The Impact of Changes at Austin Ventures

Austin Ventures is Winding Down

It is being widely reported that our local juggernaut for venture funding in Austin, Austin Ventures, is going to be changing its focus. A Fortune reporter seems to have some inside baseball on what has gone down, claiming that it can’t raise enough for its next fund and is breaking up. I’m sure we’ll hear much more in the coming weeks.

But in reality, it won’t matter much. Here’s why:

AV has had some great successes over the last few years, including BazaarVoice, HomeAway, RetailMeNot, and a few others. But as its latest fund was starting to wind down over the past couple of years, AV seemed to become increasingly conservative in where they were investing. Full disclosure: I met with one of their partners in 2012, and then again in early 2013 for a potential investment in UpgradeUSA (we weren’t ready either time). They told me, as well as other companies, that until they raise their new fund, they really weren’t going to be investing in early-stage startups.

So ironically, while the Austin startup scene has really started to cook in the past couple of years, and so many talented people have moved to town (Austin has seen around 110 people moving to town every day as of Feb 2014), many with visions of entrepreneurship, AV pretty much self-selected to stay on the sideline. This has been to the benefit of Capital Factory, TechStars, and other incubation programs that are doing what they can to meet the high demands of startups looking to really grow here.

So although there won’t any immediate impact, just from a psychology perspective I’m sad to see AV take a step back. I think it’s always good to have a large local capital presence to provide entrepreneurs with an aspiration to meet. We all want to build companies and stories that will make the AVs of the world light up with excitement. The local angel community isn’t as strong as it could be, although there are groups such as TiE shedding some light on that, trying to make it stronger. The entrepreneur support system in Austin gets stronger with each passing month.

Let’s hope that other large sources of capital see the opportunity in the Austin area, and start to take root here. We don’t want carpetbaggers, we really want and need seasoned capital here to help grow the companies that will in turn help make Austin’s economy increasingly diverse, resilient, and sustainable.

I’d love to hear your thoughts too.