By Lara Berendt
As another tough year for the economy draws to a close, Austin, Texas, continues to distinguish itself as an entrepreneurial stronghold.
The capital city ranks highest in the nation for economic recovery, according to a report released Tuesday from the Brookings Institution. This followed an assessment in May by Kiplinger’s Personal Finance that declared Austin the best city to live in for the next decade. Also in May, Forbes.com placed Austin as second most innovative U.S. city, after San Jose, Calif., and in January, Portfolio.com named Austin top in the country for small-business vitality.
What is it about Austin that has analysts smitten?
The federal government defines small businesses as those with fewer than 100 employees. Studies like those by Brookings and Kiplinger’s typically rate cities according to population growth and employment numbers, which are indicators of overall economic vigor, said Beverly Kerr, vice president of research at the Greater Austin Chamber of Commerce. But what’s good for the business community as a whole tends to be good for small businesses too.
“The amount of innovative industries affects a city’s ability to grow and increase wealth,” Kerr said, and Austin has been leading the way in innovation since the technology boom a decade ago. Currently, the leading growth sectors are in professional and business services, education and healthcare, she said.
Kerr pointed to three main factors in explaining Austin’s small-business friendly climate: population growth at a rate three times that of the nation; a diverse economy with a high-tech, high-value focus; and the fact that Austin seems to have escaped the housing bubble that crippled other American cities.
The population of the Austin metropolitan area grew 36 percent from 2000 to 2009, while the nation’s growth rate was just 9 percent, according to U.S. Census Bureau statistics. Austin saw less than 7 percent unemployment in 2009, compared to the national unemployment rate of 9.3 percent.
“We were still growing, even after everyone else had started losing jobs,” Kerr said.
Shoppers explore the myriad locally owned businesses of Austin's South Congress Avenue shopping district.
It also doesn’t hurt to have solid governmental and educational infrastructure to keep the city chugging along through hard times.
“We have a buffer here in Austin because it’s the state capital and because of the University of Texas,” she said.
Kerr said state officials are confident in the future of Texas’ economic vitality, a view reinforced by the comptroller’s most recent forecast, which showed stable unemployment figures and an increase in leading economic indicators.
“Their outlook is that Texas is the clear leader for this coming decade, that the economy here is in better shape, and it’s going to come out ahead of the rest of the nation,” Kerr said.
Austin native and entrepreneur Paul Saldaña knows first-hand how the government has insulated Austin from the recession’s effects. Saldaña worked for more than 20 years in municipal government before launching a public relations firm, Adelánte Communications, in 2003.
“The first three to five years are the toughest for a small business,” Saldaña said. “If you can make it past the five-year time frame, then you’ve done well.”
When the economy faltered, Saldaña relied on government contracts to sustain his business, which is not just small, it’s technically a “micro-enterprise,” meaning he usually has fewer than five employees. He estimated that 35-40 percent of Austin’s small businesses are micro-enterprises.
All business owners have been forced to get creative to withstand the troubled economy, he said.
“Whether you’re a big or small company, everyone’s having to rethink their existing business strategy,” he said.
Those looking to launch new ventures in recent years often found banks reluctant to make loans, but Saldaña says several Austin nonprofits are picking up the slack. Organizations such as BiGAustin and PeopleFund continued to provide affordable loans to entrepreneurs throughout the recession.
Saldaña did some creative rethinking, joined forces with two other small businesses, and has transitioned Adelánte into a new company, Brisa Communications, incorporating marketing and advertising services into his public relations repertoire.
Saldaña said he thinks Austin’s small-business appeal lies in the wealth of support and resources local government provides to entrepreneurs.
Joy Miller, spokeswoman for the city’s Small Business Development Program, said hopeful business owners have been increasingly utilizing the program’s resources during the recession, although the city doesn’t track how many people actually follow through and successfully launch a company.
“People are at least still considering opening a small business and still taking advantage of our services,” she said.
Some popular services offered through the city’s program include a “Meet the Lender” event that acquaints potential business owners with the loan application process, a help center that provides computers and instruction in everything from business-plan writing to Quickbooks accounting software, and an annual business resource fair showcasing nonprofits that provide services to small businesses.
Austin's North Loop Boulevard business district features radical bookstore MonkeyWrench Books and new addition, Blackbird clothing boutique.
Rebecca Melancon doesn’t think any specific city-sponsored program is the key to Austin’s entrepreneurial success. Melancon is executive director of the Austin Independent Business Alliance, which aims to promote, support and protect locally owned businesses. She’s convinced Austin has a unique energy – a “critical mass of loving new ideas.”
“It’s often been said, if you come here and you don’t find a job, start a business,” Melancon said. “And you don’t hear that elsewhere.”
The risk-takers involved in the late ‘90s technology boom elevated and legitimized Austin’s creative climate, she said. How?
“By succeeding.”
The remnants of the tech bubble, coupled with Austin’s creative class, musical sector and the intellectual community supplied by local universities combine to create a sort of perfect storm, she said.
Melancon has seen some small businesses fail during this recession, others forced to get creative to keep their doors open, and hoards of new businesses launching.
“Small businesses don’t have a giant corporation behind them to help them float through a hard time,” she said.
Can Austin sustain its status as a small-business mecca against a gradual, homogenizing influx of corporate money? Melancon thinks so.
“We need [corporate] jobs, we need the infrastructure money, we need all of that,” she said. “But one side should not exist to the extinction of the other.”
She’s confident that the extinction of Austin’s thriving small and independent business sector is unlikely.
“We have a very entrepreneurial community – a community that is very creative and very eclectic, and a citizenry that values that,” Melancon said.
Local Biz Austin 