Is Houston, TX a good place for startup


3

Based on the discussion here, Houston was listed as one of the startup friendly state in USA. After doing some more research about the city of Houston I am very keen with Houston as it seems to be a very nice place to live. My question now is, what is your experience from building a startup in Houston?

  1. How is the business Tax compared to other state like California? Is it much lower?
  2. How is the technology talent here? Would I be able to find talented people easily in this city with competitive salary rate.
  3. What about the building rent prices? I know Joel already asked about the price of office space in Austin, would the price be relatively the same? Would the price be cheaper if I have to rent in California or NY?
  4. How is the startup community in this city? Are they supportive or the other way around?

Location

asked Jan 5 '10 at 10:13
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Jpartogi
1,342 points

8 Answers


3

Full Disclosure: I am 100% biased towards my hometown of Houston and I think that I can safely say that this question is so tailor-made for me to answer that it almost seems like a plant.

The short answer is Houston is an incredibly supportive place to launch a tech startup.

The long answer is:

1) taxes are tolerable and largely irrelevant for a startup (see other answers above)

2) Talent is abundant and doesn't have the attitude and management problem of jumping to the next deal like you have in a hot startup town like the Bay Area, Boston, Seattle, Portland or Austin. No one retires to Houston - everyone comes here to work for a couple of years and ends up staying for twenty.

3) Office Space is dirt cheap for a sub-lease, and there are some incredible alternatives - specifically the largest coworking space in the US, carolinecollective.cc and two new coworking sites that I'm personally helping start, www.katydock.com and a brand new site up north in The Woodlands. As Mikey mentioned above (thanks for the hat tip), the Houston Technology Center houstontech.org has a very strong base of dozens of tech startups in the middle of one of the hottest neighborhoods for young, creative class people called Mid Town. It is five blocks from one of the most social media/tech startup/student friendly coffee/bars in the country, @CoffeeGroundz (coffeegroundz.net and business.twitter.com/twitter101/case_coffeegroundz) where you can regularly find several startups huddled around the tables.

4) Once again, full disclosure - I am personally very active in the startup scene having recently (the last day of the year, so four days ago as I'm writing this) left the Houston Technology Center as the Director of Entrepreneur Development - a non-profit business incubator that basically helps startups through all of the funding, management and customer issues that face early stage tech startups. In addition to organizations that have already been mentioned like HTC and Rice Alliance - home to the largest MBA business plan competition in the world, we've created a vibrant community full of professional and fun events such as OpenCoffee Club, Startup Houston Happy Hour, RefreshHouston, NetSquared, TiE Houston, and a significant and diverse User Group scene especially a very large iPhone Developer meetup, plus quite a few BarCamp-style events - 20+ in the last two years. sites.google.com/site/houstontechgroups/

You will find that all of the obvious negatives of Houston - the heat, humidity, and long commutes are quickly outweighed by the fact that the spirit of this city is so friendly, helpful and intrinsically entrepreneurial that its a wonder more people don't talk about it as a startup hub. I love Austin and go there regularly for startup-related work and SXSWi (where I'm speaking this year about building tech communities, via y-combinator style seed-funding/mentorship programs) and it's only 150 miles or 2 1/2 hours by car.

Houston has a lot to offer entrepreneurs who are willing to take the risk of coming to a place that's not one of the tech mecca's - just take a look at http://www.startuphouston and I'm happy to talk to you directly if you have more questions:

Marc Nathan
marc1919 -at- gmail -dot- com
713-401-9394 Google Voice

answered Jan 5 '10 at 16:20
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Marc1919
46 points

2

You're over thinking it. Does any of this stuff matter?

1) Ok, this matters a little. But really just a little? Has anyone really said, omg, this business would be successful if I just didn't have this extra .5% tax I need to pay here.

2) Does this really matter to you? Are you running a restaurant? It's totally awesome to hire people all over the place. It costs nothing then to stick them in an office, they can work from home or wherever they are comfortable. We don't have office space, and that rocks. Not rent to worry about. Total flexibility about where to work and hang out. Look at 37signals. They have 12 or 15 employees now, and most are all over the world. It's pretty easy to collaborate online now, especially making software.

3) Boo. No rent for startups. Work from home. Or find a co working space. Or use the government, city sponsored spaces you can rent for dirt cheap. We pay some cheap dues to the Illinois Technology Association to use their conference room and meeting spaces every now and then when we need one.

4) It's nice to have supportive people around. But this again shouldn't make a difference if you are successful building something people want.

If you like warm weather Texas is for you. I hear Austin, TX though is awesome.

answered Jan 5 '10 at 11:33
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Nathan Kontny
1,865 points

1

Houston's humid, Austin's not. If that's not enough to convince you, then Austin has a great startup culture, lots of young smart people (UT Austin is here - http://www.utexas.edu/ ), and 6th street, which has lots of bars. :-)

As to how Taxes measure up, a quick search turned up this site: http://www.taxfoundation.org/research/topic/60.html Though, as mentioned, taxes are more or less irrelevant for startups, given a good accountant/planner.

Disclaimer: I am a recent Austin/Texas transplant, so far I am loving it here. It was worth it coming here just for the decreased traffic (Compared to California). The driver license office, not so much.

answered Jan 5 '10 at 12:56
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Gabriel Magana
3,103 points

1

I've owned companies in both Houston and Austin. While I personally like Austin better, Houston has a lot going for it from a start-up point of view.

Texas is a pretty good state for starting/running a business. It's run by business-friendly Republicans, so in general the laws and regulations are decent for a business owner. There is no personal income tax in Texas, so you get to keep more of what you make (if you are making a profit). The state tax on companies (called Texas Franchise Tax) is only half a percent for companies with less than $10 MM in revenue. And the creditor laws in Texas are really good - creditors can not take away your house or your car. And the Texas LLC laws are as good as any in the country.

Houston, in particular, has some good things going for it. It's the 4th largest city in the U.S., so if you are selling to consumers, there are plenty of them there. And it's got more Fortune 500 company headquarters than anywhere but New York City, so it's good for B2B companies as well. It's the number one city for certain industries such as Energy and Petroleum, and it's a major transportation hub as well with two major airports and one of the largest ports in the Unites States. Houston is also a key city for doing business with Latin America, and many foreign country companies have offices there. Finally, Houston has the Houston Medical Center, Texas' largest collection of hospitals, medical schools, and medical research organizations, so if your business is healthcare focused, there's a built-in market.

Technology talent is as good in Houston as in most other major cities with the exception of the Bay Area and Boston (which I consider to be the best in the country). In Texas, Austin is better known for technology, so a lot of hot-shot developers move there rather than stay in Houston, but Houston has plenty of talent to go around because it's such a big city. Houston is also home to Rice University, the best engineering school in Texas and among the best in the country, and it's very common for Rice Grads to stay in Houston to work. Rice also has one of the top MBA programs in Entrepreneurship, if you feel you need an MBA later down the road.

The startup support network in Houston has really improved over the past 5-10 years. A buddy of mine runs the Houston Technology Center, an organization that helps startups succeed, and there are other organizations like the Rice Alliance that do similar things.

The rent in Houston will be much better than in California or New York, not only because there is more space, but because of a unique zoning regulation (or lack thereof). Houston is the only major city in the U.S. without a zoning ordinance, which means that you can build any kind of business anywhere - there are car repair places in the middle of million dollar neighborhoods. As a result, there isn't one central business district - there are probably a dozen scattered around town. So you can always find cheap office space in one of the office parks on the outskirts of town.

answered Jan 5 '10 at 14:34
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Michael Trafton
3,141 points

1

I echo Marc Nathan's post and am very pro Houston for startups. While I do not have anything else to add to his answers to your four questions, I do want to add that the suitability of Houston for startup will depend on the kind of startup.

Is your startup consumer oriented or business oriented. I would rank Houston as high as any other location for business oriented startups in terms of talent, support, lawyers, accountants, caterers, drivers, etc. You get the point :-)

With respect to funding, how much funding do you anticipate? While Houston may not be the easiest place to raise the $100 million first round, if you are looking for a few million, it should not be a problem. Austin is only three hours by car and a lot of Austin VC outfits have presence in Houston.

To give a tourist analogy - Houston is the up and coming undiscovered place which you can join before everyone else discovers it and ruins it like California ;-)

With respect to the quality of life comments raised by Ron, I am not sure if he is speaking from personal experience but there is a reason why Texas has attracted people from all other states in the US even among the recession. The upcoming census will further cement Texas' role in the US economy including the startup scene. Houston has the diversity to fit any lifestyle and is more progressive than people realize. You should research our newly elected mayor to find out more about the incredible diversity and energy in Houston that never really was impacted by the recession!

Go Houston!

Adnan
2008 Startup Founder and Houston Booster
www.epsyssolutions.com

answered Jan 6 '10 at 03:29
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Fel2 Master
11 points

1

Houston is a great place to start up a company.

I've started up two companies in Houston, one in Austin, and one in Lausanne, Switzerland, which later started up a US subsidiary in San Francisco. Relative to CA, NY, or MA, I give the startup environment top marks for a few reasons:

  1. The cost of living is LOW (yet the quality of life is very high)
  2. Abundance of top technical and creative talent
  3. Abundance of young, entrepreneurial energy interested in such opportunities
  4. Business-favorable employment law making it really easy to hire/fire and otherwise be agile

The entrepreneurial ecosystem is definitely not as mature in TX as it is in, say, the bay area, which I find to be a double-edged sword. On the one hand there are fewer resources just sitting around waiting to be used by entrepreneurs. On the other, it is easier to differentiate your startup to investors, business partners, and employees.

Now, Houston vs. Austin. I definitely think of Austin as more of a "startup city" but Houston's startup scene is expanding rapidly--thanks in no small part to the efforts of the HTC, the Rice Alliance for Technology, and others. Houston is particularly appropriate for B2B startups, which is why we chose to locate our most recent venture here instead of Austin.

BTW, there is a common myth that Austin is less humid than Houston. As you will see from meteorological data (http://www.met.utah.edu/jhorel/html/wx/climate/rh.html ) and as I can personally attest from having lived in both cities, it is not. Houston does, however, have more floods and hurricanes.

I don't think you can go wrong starting up a company in either Houston or Austin and one basically gives you access to the other.

answered Jan 7 '10 at 06:11
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User2182
11 points

0

I asked this same question in my hometown, Minneapolis, while starting an internet company. The area isn't known for internet startups (like, at all). So I went on a quest to figure out if I should move to the Valley or make a go of it here. Here's what I found, relative to your questions:

  1. Taxes As Nathan said, this shouldn't be a factor until you're at a billion in rev. Cost of living is way more important, if you want to get all bean-counter about it.
  2. Talent As long as you have a university around, you're fine. Houston has plenty. Utilize interns for all the secretive things you don't trust your oDesk contractors with.
  3. Office Space Should be the last thing on a startup's need list. Breath using Skype and 37Signals products, and things will roll with ease. Google "business co-op" if you want a place hourly or like 15 hours per month with a board room. If you're paying 500/mo., you're paying too much. After talking with CEOs in my area, I came away concluding that if you're paying for a new lease, you're being completely unresourceful. Sublease or co-op it (or virtualize it).
  4. Community In Minneapolis, this was a major concern of mine. Not too many people like me. I found otherwise. Meetup.com. Favorite it, and leverage it. It's a beautiful thing.

Moral? Compared to any of CA, you'll see a 15% decrease in all cost of living, 20% cheaper talent for those you hire, and all the resources that you could want. You might have to be tad bit more resourceful than Bostonians or LA entrepreneurs, but it's all there.

Best of luck!

answered Jan 5 '10 at 14:35
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Casey
51 points

0

I don't know about the start-up scene in Texas... I do know about the start-up scenes in California (silicone valley), Massachusetts (Boston) and Israel (all of it, since its a small country :) ).

I have been following your questions for a while now, and so I know that you have been considering to relocate from Sydney for a while... If you decided to take the plunge, and move across the world, wouldn't it make sense to go to the best place in the world?

While Texas might be a good place to start a web based business, it isn't famous for it... The only example that I can think of is Dell, which is an impressive business, but one example is not enough.

I suggest going to a place that has the complete ecosystem for a startup:

  • Top rated universities and companies so that recruiting talent becomes easier
  • The capital available, which includes angels and VCs
  • All the needed service professionals, which includes lawyers and accountants that specialize in the field.

I have nothing against Texas, but I am not sure that it should be your target when crossing the ocean. If rent is higher in the other places, but raising capital is easier, then its not really a problem. Incorporating is usually done in Delaware, which makes the tax issues less important.

Good luck!

answered Jan 5 '10 at 18:09
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Ron Ga
2,181 points
  • Thanks for the support Ron! Really appreciate it. Besides doing business I'm also thinking about settling in. There are many things to consider beyond the business life as well, like housing, school for the children, personal income tax, retirement, crime rate etc. – Jpartogi 9 years ago
  • Is raising capital easier in the valley? Yes there's more of it, but also a *lot* more competition no? – Jason 9 years ago
  • Competition is healthy... If you cannot raise money ?espite the fact that it is available, then it is a clear indication that something is wrong... If there isn't enough capital available, you might not be able to make it, but that is why you should look for a place with the needed capital, and not start with a handycap. – Ron Ga 9 years ago

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