CNBC Metro 20

A tech start-up founder explains why he left Silicon Valley for Austin

Tom Hadfield, the CEO at Message.io
Source is Tom Hadfield
Tom Hadfield, the CEO at Message.io

Tom Hadfield is a serial tech entrepreneur who lived and worked in San Francisco before deciding to move to Austin last year.

His decision to ditch Silicon Valley for Texas is part of a growing trend of start-up leaders looking for quality, cost-effective locations outside of the Bay Area.

In recent years, Austin, with a population just shy of 900,000, has developed its own unique and thriving start-up culture. This year, it was ranked as the best place to start a business in America in an analysis of metro areas by CNBC.

So what is it that brought Hadfield, and scores of other founders, to the Texas town? It seems to be a mix of low taxes, including zero state income tax, a relatively low cost of living, the supportive community and an edge in recruiting great people.

"In Silicon Valley, there's a subtle sense that everyone is a potential competitor," Hadfield, 33, tells CNBC. "In Austin, everyone wants to help each other succeed."

When you are hustling to get a start-up off the ground, having access to people who can give advice, make introductions and relate to the ups and downs of entrepreneurship can be incredibly powerful.

Austin, Texas
David Sucsy | Getty Images
Austin, Texas

"There's such a friendly vibe in Austin," says Hadfield. "Paying it forward is an important part of the Austin tech scene. Rarely a day goes by without an entrepreneur in Austin introducing me to a potential customer, investor or job candidate."

To be sure, what Austin has in camaraderie, Silicon Valley has in sheer start-up and tech-talent density. It may not be as friendly, but the Bay Area is still the throbbing headquarters of entrepreneurship.

"Although it's slowly changing, the vast majority of top-tier tech investors in the U.S. are still in the Bay Area. Regardless of your specific interest area, there are meet-ups and panel events [there] literally every night of the week," says Hadfield. "Every bar and restaurant is bustling with tech entrepreneurs who are all on a similar mission to create companies that change the world, and their energy is infectious."

"In Silicon Valley, there's a subtle sense that everyone is a potential competitor." -Tom Hadfield, CEO at Message.io

Hadfield, originally from Brighton, England, launched the sports website Soccernet.com from his bedroom as a teenager. In 1999, when Hadfield was only 17 years old, ESPN bought Soccernet for $40 million.

He later attended Harvard University in Boston and then worked there as the CEO of biotech firm AeroDesigns for four years before moving to Silicon Valley in 2013.

Hadfield and his wife lived in Mill Valley, just north of San Francisco, and he started the company Fetch, a digital personal assistant service that worked via text message.

Experiencing Silicon Valley was important for the serial tech entrepreneur, and he admits that Austin does not have the same concentration of investors and talent that San Francisco has.

"If you're a tech entrepreneur, there's an energy and vibrancy in Silicon Valley that is unparalleled anywhere else in the world," says Hadfield.

But along with that concentration of talent comes both competition and steep prices.

"It's increasingly difficult for seed-stage funded start-ups to compete with tech giants like Google and Facebook for the best talent in Silicon Valley," says Hadfield. "The lack of affordable housing and the cost-of-living crisis in Silicon Valley makes it prohibitively expensive for anyone except the most affluent to own a home."

For comparison, the median monthly cost of renting a one-bedroom apartment in Austin is $1,100, according to data from personal finance website GOBankingRates. That's less than a third of the $3,600 median cost to rent a one-bedroom in San Francisco.

So he and his wife got out a map and started taking notes. They were looking for a community of tech entrepreneurs, good weather, affordable cost of living and decent connections out of the local airport. They settled on Austin and moved in the spring of 2015.

They've lived and worked there ever since, save three months at the start of 2016 when Hadfield returned to the Valley to attend the Y Combinator accelerator program for his newest company, Message.io, which provides tools for building apps on chat platforms.

Joe Lopez, the Chief Product Officer of Message.io, and CEO Tom Hadfield
Source: Tom Hadfield
Joe Lopez, the Chief Product Officer of Message.io, and CEO Tom Hadfield

"Everything in Austin is 50 percent cheaper than Silicon Valley, which extends any start-up's runway by at least several months," says Hadfield.

Hadfield and his wife aren't alone in their decision. More people left the Bay Area in 2014 than moved in, according to the most recent Silicon Valley Competitiveness and Innovation Project report. That was the first year since 2011 that the Bay Area experienced negative growth.

Tech workers, in particular, are increasingly searching for jobs outside of Silicon Valley, according to data compiled by job search platform Indeed.com. After New York and San Diego, Austin is getting more attention than any other city in the U.S. from the Valley's tech employees.

And while an engineer might make a higher salary in San Francisco, a slightly lower salary will buy a better quality of life in Austin, according to a recent report by Indeed.

Hadfield hopes the high quality, affordable cost of living in Austin will give Message.io a leg up in recruiting.

"We're finding it much easier to recruit great people from around the country," he says. "Austin has a reputation as a cool place to live, and relocating here is very affordable compared to Silicon Valley. We're relocating two people to Austin this month, and I don't think we'd have been able to get them to the Bay Area."