At the height of the pandemic and the global shift to remote work, tech founders and investors alike flocked to Austin, Texas, drawn to a more business-friendly environment, relatively lower housing costs, and the city’s hip reputation.

Venture firms that set up shop in the Texas capital city included Bedrock Capital, Breyer Capital, and 8VC 1, among others. Elon Musk famously moved Tesla’s headquarters to Austin in 2021, while also purchasing a house and establishing a residence there.

But as more employees returned to in-office work, Austin slowly seemed to fall out of favor with the tech community, some of whom said it had been overhyped as a startup hub.

There were reports of tech workers who had moved to the city during the pandemic and claimed to regret it, saying they were going back to places like the Bay Area. Musk relocated Tesla’s engineering headquarters back to California in 2023.

Funding tops pandemic peak

Undeterred by the “tourists,” the startup and venture community in Austin kept plugging away. And those efforts are reflected in a surge in funding to startups headquartered there last year, with 2025 posting an all-time high for Austin venture investment, Crunchbase data shows.

Investment into Austin-based startups spiked 64.8% to $7.19 billion in 2025 as more investors poured money into companies based in the region, according to Crunchbase data. That’s compared with the $4.37 billion raised by Austin-area startups in 2024 and tops even the $6.1 billion raised in 2021, at the height of the venture funding frenzy.

Notably, deal counts actually decreased from 312 in 2024 to 272 year over year, signaling an increase in later-stage deals. Indeed, the data corroborates that with $4 billion of the total raised in 2025 classified as late-stage rounds.

Last year’s totals were also more than double — 130% higher — than the $3.1 billion raised in 2023. That money was raised across 403 deals, signaling much smaller round sizes at the time and a more mature market.

A tech scene decades in the making

Morgan Flager, managing partner of Silverton Partners, doesn’t believe that the Austin funding performance in 2025 was anomalous.

Rather, he calls it “the payoff from decades of compounding.”

“Talent density in venture categories such as software, fintech, health tech, defense and  robotics has reached a critical mass, driven by waves of Bay Area relocations, both full HQ moves and satellite offices, that brought technical, product and operational talent into the market,” Flager said.

That talent eventually left to build new companies, he said, and the cycle repeated.

“On the capital side, the stack has matured across all stages, from pre-seed through growth, with local firms that have now cycled through multiple funds and understand the market deeply,” Flager said. “Layer in a business-friendly regulatory environment, a relatively lower cost of living, as well as a lower effective tax rate, and Austin becomes an attractive place to start and scale a company.”

Former Austin Mayor Steve Adler saw so much potential in the city’s startup scene that he began a career in venture investing after his tenure ended in early 2023. (He now works for New York-based Commonweal Ventures).

Part of the city’s success as a startup hub stems from its reputation as a haven for mavericks and risk-takers, Adler has said.

“Most cities in the world, you try something, you fail; it’s hard to have access to the capital the second time,” he told Zillow co-founder Spencer Rascoff in a podcast interview in 2022. “In Austin, the civic folk heroes are the people that tried something and it didn’t quite work out and they worked on it until it did.”

Pat Matthews, founder of Active Capital, a solo GP venture firm based in nearby San Antonio, said that it feels like Texas and the Austin metro area specifically are becoming more attractive to manufacturing- and engineering-heavy businesses.

“Some of that may be thanks to Tesla, and some of it may simply reflect the physical advantages of the state,” he told Crunchbase News. “Either way, this [surge in financing] feels less like hype returning and more like capital concentrating around a narrower set of serious, technically differentiated companies.”

Deal sizes grow

That diversity among funded startups is reflected in last year’s investment totals for Austin, which were boosted by several large, late-stage deals across a broad range of industries.

The largest was a $1 billion Series C round for energy provider Base Power in October. New York-based Addition led that financing, which valued the 2-year-old company at $4 billion.

Looking back, February in particular was a busy month for venture funding. That month alone saw the second-, third- and fourth-largest rounds in Austin for the year. They included:

• A February Series C round in which autonomous surface vessels maker Saronic raised $600 million at a $4 billion valuation. Elad Gil led the round for the defense tech startup.
• Also in February, NinjaOne, which provides endpoint management, security and monitoring, raised $500 million in Series C extensions at a $5 billion valuation — more than doubling its value from just 12 months prior. The funding came in separate tranches led by Iconiq Growth and Google’s CapitalG, with participation from other investors.
• Robotics company Apptronik in February raised $415 million in Series A financing led by  B Capital and accelerator Capital Factory. (A $520 million extension to that Series A was raised in February 2026, taking the total round to over $935 million.)

The findings correspond with Flager’s observations.

“A good chunk of the capital raised in Austin was driven by several large deals. Similar to what we saw across the U.S. in 2025, venture funding in Austin was more concentrated than it has been in the past,” he told Crunchbase News. “Roughly 38% of the capital deployed went to the top five venture financings in Austin. I believe the top 10 deals nationally accounted for more than 40% of the capital raised last year. We’ll see if this trend continues into 2026 and beyond. The start of the year suggests it will.”

Krishna Srinivasan, founding partner of Live Oak Ventures, agrees, noting that from a dollars perspective, the surge in financings was driven by a handful of outsized capital-intensive deals in newer categories such as defense and deep tech.

“These companies require a combination of technology, land for manufacturing facilities, and talent for manufacturing tasks. Austin has unique skillsets for that,” he said. “It has a density of three things: talent in deep tech with The University of Texas, and many others moving to Texas in light of favorable business conditions with expertise in these industries; expansive land around Central Texas that is inexpensive, especially compared to California; and lower cost manufacturing-related labor especially given the surge in manufacturing jobs such as at Tesla in recent times.”

Burgeoning industries

Once upon a time, Austin was better known as home to software and CPG companies. And while those types of companies certainly still exist, a number of other industries are growing increasingly robust, as the local investors have pointed out.

As with many top tech markets, Flager said Austin has long been strong for application and infrastructure software, which is currently being challenged by AI. In his view, that talent has migrated to building “quality” vertical agentic software and AI-native businesses.

“We are seeing these companies grow quickly and build scale, while using less capital — which is exciting,” he added. “The domain experts who built and scaled application software companies here over the last two decades are spinning out to build the next generation of native AI businesses.”

The market overall is also broadening in interesting ways. Defense and autonomy have emerged as breakout categories, with Austin becoming one of the stronger markets in the country for dual-use and autonomous systems companies, noted Flager.

“The combination of software and hardware skills now in Texas, along with a business-friendly regulatory environment, has allowed Austin to take a leadership position in these important and developing markets,” he said. “Energy tech is also a natural fit given Texas’ grid scale and the surging power demands of AI infrastructure.”

Finally, robotics and advanced manufacturing are also gaining momentum, driven by deep engineering talent and the ability to scale manufacturing near Austin cost-effectively, allowing engineers, executives and other factory employees to coexist and collaborate in close proximity.

Srinivasan noted that his firm is seeing strong activity in vertical AI companies, or companies that serve vertical markets with AI that is tuned on specialized proprietary vertical data, often targeting the services and labor expenditures by their customers.

“These companies deliver ‘Services as Software’ with close to software gross margins and pricing models that are based more on usage and outcomes as opposed to the traditional seat-based models,” he said.

Srinivasan also expects the city to continue to see large funding deals in defense and deep tech, given the combination of local strengths and robust global demand for such products.

Continued momentum

Investors and companies continue to be drawn to Austin. In late December, San Francisco-based venture firm Craft Ventures signed a lease in the city. One of the firm’s founders, David Sacks, also announced that he had personally moved to Austin. The firm’s other founder, Bill Lee, had lived and worked in the city since 2022.

In late March of this year, Musk announced plans to build two semiconductor factories totaling 100 million square feet in Austin to supply advanced chips for SpaceX and Tesla. The venture, known as Terafab, aims to manufacture 1 trillion watts of computing power per year, he said. Media outlets valued the initiative at nearly $25 billion.

Also this week, Barcelona-based AI health tech startup Biorce announced it will open an office and hire in Austin.

CEO Pedro Coelho told Crunchbase News that with the company’s New York office already established, the next step was not just expansion, “but choosing the right place to build.”

“And we chose Austin for one reason above all: talent,” he said. “As an AI health tech company, our success depends on attracting exceptional people across engineering, data and life sciences. Austin has rapidly become one of the most competitive talent markets. The city is one of the fastest-growing in the United States. This brings together deep tech expertise, entrepreneurial energy and a growing concentration of healthcare innovation. Ideal for our goal of building an R&D hub. “

Coelho also points out that Biorce has witnessed a “trend” of people moving from the Bay Area to Austin, noting that “the quality of life has gained notoriety.”

“But for us, this isn’t about following a trend,” he added. “It’s about building where the best people are — and where they want to be.”

Related Crunchbase query:

Related reading:

On a warm March night, alternative-indie rock band, Rainbow Kitten Surprise, thrilled eager fans with their return to Austin, TX.

Rainbow Kitten Surprise is known for their eclectic influences and unique sound. They are made up of musicians Ela Melo (vocals), Darrick “Bozzy” Keller (guitar/vocals), Ethan Goodpaster (guitar), and Jess Haney (drums). They have been making music since 2013, and their most recent release was a single titled “Sixteen.” In total, they have five studio albums and are hopefully working on another.

Opening for Rainbow Kitten Surprise is Southern California-based band Common People. The band consists of members Nicky Winegardner (vocals/guitar), Konrad Ulich (vocals/bass), Cormac Cadden (drums), Asher Thomson (guitar), and Sam Belzer (guitar). Their garage-rock sound caught the eyes of Red Light Management, and in addition to Rainbow Kitten Surprise, they have opened for big-name artist Cage The Elephant. Their debut single “Thank You” gained traction last year, in 2025. Since then, they have released a few more singles, but fans are still eagerly waiting for an EP or debut album.

Common People came onto the stage with great energy. They performed their song “Ready or Not,” along with a few other originals. Mid-set, they took a second to thank and praise Rainbow Kitten Surprise for having them join them on tour. Sadly, Austin will be their last stop on Rainbow Kitten Surprise’s tour. Following, they performed an awesome cover of The Pixies’ “Where Is My Mind?” At around the 40-minute mark of their set, they closed with their newest single, “Dear Worry.”

Rainbow Kitten Surprise opened their set with “Hell Nah” from their most recent album, bones (2025), and “Our Song,” a single from 2020. Many fans at the barricade held signs that applauded the band. They also waved LGBTQ+ and Transgender Pride flags. Ela announced to fans that this would be the last stop on their 2026 bones Tour before they took a well-deserved break. At the end of May, Rainbow Kitten Surprise will pick back up their tour in Europe and before returning to the US for a few more shows. Their set continued, and they played songs such as the newer 2025 single “Espionage” and the throwback “All’s Well That Ends.”

Before beginning their latest single, “Sixteen,” Ela introduced it as the most emo song they’ve ever made. Towards the end of their show, they performed a quick three-song acoustic run of “Texas Hold’em,” “Bare Bones,” and “First Class.” As the night came to an end, Rainbow Kitten Surprise shut it down with an encore of the closing track from bones, “Tropics” and “It’s Called: Freefall,” their 2018 top-hit from the album How To: Friend, Love, Freefall.

Fans can expect their favorite band to come to Austin sometime soon, as it seems Rainbow Kitten Surprise tours here pretty regularly.

RAINBOW KITTEN SURPRISE
Website  Facebook  X

COMMON PEOPLE
Website  Facebook

MOODY AMPHITHEATER
Website  Facebook  

MORE: ‘Little Yellowstone,’ a Wyoming Ranch Once Asking $85 Million, Sells for the First Time in 130 Years

“We knew the house needed work, especially since not all of the plumbing was functional,” Potter said. Once they brought in Side Angle Side Architects, however, it was clear they faced a full-blown renovation. “After the project started, they discovered rotting wood, broken windows and a dysfunctional roof structure, plus when we pulled off the skirting under the house it revealed that we needed a new foundation and new framing.”

The Potters pulled back from that renovation to build an accessory dwelling unit (ADU) on the property, a two-bedroom, two-bathroom house they lived in while the main house was rebuilt. Now the ADU serves as a guest house for friends and family.

“They basically had to take apart the main house piece by piece and put it back together, but they saved as much as they could of the wood and trim and reused it,” Potter said. “It probably would have been easier to tear it down, but we wanted to preserve the character as much as we could. They reconfigured the original house on the same footprint, moving the kitchen between the living room and dining room on one side of the hallway, with the primary bedroom and a second bedroom on the other side.”

The dining room has the original shiplap from the old house and original wood pocket doors. The new kitchen and living room are open to each other, with a hemlock wood ceiling overhead. The architects took some space from the central hallway to create a mudroom, closet and pantry.

An addition, which doubled the living space from 1,800 square feet to about 3,600 square feet, includes an office, a family room with a loft and the children’s bedrooms.

“Our goal with the addition was to deliberately design it in a different architectural style,” Potter said. “Sometimes people ask me if this is one house or two.”

MORE: ‘Shiplap in Nearly Every Room.’ Inside Empty-Nesters’ $1 Million L.A. Home Renovation.

The Potters declined to comment on how much the renovation and addition cost. Construction took about 21 months.

The collaboration between Potter and Side Angle Side Architects on the house was so successful that her company, HB Studio, is now part of Side Angle Side.

Potter and the Side Angle Side team offered more insight into the renovation process:   

I would describe the aesthetic as… “timeless,” Potter said. “I chose furniture that felt contemporary, while also leaning into tones and patterns that were warm and romantic to create an overall feeling of timelessness.”

My advice to others… “is to let the old house tell you what to do,” said Annie-Laurie Grabiel, co-founder of Side Angle Side Architects. “In this case, it was important to let the original home be the star of the show. We figured out that the best way to add onto the house without compromising its integrity was to essentially build a separate building next to it and connect the two as minimally as we could. The new addition almost stands alone and connects to the old house with a lower roof that just tucks under the existing roof eave.”

From Mansion Global Boutique: The Spring Cleaning Checklist: What You Need to Get in Gear

My favorite post-renovation feature is… “the way we embraced indoor-outdoor living,” Potter said. “We preserved this big tree in the backyard and built the courtyard and pool area around it. We can open all the doors and windows around it, so you feel like you’re outside even when you’re indoors.”

The biggest challenge… “was working with the existing house,” said Arthur Furman, a co-founder of Side Angle Side Architects. “The clients loved the character of the old home, and we were determined to keep it as a central aspect of the new design. However, the wood framing was compromised from water damage and rot. In the end the house had to be reframed, but we matched the original footprint and proportions. We salvaged and reinstalled as much of the interior woodwork as we could, including the wood floors, interior doors, window trim and base boards.”

The most dramatic change was… “the new kitchen,” Grabiel said. “The original kitchen was small and dark and didn’t have a strong connection to the outdoors. We relocated [it] to the heart of the interior and opened it up with access and views to the back porch and pool deck.”

The biggest surprise was… “that some of the best elements weren’t part of our pre-construction plans,” Furman said. “When the roof was being reframed, we looked up at the treetops through the rafters and we thought how nice it would be to open up a skylight and experience the natural light right when you enter the home. Also, we had always planned the kids’ loft area, but then one day the clients had the idea to add the netting to extend the loft space and create more connectivity between above and below.”

Favorite materials we discovered during the process… “include the natural materials for the walls, floors and bathrooms,” Potter said. “In the living room we installed a hemlock wood ceiling and a plaster fireplace wall, and we used quartzite counters in the kitchen and bathrooms.”