To Austin From Silicon Valley—8VC Becomes Latest Firm to Relocate
8VC, a major Silicon Valley venture capital firm led by Joe Lonsdale, has revealed that it is relocating to Austin, Texas. The move follows a wave of prominent moves to the growing tech hub. Dubbed the “Silicon Hills” of Texas, a number of Silicon Valley companies have recently announced plans to relocate some or all of their operations to Austin.
Oracle announced in December 2020 that it had changed its corporate headquarters to Austin. Just a short time earlier, Tesla revealed that it is building its Gigafactory for manufacturing electric vehicles in Austin. Although Dropbox is staying put in Silicon Valley, founder Drew Houston purchased a home in Austin that will be his permanent residence. Finally, Amazon is establishing new distribution hubs in the nearby towns of Round Rock and Pflugerville.
8VC decided to join in on the Silicon Valley exodus. Founded by Joe Lonsdale, the venture capital firm has many strong ties to California and its startup scene. Lonsdale grew up in the Bay Area, attended Stanford, and has founded and invested in a number of prominent Silicon Valley startups. Despite being a native Californian, Lonsdale stated in a Wall Street Journal opinion article that he felt California was becoming “unlivable.” Six of 8VC’s portfolio companies have already left Silicon Valley behind for Austin.
While tech talent has started to spread to other U.S. cities such as Denver, Las Vegas, and Nashville, Austin has stood out from the pack. Austin’s entrepreneurial spirit, business opportunities, and living conditions have given it a unique appeal.
One major lure of Texas is the lower living costs. Texas does not collect state income tax or capital-gains tax from individuals. Meanwhile, California has some of the highest taxes in the nation. The personal income tax rate is 13.3% for top earners and capital gains are taxed at a similarly high rate.
In some cases, politics has also driven the decision to relocate to Austin. Many of the individuals spearheading the corporate moves to Austin have cited discontent with Silicon Valley’s political leanings. Venture capitalists Peter Thiel and Keith Rabois have expressed feeling alienated for their conservative-leaning political viewpoints. Some also feel that the region’s politics are leading to increasingly high regulatory obstacles for companies that can interfere with innovation.
Austin also has one of the best music scenes in the world and a thriving artistic community. The warm weather cannot hurt either. With the increased flexibility of work from home policies brought on by the pandemic, many companies and employees have decided to move away from Silicon Valley.
History of 8VC
8VC was founded by Joe Lonsdale in 2016 and has over $3.5 billion in assets under management. Lonsdale had previously helped Peter Thiel started his hedge fund Clarium Capital. Palantir Technologies, a data analytics platform valued at over $25 billion, was co-founded by Lonsdale. He also co-founded Addepar, a wealth management platform, and OpenGov, a cloud software platform designed for use by local governments.
Formation8 Partners, the predecessor firm to 8VC, was founded by Lonsdale in 2012. The investment strategy of Formation8 was focused on identifying and investing in early-growths startups. Formation 8 disbanded in 2015. Similar to its predecessor firm, 8VC retains an emphasis on seed stage, early venture, and growth capital investing. Eventually, Lonsdale wound up in Austin.
It is unusual for VC firms with the amount of capital that 8VC has to retain an interest in seed stage investing. Lonsdale opted to maintain a seed stage program partly because of the value he places on getting to know the founders of the startups he invests in.
Indeed, many of Lonsdale’s most successful deals began as seed stage or early stage investments. Some companies Lonsdale’s venture capital firm was an early institutional investor in include Wish, Oculus, Oscar, Illumio, and Joby Aviation.
The other founding members of 8VC are Kimmy Scotti, Drew Oetting, Alex Kolicich, and Jake Medwell. Kimmy Scotti is also the co-founder of a women’s health and wellness company called Monthly Gift.
8VC’s Future Plans
In January 2020, 8VC disclosed its intent to raise $640 million for its third flagship fund. The firm closed its first flagship venture capital fund in 2016 and its second fund in 2018. It plans to focus its investments on early-stage companies across different tech industries such as logistics management, fintech, cloud computing, and biotech.
Building a “Tech City” Near Austin
Aside from growing his venture capital firm, Lonsdale has big ambitions for Austin as well. He is formulating designs for infrastructure projects and envisions building Austin into a tech city. Lonsdale states, “It’s a big hub. I think there’s going to be a lot of really cool suburbs. One of my favorite ideas is to build a new city somewhere around here, nearby, in the next few years. Buy a bunch of land and dig tunnels connecting it to these places.” Some ideas he has conceptualized for the city include smart buildings, flying drones, robots, and tunnels for autonomous vehicles. Transportation tunnels would enable people to commute into Austin from less expensive nearby areas.