Today marks the kickoff of Austin Startup Week, a dawn-to-dusk boot camp for local tech entrepreneurs. And there's plenty of varied programming to choose from. Seats for “What Willie Nelson Can Teach You About User Experience” were sold out nearly a week before the event’s scheduled date (maybe some think Willie will make a cameo). Thursday’s discussion “I’ve Got 99 Problems but a Pitch Ain’t One” will showcase entrepreneurial lessons gleaned from hip-hop. Given the city’s exploding startup scene, it’s easy to see why unorthodox innovation events are popular. To stand out in this market, entrepreneurs need an edge.
The Texas state capital has nearly doubled its population in the past 20 years, aided by a steady stream of cash from venture capitalists. A March report by the Martin Prosperity Institute found Austin’s $555 million in capital investment to be the eighth highest in the U.S. during 2013—more than Chicago, Seattle, and Los Angeles. Austin also placed in the top 10 for its total number of venture capital deals. Austin is undeniably one America's newest “nerdistans,” as CityLab's Richard Florida likes to call them—urban centers that strongly support high-tech industries.
Yet despite a robust investment culture, some Austin tech companies are having a difficult time accessing local labor. Shortly after launching Gluu, an Austin-based company that works with internet servers in 2008, Mike Schwartz was eager to hire international students graduating from nearby universities. The University of Texas at Austin's engineering school, in particular, offered his young company well-trained tech engineers. On two separate occasions, however, international students hired and trained by Schwartz were ultimately poached by larger tech companies, including T-Mobile. They offered entry-level salaries that Gluu simply couldn’t compete with.
“There’s just not enough talent here and there’s too many tech companies chasing it,” Schwartz says. Subsequently, Gluu largely stopped hiring locally. Of the company’s 15 employees, including Schwartz, only two reside in Austin. The rest work remotely in countries like China, India, Bangladesh, and Ukraine.
“We don’t want to have to give people yoga classes and do their laundry in order to get them to work for us,” says Schwartz. “[W]e will pay you and you will be part of our team that loves to work together, but that’s it.”
Gluu’s inability to find young, employable talent is the product of an array of factors. But one glaring issue is that Austin’s universities appear to be limiting their admissions of tech-minded international students, many of whom would certainly see Austin as a great launchpad for employment after graduation.
While other startup cities like Boston, Seattle, and San Jose boast high numbers of international students, Austin on the whole retains a largely Texas-centric student body. The past 20 years have brought in hundreds of thousands of new Austinites and billions of dollars in tech investment. But foreign students otherwise eager to study in the U.S. have stayed away. What’s the deal?
“Everyone knows New York, it’s a very cosmopolitan city,” says Neil G. Ruiz of the Metropolitan Policy Program at the Brookings Institution. “And Austin, it’s pretty cosmopolitan within the U.S. and a very thriving town. But I think, internationally, people might not know that as much,” he adds.
Austin, according to Ruiz’s August study, “The Geography of Foreign Students in U.S. Higher Education,” is far behind other tech hubs when it comes to enrolling students from around the world.
Between 2008 and 2012, there were just 17 foreign students for every 1,000 students in Austin. Not only is that a lower ratio than other Texas cities like Dallas, Houston, and College Station—whose economies are less innovation-focused—it’s far lower than that of cities with similar rates of venture capital investment. For every 1,000 students that enrolled in Seattle colleges between 2008 and 2012, 50 were international students. That figure is even higher in San Francisco—60 per 1,000—and Boston’s student body was more than three times as global as Austin’s.
This is not to say that Austin has an inherent diversity problem. The share of Austin’s white, non-Hispanic population dipped below 50 percent for the first time in 2005, according to the city government. Census Bureau figures indicate that Latinos accounted for 35 percent of the city’s population in 2012. Moreover, the city boasts more than 10,000 residents who identify as being Chinese and nearly 9,000 who identify as Vietnamese. “Austin, I would say over the last 20 years, has had this technology explosion, so there’s probably, from a corporate perspective, a lot of catching up to do,” says Teri Albrecht, Director of International Student and Scholar Services at the University of Texas, Austin. “But from personal experience, Austin is a really great city to live in due to its cultural diversity,” she adds.
Texas law mandates that high-school graduates in the academic top 10 percent of their class receive automatic admission to public universities, Albrecht notes. This policy, she says, has likely closed many doors for international students applying to Austin’s universities.
UT-Austin is just one of five four-year institutions in the metropolitan region. That's a small number for a city its size, so it’s really no surprise that Austin has a comparatively low net foreign student population. But with roughly 50,000 students, UT-Austin makes up the lion’s share of the city’s student population. And in order to meet state law requirements, Texans account for about 90 percent of all incoming freshman at Austin's largest university.
“[W]e have a very small slice at UT that are U.S. students coming from out of state, and then we have very small slice of those who are international undergraduate students,” Albrecht explains, “And so that really drives what our overall student population is.”
The issue is that when cities such as Austin essentially cap the number of international students enrolled in their schools, they miss out on the many benefits of circular migration.
The city a foreign student chooses to study in essentially becomes his or her “home base” in the United States. If they decide to remain in the U.S. after graduation—possibly pursuing a green card—they will most likely consider that city as a permanent residence. If he or she decides to return to their native country, their college city will continue to be a networking source while abroad. If he or she starts a business back home, contacts from their college city will likely be tapped when conducting business in the U.S.
The long-term benefits that Austin is missing out on given its low international student population, says Neil G. Ruiz of Brookings, could ultimately be a major detriment to the city.
“In the long-term, what’s good about [enrolling more foreign students] is that a place like Austin can become more global and cosmopolitan," Ruiz explains. “These students are mostly coming from fast-growing cities like Seoul and Beijing—huge mega-cities with large markets. So Austin’s employers can benefit from the students because they know the language and they have the networks of their home communities abroad,” he adds.
Venture-capital investors may come to Austin Startup Week for the Willie Nelson-themed idea session, but they might be left wondering why events focused on attracting young, international talent to the city were left off the agenda.