Austin Venture Capital & Startup Ecosystem Outlook: A Featured Investor Interview With Jim Breyer of Breyer Capital
Austin superstar global venture capitalist and private equity investor, Jim Breyer of Breyer Capital, shares his views of current and future conditions for startups and investors in the Austin region. Breyer was the first institutional money into Facebook, and now, more than forty of Breyer’s investments have had highly successful mergers or IPOs. He spent nearly thirty years at Accel Partners and has invested heavily in China via IDG-China. Read more of his storied history here. CS Freeland, cofounder of the Texas Venture Alliance, interviewed him with insights below.
Freeland: How will Austin startups be affected by this contraction in the market? (Will we feel the hit as much as anywhere else? Are we a bit protected as Austin is still a very attractive city to move to even in downturn?
Breyer: While Austin will remain an attractive city to move to even during the market downturn, I don't expect that the startups here will do a better job weathering the storm than ones based elsewhere. While many companies have moved to Austin, a good number of them have remote employees in other locations. The fact is, tech talent is spread out across the country and while hubs like Austin, New York, and The Bay Area remain incredibly important, no specific ecosystem will be protected from market turbulence.
Freeland: What are any timeline predictions of how hard Austin might be hit? What does the duration look like and will Austin continue to experience growth, just slowed down, etc?
Breyer: I think Austin will continue to experience growth. In fact, over the long term, this type of market correction could benefit Austin. Founders and investors will come out of it with newfound grit, resilience, and prioritization. With that said, the next few years will be challenging (in Austin and elsewhere). Business leaders will have to conserve cash, invest wisely, and stay very patient.
Freeland: Any comments about various sources of strain/economic indicators to monitor closely (interest rates from the fed, supply chain, stock market, crypto market, and Ukraine) which could help give direction into how bad things could/ will get:
Breyer: For younger web2 investors and founders, this is the first bear market they've encountered. The web3 environment, comparatively, has been much more volatile. Since I invested in Circle in 2013, we've seen three (maybe four) bear markets. I think monitoring web3 closely will be an interesting signal for the market as a whole. If that asset class begins to rally (and I expect it will sooner than tradfi), that will be a sign that optimism is returning to the investor community.
Freeland: What are pieces of advice to Austin startups?
Breyer: Great companies are built during tough market conditions. For the next few years, success, investment capital, and revenue will have to be competed for and earned. It will be important to lean on the advice and counsel of more seasoned operators and investors. Some of us have been here before.
Freeland: Any advice or insights for Austin startups between early stage and growth stages?
Breyer: Retain your best talent, even if you have to pay up. This advice might sound counterintuitive in a market downturn, but in tough conditions hiring and retaining stellar talent is more important than ever. Instead of growing headcount dramatically, focus on paying more for the 20% of your employee base that contributes 80% of the value.
Freeland: Advice to other Austin investors?
Breyer: Sometimes downturns unleash bad investor behavior. It's important that VCs don't take advantage of these conditions and remain hyper-focused on adding value and building for the long term, as opposed to extracting short-term wins at the expense of founders.
Freeland: What out of your experience with other highs and lows can you tap into that will be helpful to your portfolio companies? What will you be doing for your portfolio?
Breyer: It's easy to be reactive in a bear market (just like it's easy to be reactive in a bull market). In both scenarios, patience and discipline need to be emphasized. I will be working with my companies to help them think about the milestones they want to reach over the next 3-5 years while strategizing about what we need to demonstrate and do in the short term to ensure we have a shot at the long term.
Freeland: As a local leader in town, what would you encourage other folks in the community to do? What would you like to see in other leaders in Austin's startup and venture community?
Breyer: One of the best things I've discovered about the Austin tech ecosystem is the collaborative nature of its investors and founders. I would hope and expect that to continue, even when conditions worsen. More than ever, this city needs to support its innovators. In tough times, there might be a human impulse to reprioritize individual goals. Over the long term though, collaboration benefits all of us and will allow for some truly great business and life outcomes.