people what’s going on in their neighborhoods.
“We are creating a mini trade show for those folks,” said Fiona Schlachter, a Startup Week Dallas organizer. “We’ll get a flavor of what they have going on in each city.”
Joyce is right — the fragmentation may have inhibited startup ecosystem growth in the past. But as long as those connections can be made, both online and offline, Sitarzewski thinks the separation is totally fine. For him, it all goes back to the theme of building a community.
“I encourage each of these surrounding cities to build their own communities, their own startup cultures,” he said. “You don’t have to feel isolated if you build a startup in Fort Worth because there’s a bunch of stuff happening in Dallas or Frisco. We are all one community. There’s a larger startup culture here.”
While the surrounding suburbs are key to the DFW startup ecosystem, downtown Dallas is the anchor of it all, with more than 1.25 million residents. Yet just five years ago, the area lacked any sort of vibrance and a majority of the office space was somehow vacant.
“It was like a ghost town, man,” Joyce said. “If you were in downtown Dallas after 5 p.m., you basically didn’t want to be on the streets.”
Daniel Oney, a Business Network Manager for the City of Dallas, explained how most of the Dallas core was built out by the 1980s. Over the next few decades, the city’s population started to age, and things “started to decline,” Oney said.
A key moment happened in 2001, when Boeing moved its headquarters from Seattle to Chicago. The airline giant had strongly considered Dallas for re-location, but ultimately decided otherwise. Some people called out a mediocre downtown Dallas as the reason for why Boeing didn’t come.
“Whether that’s true or not, it motivated the city,” Oney said.
Oney arrived in Dallas shortly thereafter and formed a research team that helped the city figure out how to facilitate more real estate development and foster a better business environment downtown.
It’s been a slow growth, but Oney described it as “dramatic.”
“Ten years ago, nobody was on the streets, and the storefronts were vacant,” he said. “Now, if you go out on a nice day, there’s going to be thousands of people walking around.”
This revitalization of downtown has been key to the startup ecosystem in Dallas.
“If this hadn’t happened, you would still have the tech economy focused on the suburbs and spread out everywhere in multiple counties,” Oney added. “Now, the central city attracts a lot of young people who are self-conscious about wanting to create a startup. It’s been gradual, but it’s one of those things that creeps along slowly and then grows exponentially. We are right at the turn where it’s beginning to go vertical.”
Joyce, who noted how people didn’t want to be in downtown after 5 p.m., echoed that sentiment — in fact, he’s one of those “young people” that Oney referenced. Joyce’s LaunchDFW office is in a downtown Dallas building filled with a dozen other tech startups. That’s partly because the building’s real estate developer made it a point to rent space only to tech companies.
Downtown Dallas is much more “livable and walkable” from years past, Joyce explained, and also a place where you can go to lunch and run into several people in the startup ecosystem.
“It’s night and day,” he said of the changes.
Zajicek, CEO of the Health Wildcatters accelerator, agreed. When he arrived in Dallas more than a decade ago, the downtown area was “incredibly abandoned.”
“Now, it’s undergoing a phenomenal revitalization and a renovation boom,” Zajicek said. “Downtown Dallas is back.”
THE POWER OF CORPORATIONS
One key aspect of the DFW area that sets it apart from other business environments is the density of huge corporations. Dating back to the mid-1900s, the innovation culture was focused on building big companies. It started with Texas Instruments, which built military technologies and later computer chips. That led to the formation of the “Telecom Corridor,” with companies like AT&T, Ericsson, and MetroPCS all setting up shop just north of Dallas.
“Going to work for one of the big telecom companies or Texas Instruments was the cool thing to do,” Oney noted.
The dot-com bust hit the DFW region hard, which may have contributed to the demise of downtown. But today, there are still countless corporations headquartered in the region, from ExxonMobil — one of the most profitable companies in the world — to AT&T, to American Airlines, to 7-Eleven, to Zales, to JCPenny, to … you get the point. There are small companies, too, with nearly half of DFW-area businesses employing less than 50 people.
A combination of low cost of living, no state income tax, a large population, and an entrepreneurial attitude among the people in DFW have helped attract a host of companies to set up shop in the region.
But what do these corporate giants mean for the startup ecosystem?
Lindenmeyer, the VP of Corporate Affairs and PR at the Tech Wildcatters accelerator, is bullish about the potent combination between big companies and small startups. In fact, Tech Wildcatters just launched a new program called the Corporate Innovation Network in order to help form the relationships between big and small.
“This all came from conversations we had with corporate friends and partners that said, ‘We want more access and we know we need it,'” Lindenmeyer said.
Having a pack of successful corporations that support local startups is something that few startup hubs have, and many yearn for. Places like Boulder and Austin certainly don’t have it.
“It’s an important differentiator,” Sitarzewski said.
Lindenmeyer noted that there’s a “warm environment” in regard to how startups treat corporations, and vice versa. The key, she said, is organizations like Tech Wildcatters or the Dallas Entrepreneur Center figuring out the best way for the two sides to connect so they can help one another in the most efficient way possible, whether it’s a startup providing technology tools to a corporation, or a big company investing in — or maybe even acquiring — a startup.
The partnerships with corporations is especially important in Dallas, which is home to many B2B startups.
“You probably won’t see the next Snapchat come out of Dallas, but you may see the next big enterprise company come out of here,” Joyce said.
This all circles back to the idea of community, and why that’s important. Lindenmeyer noted that it’s about entrepreneurs and corporate executives being on the same page about how these relationships can benefit the entire ecosystem.
“We need to get the corporations to really start playing ball,” Lindenmeyer said. “We need to get them involved to where you can’t be a corporation in Dallas and not be involved with the startup scene — especially in the tech world.”
And it’s not just about the big companies participating in the ecosystem, or the entrepreneurs and investors.
“It’s also about stakeholders, like universities and accelerators, all taking a step forward and engaging with this community, finding out what their role is,” said Bowles, a startup veteran and CEO of Dallas Entrepreneur Center. “When they do that, everybody wins in the long run — we have company creation, job creation, and an economic stimulus.”
TAPPING INTO THE WEALTH
There is an incredible amount of wealth in the Dallas area. Former executives of big companies and those that made smart investments in oil, gas, and real estate industries are rolling in the dough.
The problem — at least for the startup ecosystem in Dallas — is that most aren’t signing checks for startups.
“Banking, insurance, real estate — these are industries that have a real risk management mindset,” Oney said. “People that have invested in Dallas are used to a more cautious approach.”
One solution to that problem is creating angel investment groups and incubators that may reduce some risk for those that aren’t so familiar with the startup scene. The other part is simply educating investors who have put their money into more traditional industries or used wealth advisors that aren’t keen on investing in the next tech startup.
That’s certainly happening in the DFW area, with more accelerators, incubators, and angel groups sprouting up in the last decade or so. The venture capital money is flowing, too. Data from Pitchbook shows 51 deals and $429 million invested in 2009; those numbers jumped to 84 deals and $973 million invested in 2013:
Still, Joyce noted that it’s tough for early-stage startups to find funding if they don’t have big user traction or revenue flowing.
“Very few investments here happen on great team and a great idea,” he noted.
But the fact that an enormous amount of money exists is a lot more than other startup hubs can tout.
“We have definitely have access to capital,” Sitarzewski said. “Now, it’s figuring out how we activate that in this community.”
‘JUST COME VISIT’
Mike Huckabee just put out a new book last month called God, Guns, Grits, and Gravy. In it, Huckabee describes his favorite way of determining how well a city or state is doing at encouraging people to stay there: U-Haul rates.
“U-Haul has so many moving vans heading one-way from California to Texas that they’ll subsidize your move by $656 (that’s a 41 percent discount) just to drive one back to L.A. for them,” Huckabee wrote.
The data shows that Dallas is becoming an attractive place to live. Now it’s a matter of actually showing people what the city is all about.
“Most people’s opinions of Dallas are about the place where the Cowboys play, or where Kennedy got killed, or where there’s that big annoying airport,” Bowles said. “The things they have aren’t based on real information. If we can have them come visit, the deal is closed. They’ll see the events, they’ll see the places to live, they’ll understand the culture and community — one that champions its entrepreneurs, supports them, and spends time with them freely with no expectation of return.”
Bowles has lived in several other cities, but he’s never seen a more collaborative ecosystem than the one in Dallas.
“Everyone is working together for the better of the whole community,” he said.
Dallas still needs to figure out how to help its wealthy investors put money back into the startup ecosystem. It still needs a few more big exits like SoftLayer’s $2 billion sale to IBM.
But clearly, the city is poised for something big.
“When you pull together a community of people willing to help and support businesses as they grow, and couple that with potential customers that exist here, and tie it into an extremely affordable lifestyle with no income tax,” Bowles said, “you create the perfect opportunity for someone to start a business.”