It’s a beautiful March evening in Austin, and South by Southwest is in full swing. Along Sixth Street and Red River, lines are forming for the night’s exclusive parties. Elsewhere downtown, movie theaters are rolling out red carpets for Hollywood celebrities. The great unwashed and uncredentialed are out too, soaking up sun like they own the place, mobbing the jogging paths and margarita-strewn patios that ring the downtown VIP zone. But the weather and the glamour are irrelevant where I am, a climate-controlled ballroom deep in the heart of this Texan carnival, surrounded by roughly 600 would-be titans of industry. For a certain class of South by Southwest attendee—more than a few of whom are bespectacled, poorly dressed, and Vitamin D deficient—Hilton Salon F/G is the place to be.
This is the hub of “Startup Village,” a five-day communal beehive of activity in the honeycomb of ballrooms on the Hilton’s fourth and sixth floors. The Village has been erected by SXSW Interactive as a gathering place for technology “innovators” and “thought leaders” to do a sort of mating dance to attract venture capitalists to fund their “transformative” and “disruptive” ideas. In reality, the Village is an overstuffed calendar of panels, meetups, and awkward networking opportunities. Its citizens wander the hallways with business cards in one hand and festival schedules in the other, getting lost and ahead of themselves in frantic effort to be in the right place at the right time.
The marquee event of the whole affair is SXSW Accelerator, a live pitch event billed as a “glimpse of the [tech] industry’s future.” For the past two days, the Village’s denizens have been swimming in an atmosphere gummy with buzzwords and hyperbole—“I hope you’ll join me in fundamentally changing the way we use energy.” “Come by our booth, I’d love to tell you about how we fixed medical records.” “We’re planting the seeds for a more collaborative and more peaceful planet. We hope you’ll join us.” It’s a distinctively millennial flavor of the old, oily used-car salesmanship—the difference being that the stakes here run to the billions of dollars. Fifty percent of past SXSW Accelerator contestants have gone on to find investor funding, to the tune of a cumulative $1.75 billion. Twelve percent have been acquired by larger tech concerns, including Apple and Google.
In just a few minutes here in Salon F/G, the winners will be announced. Will the “Fitbit for dogs” from Kansas City be among them? The “selfie drone” from Latvia? The recipe-learning “smart pan” from Oakland? Together we’re all waiting anxiously to find out which newfangled idea gets plucked from obscurity to be paraded in front of venture capitalists hoping their investment eventually sees billion-dollar valuations. It’s a tense moment.
It’s been said before, but it bears repeating: In the nineties and early aughts, the SXSW dream was to get a major label recording contract for your band. Now the aspiration is to find an angel investor for your downloadable app, wearable device, or brilliant bit of code.
No company symbolizes this new SXSW dream more than Twitter, which famously made its name in 2007 through a marketing campaign displaying tweets on screens along the festival’s hallways. In-festival promotions, however, can be expensive. Twitter spent $11,000 on its 2007 campaign—and the Interactive festival was a much smaller beast then. Now, the most cost-efficient way to get noticed by the moneybags is through the SXSW Accelerator. The competition began in 2009, two years too late to count Twitter among its alumni, but Klout, GameSalad, Tango, and Storify are all alumni. Siri competed in 2010 and was acquired by Apple just one month after the pitch contest.
A few years ago, if you said that phrase—“pitch contest”—to an ordinary person, he would have no idea what you meant; now, most people get it after two words: Mark Cuban. “My 81-year-old mother never understood what I did,” says Chris Valentine, who has directed the SXSW Accelerator program since its inception. “But now she watches Shark Tank.” Cuban’s hit TV show has made live pitches a legitimate crossover phenomenon, Valentine says, to the point where an event like the Accelerator is almost a spectator sport.
Valentine’s Accelerator contest looks much like Shark Tank, minus the on-the-spot deal-making. Contestants—chosen from a pool of over 500 applicants—have two minutes to explain their startup to the audience by delivering a prepared speech in front of a projection-screen slideshow. Many try to open with a memorable hook, like a celebrity-studded video (for a Santa Monica-based social networking app) or the tale of a grisly real-life murder (for a cloud-based 911-dialing app). A panel of expert judges then interrogates them on the weaker points of their business plans. The initial field of 48 is winnowed, over the course of two days, to six category champions—for Enterprise and Smart Data, Entertainment and Content, Digital Health and Life Sciences, Innovative World, Social, and Wearable—and three at-large award-winners, the “Miss Congenialities” of this sun-deprived startup beauty pageant.
Valentine counts at least thirty top venture capitalists on hand, many of them judging one of the forty-plus live pitch events at Startup Village. Cuban is one such mega-investor. The Dallas Mavericks owner, who made his fortune by navigating the late-nineties tech bubble with perfect timing, is more than just a physical presence at this year’s festival. On March 4, he published a blog post predicting a bust “worse than the tech bubble of 2000.” In particular, he predicted pain for many of the 225,000 so-called “angel investors” in the U.S., many of whom he guesses are actually small-timers in over their heads. If these investors can’t get their money out of the pre-IPO startups they’ve backed, Cuban foresees a liquidity crisis that could affect the entire technology sector.
Cuban’s doom prophecy hangs over the Village’s orgy of networking and investment-mongering like the rainclouds forecast for later in the festival. (Prominent investor Bill Gurley would make similar remarks at SXSW on Sunday.) Still, as far as anyone present can tell, the seed money is still sprouting. “I really just hear people talking about other people talking about it, but not material concerns, at least in my network of entrepreneurs,” says Rick Orr, a finalist in the Social Media category.
Orr is CEO of the startup Real Savvy and one of only two Texans among the Accelerator finalists. A native of Sulphur Springs, in Northeast Texas, he’s lived in Austin since enrolling in UT in 1995. After graduating, he worked as a realtor “to pay off some bills” before diving into the city’s nascent tech industry. Now he’s the veteran of one still-promising tech startup, TabbedOut, a restaurant bill-paying app. Real Savvy is his baby, a product aimed at residential real estate consumers (he calls it “the Pinterest of real estate”) that also delivers social-networking-powered sales leads and CRM for realtors. Orr’s hope is that realtors will see a benefit in the app, encourage clients to adopt it, and the rest will be, well, insert dollar signs here.
The unbridled embrace of the bottom line is another factor that distinguishes this new, tech-centric incarnation of SXSW from its indie-music origins. At one pitch, a judge tells a presenter, “You made a great presentation, but I’m not convinced that you really want to make a lot of money. Tell me how you plan to start making shitloads of money.” It’s a dig, the 2010s SXSW equivalent of calling a nineties showcase band posers or sellouts.
Such are the exotic mores of Startup Village, a city-within-a-city with very different norms from the Austin I live in the other 360 days out of the year. (Though perhaps the two are becoming more similar by the day.) For instance, there’s the local habit of insulating huts with corporate money. Fast food behemoth McDonald’s, a major sponsor of this year’s Startup Village, is holding its own series of branded pitch contests on the Hilton’s fourth floor. The free coffee-and-donuts room, branded the McDonald’s Thought Leadership Lounge, is a regular morning stop for Village denizens. A discomfiting sign tucked just out of sightline at the lounge’s entrance warns festival-goers that, “By entering this event, you consent to photos and audio/video recordings of yourself, which may be used by McDonald’s in any medium and for any purpose,” including advertising. Those who enter waive any rights to payment or liability. It’s an unsettling mirror of the ideologies of the Village, where every other entrepreneur is proposing a panopticon profit model built on collecting new, undreamt-of data sets of user activity and selling them to the highest bidder.
Until these visions of Facebook-like omniscience become reality, however, most everyone here is still just a street-level digital hustler, working the back alleys of the Village (i.e., the hallways, lounges, and ping pong tournaments of the Hilton), checking badges for whiffs of money and exposure, and generally trying their luck at the old American bootstrap trick. (Perhaps appropriately, more than one startup here hopes to pull themselves up by their footwear-based technology, including one, a 3-D shoe printer called Feetz, whose futuristic design unfortunately omits straps and laces.) It can be overwhelming, even touching, to listen to so many earnest, cockamamie, and maybe-just-maybe schemes laid out one after another—a twenty-first century Spoon River-style recital of unlikely ambitions, the whole digital-age delirium condensed in the many voices of a single Village.
Nowhere is this pathos more evident than at the “Startup Spotlight” expo, a mini-trade show where newly minted CEOs stand in front of signs advertising their hypothetical product and hawk it to crowds drawn in by the open bar. Among the exhibitors are a pair of post-collegiate brothers from Upstate New York who will leverage their SXSW trip to get their social media startup covered in local hometown press, and a Medicare-eligible procurement guy from Northeast Pennsylvania who has started a website with his 73-year-old business partner. “Up until now, our marketing and branding has been shoe leather,” he tells me. “Now we’re stepping into the big puddle.”
But the Village draws more than the average Joe Schmo with an iPhone; celebrities are dipping their toes in the startup waters as well. Sir Mix-a-Lot, né Anthony Ray, is a Seattle rapper and DJ best known for “Baby Got Back”, a hip-hop paean to large derrières still ubiquitous 23 years after it first hit the airwaves. He’s also a judge in the Accelerator contest’s Innovative World Technologies category. A life-long electronics nerd, Mix-a-Lot says hip-hop mogul Dr. Dre’s recent $3 billion sale of headphone company Beats to Apple inspired him to take a shot at the startup game. “What the Beats thing did do was let me know that guys like us could get in,” he says. “But the balancing act is trying to be taken seriously. Initially people think, you know, tell a couple of butt jokes and that’s all he’s good for. It’s hard to combat that without coming off as angry.”
Mix-a-Lot suggests that the striver aesthetic of the Village is not so different from the music community he was raised in around the same time SXSW was first getting off the ground. “In my era we had to actually go in front of the Rick Rubins and the Russell Simmonses and the Mo Ostins of the world and actually pitch our work,” he says. “So I can relate to a guy being nervous on his pitch.”
Indeed, some Accelerator participants falter onstage, losing concentration as the the clock runs out. But the eighteen finalists seated at banquet-style tables in the center of Salon F/G have all made their cases with aplomb. Before announcing the winners of the Accelerator contest, emcee Andrew Hyde pauses to muse on the irony of a panel of judges picking the best startup business idea. “In the end, it’s the market that chooses the winners, isn’t it?” he asks. Nonetheless, he has good news for hometowners in the crowd. Real Savvy, Orr’s Austin-based startup, captures the Social Technologies crown.
Orr is thrilled, of course. He tells me that part of his excitement is the pride of a native son done good. “We’ve never in Austin had the really big consumer [tech] win,” he says, dreams of Twitter-scale success dancing in his eyes. “We want to represent Austin as a city and a technology hub that can produce wonderful products for consumers.” That sort of step forward, as Hyde overtly reminded the Villagers, will be decided by consumers, not judges, but Orr’s Accelerator victory can only help.
The best news of the long weekend, however, comes the next morning, when I catch Cuban before he takes the stage to judge a pediatrics-themed pitch contest. He clarifies and softens his warning of an incipient tech crash, though he stresses that investors should see startups as a long-term hold and that certain regions are more insulated than others. “The bubble’s not nearly as bad here as in Silicon Valley,” he says. “It’s just that those valuations tend to carry over.”
Cuban himself is still investing in startups, he adds. “I tend to look for Boston-based companies, Austin, Dallas, and Texas-based companies, Florida-based companies. Because there are smart people everywhere, but there are more realistic people here.”
So the skies remain sunny over Startup Village, USA, all the way up to its dismantling on Tuesday afternoon. The storms don’t arrive until later in the week, when the music industry, thoroughly gutted by tech disruption and innovation, arrives for what’s left of its portion of SXSW.