Texas Should Be Ashamed of List of World’s Most Valuable Web Startups


A new list from news website Business Insider should be a very loud wake-up call for the Texas high-tech business community.

Business Insider just ranked the world’s 100 most valuable Internet startups, and not one of the companies is based in Texas. Not Austin. Not Houston. Not Dallas. Not Fort Worth. Not San Antonio. Not even Marfa (OK, that one’s a stretch).

Sure, some of the companies appearing on the list do have offices in Texas, such as Facebook, Zynga, Indeed and LegalZoom. But there’s more cachet to having a company on the list with headquarters in Texas rather than one with a satellite office in Texas.

For all of the hand-wringing over the anemic California economy, more than one-third of the startups on the Business Insider list are based in the Golden State. Given that California is the country’s most populated state and is home to Silicon Valley, it’s no shocker that California holds the top spot among all states with companies on the list.

But c’mon, Texas. Even two much smaller states have companies on the list. The eyes of Texas should be upon this list — and should be shedding a few tears about it. In the Business Insider ranking, Texas is a business outsider.

In April, Texas Gov. Rick Perry made the case for the Lone Star State to be the next hub for innovation, collaboration and competition in tech development and manufacturing. Unfortunately, the Business Insider list underscores the work remaining for this goal to become a reality.

Texas does boast plenty of prominent tech employers (large and small alike) and loads of tech talent. But to not have a single startup on the Business Insider list is quite surprising and a little embarrassing.

What can and should be done to ensure a Texas startup makes the Business Insider list next year? Perhaps Perry gave the answer back in April during the Governor’s Technology and Economic Development Forum. Among the attendees were Francisco Cigarroa, chancellor of the University of Texas System; Fred Heldenfels, chairman of the Texas Higher Education Coordinating Board; Thomas Gilligan, dean of UT’s McCombs School of Business; and Gregory Fenves, dean of UT’s School of Engineering.

Perry said at the forum: “Making Texas the nation’s next high-tech hub will require the teamwork and dedication of professors, researchers, administrators and legislators along with the private sector working together toward a common goal. I believe it can happen, and if we make the right choices, it will.”

What are some of those right choices? From my perspective, they include:

  • Maintaining and improving Texas’ system for granting incentives to companies that want to move or expand in the state.
  • Ensuring Texas bolsters business and tech education at the state’s colleges and universities. Tight state finances have forced some painful decisions, but higher education must be fortified so that Internet startups like the ones on the Business Insider list can tap Texas-trained talent.
  • Making sure Texas-born Internet startups have access to venture capital and other funding, such as money from the Texas Emerging Technology Fund.

It’s my hope that at least one Texas startup will pop up on the Business Insider list next year. Everything’s supposed to be bigger in Texas, right? Why shouldn’t the state’s Internet startups be some of the world’s biggest players?


The views expressed are those of the author and not necessarily The University of Texas at Austin.

About The Author

John Egan

Editor in chief, SpareFoot

A resident of Austin since 1999, John Egan has more than 25 years of experience in journalism, communications and public relations. He is editor...


#1 Maybe you guys just have an

Maybe you guys just have an oslob diving expedition for a while to refresh your minds in order to think wisely about web startups.

#2 Thanks for the response John.

Thanks for the response John. Still, I think my point 2 is especially valid. While I have not done any formal valuation comparisons of start-up companies across the US or the world, I would guess that Austin and Texas startups, especially in the high visibility tech space get lower valuations than their peers in New York and Silicon Valley due to the greater amount of capital raised and allocated in those regions. While their regional VC firms are increasingly looking nationally and internationally for good deals, they prefer local companies that they can keep an eye on. Brandon emphasizes this point by mentioning that the valuations referenced in SAI are funding valuations based on high growth assumptions. It is to be seen to what degree that growth, retained earnings, and value results from these companies. As far as putting together the list of high valued TX startups - could be a very fun project indeed! Even more interesting would be to determine the difference in our relative business and competency ecosystems (rather than just focus on shiny money). After all, the ultimate question in my mind is which region(s) are developing an ongoing, sustainable and differentiated aggregate advantage?

#3 Many of the value assessments

Many of the value assessments of these top online companies are not based on active revenue streams, projected returns from investment or new product offerings. Rather, they are assessed on appraised value of future injections of capital or prospective branding growth, which can (in theory) be leveraged into dividend payouts (albeit, a risky maneuver for the owners). Before ever earning a dollar in revenue, Twitter was valued heavily based on injections of capital and future investment attention. This deal-flow is not indicative of a company's growth potential for consumer buyership interest, which was one striking element of the first internet bubble. I'm not all too concerned Texas did not make the top list of valued companies, because Austin companies like uShip ACTUALLY EARN MONEY BASED ON VALUE EXCHANGES AND MONETARY EXCHANGES! Incorporating traditional business models with new-age technology (social web space business and online market interaction), is a better model for staying power, longevity and steady growth.

#4 Hi, Brandon. Thanks for the

Hi, Brandon. Thanks for the comment. Lots of food for thought. Inflated valuation is definitely a measurement that has its flaws. In writing the blog post in the first place, I guess I should have indicated that my Texas pride was a little wounded by not seeing a company on the list. At the end of the day, Texas startups will do just fine without being on this list or other lists like it.

#5 I disagree with this post

I disagree with this post from the Texas Enterprise and John Egan for a few of reasons. 1) SAI - Silicon Alley Insider - is a New York based publication focused largely on technology companies in New York and (as it's name implies) tech companies in Silicon Valley. Why is it surprising that companies like Home Away, Bazaarvoice, uShip, Whale Shark, Spiceworks, Spredfast, and many many other Austin & Texas startups are being ignored by an echo chamber? 2) The Austin funding scene is MUCH different than the big money funding scene of the Valley and the Alley. We are much more focused on bootstrapping around here and frankly there is a lot of "value" in that. 3) Instead of complaining about the biased perspective of a New York based publication, why doesn't the Texas Enterprise come out with its own list? Ultimately the point is to help provide visibility to the awesome entrepreneurial community that Texas boasts. Sure the TX government could do more, but one thing that Texans do incredibly well is promote ourselves. How about we do some of that instead of telling Texas to "be ashamed".

#6 Hi, Benjamin. All very good

Hi, Benjamin. All very good points. I'm still perplexed, though, why startups in states much smaller than Texas -- and states with startup scenes much less robust than Texas' -- were on the list but no startups from the Lone Star State were represented. And the list is supposed to be based on valuation, not on someone's opinion, so I'm assuming there was no pro-Silicon Valley and pro-Silcon Alley (New York City) bias. So that begs the question: No one could find a startup in Texas that has a valuation high enough to make the list? Maybe I should not have used the word "ashamed." Maybe, instead, I should have said it's a shame that Texas lacks any startups on the list. By the way, I like your suggestion about developing a list of highly valued startups in Texas. Why not toot our our (Long)horns?

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