Don't Mess With Texas: Lone Star State Uses SXSW To Steal Companies From California

Deep in the heart of Texas, SXSW is big and bright. Last year the two-week festival generated $325M for Austin’s economy. More than just tax revenue and tourism, SXSW — running this year from March 6-19 — showcases the Texas capital, drawing companies from all over the world to open offices in its rolling hills.  

Though SXSW started as a music festival, over its 30-year history it has morphed into much more. It now features tech, film and comedy alongside the music. The transition has doubled the annual attendance in just over five years to about 140,000 annually. Visitors are liking what they see.

During the peak of the dot-com boom, Silicon Valley was a net importer of Texans. Between 1997 and 2000, about 1,500 more households moved from Texas to the region than vice versa. The trend changed. 2009 saw the single largest year-over-year attendance boost at SXSW Interactive, the tech component of the festival. Between 2009 and 2012, Silicon Valley lost roughly 1,430 households to Texas. While there are numerous factors that influence a household's or company's decision to relocate, firms rarely move somewhere their executives have never visited. It is more than coincidence that the shift from California to Texas coincides with the rise in prominence of SXSW Interactive, which featured keynotes from Wikipedia’s Jimmy Wales, Craiglist’s Craig Newmark and Facebook's Mark Zuckerberg during that time.

Austin is attracting major household names like Facebook, Samsung, Amazon and Apple, each of which moved 500 employees to the area in 2016. Austin has also become a major player in the startup space. Austin ranked No. 1 in the CNBC Metro 20: America's Best Places to Start a Business ranking in 2016. The proliferation of technology companies has led to the region's nickname, "the Silicon Hills," and spurred development that greatly expanded the city.

While one of the world’s pre-eminent marketing events for tech companies, SXSW does quite a bit of marketing for Austin itself. The State of Texas recognizes the opportunity SXSW presents for the area and the state. Last Saturday, Gov. Greg Abbott hosted a technology reception to court potential business. "You happen to be at ground zero for the future of innovation and especially where it intersects with technology," Abbott said. "If you have a vision, if you have a dream, if you have a work ethic to achieve that dream, there is no better place for you to be than in the Lone Star State right now."

Low housing costs and plentiful local talent are major factors influencing relocation. The tech scene also has strong local support from the Austin Chamber of Commerce and other groups. Global real estate firm Savills recently used five metrics to determine Austin is the top overall tech city.

There is also the obvious boost to tourism and hospitality, a staple for the area. In 2016, SXSW directly booked 14,415 individual hotel reservations totaling over 59,000 room nights for SXSW registrants. Direct bookings by SXSW alone generated $1.8M in hotel occupancy tax revenues for the City of Austin.

“SXSW continues to position Austin in the national spotlight and as a result, the Kimpton Hotel Van Zandt reaches an expanded customer base for the greater part of March,” said general manager Joe Pagone. “By embracing the creativity surrounding the conference, we are able to hit the affluent, tech-savvy target audience for our hospitality brand.”

The festival has had its issues. This year, a lack of Uber is giving visitors a headache as other ride-sharing alternatives crashed. The state’s controversial SB6 "bathroom bill" and SXSW’s own controversial immigration language in its contracts have raised concerns.

But things are off to a good start this year. On Sunday, former vice president Joe Biden spoke about The Cancer Initiative, a program that continues the work he began under the White House Cancer Moonshot Task Force, which seeks to foster research and facilitate access to treatment and detection to eliminate cancer. 

Abbott summed up the spirit this weekend when he said, “If you have a longing to be able to chart your own future, as opposed to having somebody else dictate that future, that is the brand of independence that stimulates technology development, but it's also the brand of independence that stimulates the Texas economy.”