Is Austin stifling business innovation? Investment firm says 'yes'

On Twitter Wednesday night, Mike Maples Jr. with the venture capital firm Floodgate tweeted his company quote "now has policy not to invest in on-demand companies in Austin.  Local government too hostile."

The Twitter conversation also included Joshua Baer, the founder of start-up incubator The Capital Factory here in Austin.  Baer says Maples is a frequent investor in Austin start-ups.  He says Floodgate is the first company he's heard make such a statement publicly about on-demand companies.

"For him to make a statement like that, that's a really big deal," Baer said.

Baer says Maples was responding to issues like the ridesharing fight, the phasing out of type-2 short term rentals and even the lack of Tesla dealerships in Texas.

"Pointing out...'What kind of message does that send to the rest of the country and to the rest of the world?'  We're trying to brand ourselves as one of the most innovative cities where everybody wants to be and businesses want to move and where businesses and investors want to put their money and yet we're making it really difficult for these new business models to thrive," Baer said.

Floodgate has invested in companies like Twitter and Lyft in the past.  I reached out to Maples in California.  He told me "Startup companies face extraordinarily difficult odds to begin with.  If there is one thing that scares investors away, it is when governments act capriciously.  I love Austin, lived there for 11 years, and am doing everything I can to be a positive force for startups."  He also said "I don't think the city council understands the damage they are causing with their actions.  It's so frustrating to see them erase so much progress and the good efforts of so many people."

Council member Don Zimmerman sympathizes with Floodgate's policy.

"Well I think that's a rational approach and I think it's a bit tragic.  We had a reputation for being a technology hub here, we were trying to build on that," Zimmerman said.

He says there's a zealousness for over-regulation on the council.

"The issue here is we keep hearing the 'level the playing field' argument but the disruptive technologies are not on par with the existing businesses," Zimmerman said.

Baer says the over-regulation has seemingly been amplified by 10-1.

"Now that we have this structure it seems like a lot of the local neighborhood associations and others are mounting a megaphone that's really extending out to the whole world and branding Austin as being anti-innovation," Baer said.

He says council needs to understand, in the end...these business models are inevitable.

We did reach out to some of the other city council members today for comment but with the city council meeting going on it was a little difficult.

But Joshua Baer with the Capital Factory did commend Mayor Adler on his willingness to find solutions that will make everyone happy.  We've talked about the Thumbs Up Austin badge before -- it's a visual indicator that a ridesharing company driver has been fingerprinted.  Some of the Capital Factory folks worked on that but it was the mayor's idea.

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