I had a good conversation about Austin start-ups recently.  Specifically, we were talking about the differences between Austin start-ups and those in Silicon Valley.

My point in the conversation was that I was in love with the Austin start-up scene because “Austin start-ups have these really cool things called business models.”

Now, I know that there are plenty of exceptions to this claim, and I haven’t done any official research to prove the point.  But I’m basing my claim on a lot of conversations with companies in town, during SXSWi, etc.

This is really a cultural strength of the entrepreneurial community in Austin, I think.  Our start-ups talk about changing the world, just like in the Valley.  But the difference seems to be that Austin start-ups really do their homework on business models and identifying several possible revenue streams right from the get-go.  In contrast, the Valley seems to embrace a different approach:

1. Hype the crap out of the product
2. Get other people who love the new shiny object to hype the crap out of your product
3. Hope some investor falls in love with your product and gives you money to hype the crap out of it even more
4. Start talking about how you have awesome plans to make money, but you’re focused on improving the product right now
5. Keep saying that for a few years
6. Get another investor to give you MORE money to hype your product even further
7. Get acquired at a ho-hum valuation by a company that has a business model, and has been able to find a way to use you to drive revenue

And so it goes… over and over again.  I’m not saying there’s something wrong with that model.  And I’m certainly not saying that every start-up in the valley follows that model.  But it’s becoming increasingly visible that this is happening with alarming frequency now that acquisitions have sped up as the economy shows signs of recovery.

Frankly - an exit strategy is always good.  But I’m always a bit disappointed when a really cool start-up didn’t find a revenue stream so they could keep changing the world, etc.  These companies do awesome things, but I want them to stay alive, independent and full of the same fire that disappears far too quickly when they’re absorbed into a large, purely money-driven organization.

Austin seems to embrace that sentiment within the start-up community. There’s strength to our start-ups because they don’t necessarily put all their hopes into an exit strategy.  Perhaps there’s some bravery there that doesn’t exist in a region that isn’t trying desperately to maintain its weirdness…

I don’t really know what it is, but I would be interested to hear if other folks in Austin get this same impression, the opposite, or something else entirely.